Apple and its key component supplier TSMC, the U.S. Congress and the Arizona state government have been working toward this moment since early 2020. Dozens of press releases have been written, billions of dollars spent, and countless speeches praising America’s return to chip supremacy. Once the global leader in semiconductor manufacturing, the world superpower ceded control to Taiwan, which has more than 90% of the world’s cutting-edge production capacity.
In a recent meeting with German employees, Cook revealed what the world already knew: “We have decided to acquire a factory in Arizona that will be in production in the 24th century,” he commented Commentary by Mark Gurman of Bloomberg News. Apple, the world’s most valuable company, is the leading maker of smartphones by revenue, accounting for 26% of TSMC’s sales. And it’s American. So of course the company is going to source from this new factory. (To be fair, Cook didn’t name TSMC, but it’s unlikely he was talking about Intel Corp., which also operates a factory in the state.)
Likewise, TSMC works closely with customers including Nvidia Inc. and Qualcomm Inc. and Advanced Micro Devices Inc. — both American — and don’t make big decisions without consulting them. This year’s record capex figure of $36 billion didn’t come out of thin air, but was carefully planned after detailed discussions with customers who would buy capacity from the Hsinchu-based company.
While Apple’s purchase of U.S.-made components is a big step forward, it has done little to change the direction of global sourcing. On the one hand, TSMC’s new factory will manufacture chips at the 5nm technology node. That was a head start last year, but the chipmaker has moved to 3nm (smaller is better) and will be even more advanced when the factory opens in 2024, thanks to the incredible pace of technology development. Apple is highly unlikely to use Arizona-made processors to power its latest iPhones anytime soon.
Anyway, TSMC will not have this capacity. The new factory will produce 20,000 silicon wafers per month. That’s less than 1.6 percent of the 1.3 million it currently produces per month. Even if it adds another Arizona factory, as expected, the U.S. factory is nowhere near enough to fill Apple’s entire order. It is more likely to secure orders for several key chips used in smaller devices such as AirPods, TVs, HomePod or Watches.
Then there is Europe. During his recent visit, Cook hinted that the African continent would be another source of leverage. TSMC has no factories there and has not announced any plans. Financially, it doesn’t make sense. The chipmaker has the advantage of being concentrated on an island, with its facilities and engineers within bullet train range of each other. That has chafed clients, though, because Taiwan is also at greater risk as tensions with mainland China heat up.
The new factory in Japan and the Arizona project have spread out human resources, and another location on the other side of the world will make operations more challenging. That said, there’s a good chance that Germany will spend enough money and offer enough incentives to attract a factory, and the bragging capital that comes with attracting TSMC to its shores. Such a European factory would also not be at the cutting edge and therefore unable to produce Apple’s most advanced processors used in iPhones, iPads and Macs. It’s ok.
These factories may offer fewer components made using traditional manufacturing processes. While the older technology isn’t as cool, it’s critical to the global semiconductor supply chain. More chips are being made today using technology available in 2010 than have been introduced in the past two years. Recent shortages have affected products ranging from cars to computers, largely due to capacity constraints on technologies released more than a decade ago.
You don’t hear politicians advocating spending billions of dollars (or euros) to attract a factory producing “old” chips. But that’s the reality, and it’s perfectly acceptable, because these are the components the world needs most. Of course, Apple, Nvidia, Qualcomm, and AMD will be eager to announce their US-made chips, but actual supplies will be paltry and symbolic.
The purpose of TSMC’s global expansion is not to distribute the world’s best chipmaking technology globally. This is to allay concerns increasingly expressed by business and political leaders about too much capacity being concentrated in one place.
More views from Bloomberg:
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• Tech giants should help us tackle phone addiction: Parmy Olson
This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg columnist covering tech in Asia. Previously, he was a technology reporter for Bloomberg News.
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