Enlarge/ President Biden speaking at the official opening of TSMC’s first Arizona fabrication plant in December 2022. The Taiwanese chipmaker plans to start manufacturing 2-nanometer chips in the US in 2028.
Caitlin O’Hara/Bloomberg via Getty
Taiwan Semiconductor Manufacturing Company’s decision to bring its latest technology to America is a big step forward for US President Joe Biden’s quest for security in the vital tech supply chain—but still leaves Washington short of being able to completely produce the most complex chips in the US.
The world’s biggest chipmaker by sales must also pull off an intricate balancing act as it steps up its US presence, satisfying customers such as Nvidia without damaging its highly profitable business model, which has underpinned the development of the global semiconductor industry for more than 30 years.
TSMC’s planned $65 billion of investments in Arizona are part of a construction race in the US that involves other global chipmakers such as Samsung and Intel, which are also taking big subsidies from Washington.
But producing chips for purposes such as AI is still likely to involve plants in Asia, a reflection of the complexity involved in packaging various types of chip together to boost their performance and efficiency.
“It’s really not that simple to onshore everything. Having the logic [chip] foundry in the US and then a bit of the packaging there is not enough,” said Myron Xie, an analyst at boutique consultancy SemiAnalysis.
TSMC—which makes chips under contract at hugely complex and expensive fabrication plants, or fabs—plans to start manufacturing 2-nanometer chips in the US in 2028. This is an upgrade from the company’s previous plans. At that time 2 nm technology is expected to be the latest in mass production worldwide, whereas previously the company had intended each new US fab to start operating with process technology one generation behind Taiwan.
TSMC has also committed to offer a third plant using 2 nm or even newer technology by 2030.
Washington is paying a hefty price for the upgrade, with US$6.6 billion in grants and up to $5 billion in loans for TSMC. The money comes from the 2022 Chips and Science Act, which aims to onshore advanced chipmaking for the US. Commerce secretary Gina Raimondo has said the US will be on track to make about 20 percent of the world’s most advanced chips by the end of the decade.
But while Washington’s money offers some incentive, TSMC’s most important motive for stepping up its commitment to the US was to bring its own US strategy in line with the needs of Nvidia and other vendors of the AI chips that have become the most potent driver of global semiconductor demand.
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While TSMC will kick off 2 nm volume production in Taiwan next year, its original plans would have offered less powerful 3 nm chips only from 2028 in the US, putting it years behind the AI chip cycle, analysts said.
Enlarge/ US President Joe Biden speaks before signing the CHIPS and Science Act of 2022.
The Biden administration announced investments Friday totaling more than $5 billion in semiconductor research and development intended to re-establish the US as a global leader manufacturing the “next generation of semiconductor technologies.”
Through sizeable investments, the US will “advance US leadership in semiconductor R&D, cut down on the time and cost of commercializing new technologies, bolster US national security, and connect and support workers in securing good semiconductor jobs,” a White House press release said.
Currently, the US produces “less than 10 percent” of the global chips supply and “none of the most advanced chips,” the White House said. But investing in programs like the National Semiconductor Technology Center (NSTC)—considered the “centerpiece” of the CHIPS and Science Act’s four R&D programs—and training a talented workforce could significantly increase US production of semiconductors that the Biden administration described as the “backbone of the modern economy.”
The White House projected that the NSTC’s workforce activities would launch in the summer of 2024. The Center’s prime directive will be developing new semiconductor technologies by “supporting design, prototyping, and piloting and through ensuring innovators have access to critical capabilities.”
Moving forward, the NSTC will operate as a public-private consortium, involving both government and private sector institutions, the White House confirmed. It will be run by a recently established nonprofit called the National Center for the Advancement of Semiconductor Technology (Natcast), which will coordinate with the secretaries of Commerce, Defense, and Energy, as well as the National Science Foundation’s director. Any additional stakeholders can provide input on the NSTC’s goals by joining the NSTC Community of Interest at no cost.
The National Institute of Standards and Technology (NIST) has explained why achieving the NSTC’s mission to develop cutting-edge semiconductor technology in the US will not be easy:
The smallest dimensions of leading-edge semiconductor devices have reached the atomic scale and the complexity of the circuit architecture is increasing exponentially with the use of three-dimensional structures, the incorporation of new materials, and improvements in the thousands of process steps needed to make advanced chips. Into the future, as new applications demand higher-performance semiconductors, their design and production will become even more complex. This complexity makes it increasingly difficult and costly to implement innovations because of the dependencies between design and manufacturing, between manufacturing steps, and between front-end and back-end processes.
The complexity of keeping up with semiconductor tech is why it’s critical for the US to create clear pathways for skilled workers to break into this burgeoning industry. The Biden administration said it plans to invest “at least hundreds of millions of dollars in the NSTC’s workforce efforts,” creating a Workforce Center of Excellence with locations throughout the US and piloting new training programs, including initiatives engaging underserved communities. The Workforce Center will start by surveying best practices in semiconductor education programs, then establish a baseline program to attract workers seeking dependable paths to break into the industry.
