TSMC’s Arizona chip push is getting bigger, costlier and more awkward as US demand keeps roaring for advanced silicon.
TSMC chief financial officer Wendell Huang said the chipmaker is seeing strong demand from US customers. His comments came after the company’s latest earnings report and a fresh $100 billion US investment pledge.
According to Reuters the new money will expand TSMC’s Arizona footprint and add four facilities. It is meant to keep customers happy as demand for semiconductors and AI chips continues to bubble.
TSMC chief executive C C Wei said customers remained optimistic about semiconductor and AI chip demand. Wei said the Arizona investment would still depend on market conditions, which is corporate speak for not spending blindly if the party gets cancelled.
Huang told CNBC that TSMC was seeing multi-year demand, which explains the extra cash in Arizona. He said: “But we decided to continue to increase the investment in Arizona because it’s a multi-year structured demand increase. Okay, so, for us, in Arizona, we’re doing really well. We’re very happy about it. Our phase one, using N4 technologies, is up and running. The yield is as good as its mother fab in Taiwan. Phase two will be moving in tools very soon. It will be N3 technology. Phase three will be N2 technology the construction has already begun. And phase four, and the first phase of the advanced packaging fab in the US, the preparation works have started. So we’re doing very well, we’re seeing strong demand from the customers. And we also receive very strong support from the US government. Federal, state, city, very strong support. So we decided to increase our investment in Arizona by another 100 billion US dollars.”
The catch is that TSMC’s most advanced production still starts in Taiwan. That is where its closest research, development and operations work happens before anything gets exported.
Huang explained: “When you ramp the most leading-edge technologies, you need very close collaboration between the R&D and operations functions. It has to be in Taiwan. And after it stabilises, then we can consider transferring overseas.”
That leaves Arizona following Taiwan rather than overtaking it. The site is still important, but it is not about to become the centre of TSMC’s most advanced manufacturing universe.
Huang said the second Arizona phase, using 3nm technology, should arrive in the second half of 2027. The third and fourth phases will follow, assuming customers continue to waive purchase orders.
He said: “We expect phase two, using 3-nanometers, to be online in the second half of 2027 and phase three and phase four will follow. But as you said, it depends on market conditions and customer demand. At this moment, we like to do it as soon as possible.”
The ugliest bit is cost. Taiwanese analysts have been muttering about the cost of building fabs in the US, where everything seems to require more money, paperwork, and patience.
Huang admitted overseas expansion is expensive but tried to sound cheerful about it. He said: “The expansion overseas is more expensive. It takes four to five times as long to construct fabs in the US as in Taiwan. Therefore, there will be dilutions from overseas fabs. I’ll give you an example. Phase one started from dilution, it will improve, the profitability of phase one will improve. Although it may not reach Taiwan’s level, it will improve. Then phase two comes in, and phase two will improve. But then phase three comes in, so that’s why we’re saying, in the five-year period, between 2024 and 2029, the dilution at first will be two to three per cent a year and widen to three to four per cent a year. That’s because the size is getting bigger and bigger.”
So TSMC gets political support, customer demand and a strategic US foothold. It also gets a fab build-out that costs four to five times as much as Taiwan and drags on margins for years.
The Arizona roadmap now runs from N4 production to N3, then N2 and advanced packaging. That gives US customers more local capacity without giving them the first bite of TSMC’s newest process toys.
For Washington, this is a win wrapped in an expensive invoice. For TSMC, it is a hedge against geopolitics, customer pressure and the awkward truth that advanced fabs are much cheaper at home.
