TSMC is building a second chip plant to meet US semiconductor demand

The expansion marks one of the largest direct foreign investments in the US.

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The White House and Taiwan Semiconductor Manufacturing co. (TSMC) have announced plans to build a second chip plant in Arizona, AZCentral has reported. That will boost the company's investment in the state from $12 billion to $40 billion, while heavily reducing US reliance on semiconductor imports.

Both TSMC factories combined will produce 600,000 wafers per year. "At scale, these two [plants] could meet the entire U.S. demand for U.S. chips when they’re completed," the National Economic Council's Ronnie Chatterji told CNBC. "That’s the definition of supply chain resilience. We won’t have to rely on anyone else to make the chips we need."

The newly announced factory will produce cutting-edge 3-nanometer chips by 2026. The expansion marks one of the largest direct foreign investments in the US and the largest in Arizona. TSMC recently upgraded its plans at its first facility as well, announcing it will now manufacture 4-nanometer instead of 5-nanometer wafers. The first chips are set to be manufactured there starting in 2024, with Apple and NVIDIA reportedly among the first customers.

The CHIPS and Science Act allotted $52.7 billion in loans and other incentives, plus billions more in tax credits, to encourage US semiconductor manufacturing investment. The legislation aims to boost private financing in chip manufacturing in the US.

President Joe Biden is set to visit the site of TSMC's first plant later today, but the White House announced other related news yesterday. The US Department of Commerce and the European Commission are striking a deal to implement an "early warning mechanism" related to semiconductor chain disruptions following a pilot program last summer. The aim is to improve forecasting of semiconductor supply and demand to achieve a balance between the two.

At the same time, the EU and US are implementing a "transparency" mechanism around public support provided to the chip sector. In other words, one side won't blindside the other with unexpected semiconductor subsidies that could put either at a competitive disadvantage. A similar issue came up during a recent visit by French President Macron, as EU leaders complained that the US Inflation Reduction Act was unfair to non-American companies.