The world's largest contract chipmaker, Taiwan Semiconductor (TSM -0.17%), announced last week that is expanding its manufacturing footprint within the U.S., in line with rumors that surfaced in recent days. The new facility will be built in Arizona, and TSMC says it received support for the project from the U.S. federal government as well as the State of Arizona.
Here's what investors need to know.
A $12 billion project
The chip fabrication plant will use TSMC's 5-nanometer process technology and be capable of producing 20,000 semiconductor wafers per month. Over 1,600 jobs are expected to be created directly by the construction project. The company plans to commence construction next year, with production starting in 2024. The total cost including capital expenditures is estimated to be approximately $12 billion, spread out between 2021 and 2029.
"This U.S. facility not only enables us to better support our customers and partners, it also gives us more opportunities to attract global talents," TSMC said in a statement. "This project is of critical, strategic importance to a vibrant and competitive U.S. semiconductor ecosystem that enables leading U.S. companies to fabricate their cutting-edge semiconductor products within the United States and benefit from the proximity of a world-class semiconductor foundry and ecosystem."
TSMC already has a presence in the U.S., including another manufacturing facility in Washington that it operates through wholly owned subsidiary WaferTech. The new Arizona facility will be TSMC's second manufacturing plant in the U.S. The company also has design centers in Texas and California.
Trump has been pushing for this
Apple (AAPL -0.66%) is easily TSMC's most prominent U.S. customer; TSMC produces the Cupertino tech giant's A-series of chips that power iOS devices. Meanwhile, the Trump administration has been pushing for chipmakers to build new chip factories in the U.S., according to a recent report from The Wall Street Journal. In other words, the TSMC news could be interpreted as a win for the Trump administration.
In an interview last week, the tweeter in chief suggesting imposing some type of tax on companies that assemble products outside the U.S., including Apple. It's unclear what type of tax he was referring to. Apple scored tariff exemptions last year in exchange for producing the new Mac Pro domestically, in addition to more tariff relief earlier this year.
"You know, if we wanted to put up our own border, like other countries do to us, Apple would build 100 percent of their product in the United States," Trump told Fox Business. "That's the way it would work."
The president then suggested that the U.S. has all the companies necessary to bring tech supply chains completely within the U.S., which it does not. On the earnings call last month, Apple CEO Tim Cook added that "our supply chain is global and so our products are truly made everywhere."
TSMC also produces chips that are used in the U.S. military, such as for fighter jets and satellites.