Last year, the Semiconductor Industry Association (SIA) released a study showing that the US was not adequately preparing a highly skilled workforce. Between “67,000, or 58 percent, of projected new jobs, may remain unfulfilled at the current trajectory,” SIA estimated.
A skilled workforce is just part of the equation, though. The US also needs facilities where workers can experiment with new technologies without breaking the bank. To that end, the Department of Commerce announced it would be investing “at least $200 million” in a first-of-its-kind CHIPS Manufacturing USA Institute. That institute will “allow innovators to replicate and experiment with physical manufacturing processes at low cost.”
Other Commerce Department investments announced include “up to $300 million” for advanced packaging R&D necessary for discovering new applications for semiconductor technologies and over $100 million in funding for dozens of projects to help inventors “more easily scale innovations into commercial products.”
A Commerce Department spokesperson told Ars that “the location of the NSTC headquarters has not yet been determined” but will “directly support the NSTC research strategy and give engineers, academics, researchers, engineers at startups, small and large companies, and workforce developers the capabilities they need to innovate.” In 2024, NSTC’s efforts to kick off research appear modest, with the center expecting to prioritize engaging community members and stakeholders, launching workforce programs, and identifying early start research programs.
So far, Biden’s efforts to ramp up semiconductor manufacturing in the US have not gone smoothly. Earlier this year, TSMC predicted further delays at chips plants under construction in Arizona and confirmed that the second plant would not be able to manufacture the most advanced chips, as previously expected.
That news followed criticism from private entities last year. In November, Nvidia CEO Jensen Huang predicted that the US was “somewhere between a decade and two decades away” from semiconductor supply chain independence. The US Chamber of Commerce said last August that the reason why the US remained so far behind was because the US had so far failed to prioritize funding in the “science half” of the CHIPS and Science Act.
In 2024, the Biden administration appears to be attempting to finally start funding a promised $11 billion total in research and development efforts. Once NSTC kicks off research, the pressure will be on to chase the Center’s highest ambition of turning the US into a consistent birthplace of life-changing semiconductor technologies once again.
Enlarge/ US President Joe Biden speaks during a “First Tool-In” ceremony at the Taiwan Semiconductor Manufacturing Co. facility under construction in Phoenix, Arizona, US, on Tuesday, Dec. 6, 2022. TSMC today announced plans to boost its investment in the state to $40 billion and construct a second production facility, following major customers urging the Taiwanese chipmaker to build more advanced semiconductors in the US.
President Joe Biden’s plan to expand America’s command of the global chips market hit another setback Thursday when Taiwan Semiconductor Manufacturing Company (TSMC) Chairman Mark Liu announced that he anticipates significant delays at the company’s second chips plant in Arizona.
This news follows previous delays announced last year at TSMC’s first chips plant, which Liu partly blamed on US workers lacking specialized skills. At Thursday’s news conference, Liu “reiterated” those complaints, Bloomberg reported, claiming that TSMC is still struggling to hire skilled workers in Arizona.
According to Liu, TSMC’s second Arizona plant—which is supposed to become the most advanced facility in the US—likely won’t start volume production of advanced chips until 2027 or 2028. That’s potentially two years longer than initial projections suggesting that production would start in 2026.
Such lengthy delays, Bloomberg noted, might be “time enough for semiconductor tech to advance by one generation.” If that’s the case, one of the country’s biggest foreign investments ever might result in the US still lagging behind foreign chips competitors.
Liu also suggested that the second plant, even with delays, might not start producing the 3-nanometer chip that TSMC had earlier stated would be possible in 2026. This 3-nm chip is “among the most advanced” chips manufactured today, The Wall Street Journal noted, but Liu said that until TSMC could calculate “customer demand and government incentives,” the chipmaker wouldn’t be able to determine “the specific chip type” that the second plant would begin producing as late as 2028.
TSMC’s delays could be due to a lack of Chips Act funding, Bloomberg suggested, pointing out that none of the leading chip manufacturers ramping up efforts in the US today have been approved for funding yet by the Department of Commerce.
Last month, Commerce Secretary Gina Raimondo confirmed that the US had not yet awarded grants to commercial semiconductor facilities like TSMC because selecting a defense contractor first “was meant to emphasize the administration’s focus on national security,” The New York Times reported. By funding BAE Systems, the Biden administration was likely moving quickly to decrease reliance on China-based chip supply chains for military purposes amid growing tensions between the two countries.
“When we talk about supply chain resilience, this investment is about shoring up that resilience and ensuring that the chips are delivered when our military needs them,” Jake Sullivan, President Biden’s national security adviser, said last month.
If the US announced funding for TSMC, that could ensure that the second Arizona chips plant would be operational by 2027 rather than 2028. According to Bloomberg, TSMC announced it was building a “more modest plant” in Japan that’s on track to launch operations this year after the Japanese government promptly provided funding.
In December, Raimondo promised that “much larger grants for major semiconductor manufacturing facilities run by companies like Intel, Samsung,” or TSMC would be announced “in the coming months.” She also confirmed that the “pace” of announcing awards would speed up in the first half of 2024.
Liu said that TSMC is in “consistent communication with the US government on incentive and tax credit support” in Arizona, the Journal reported.
