TSMC held the ‘first tool-in ceremony for its Arizona fab this week. In addition to celebrating its first US fab, the company also announced major expansion plans for the production facility. The world’s largest foundry plans to invest tens of billions of dollars in the next phase of its Fab 21 near Phoenix, Arizona, to significantly increase its capacity and begin manufacturing chips using its N3 process technologies there by 2026.
Earlier this year, TSMC’s Fab 21 phase 1 construction in Arizona was completed, and this week the company began installing production tools into the facility. In the coming quarters, the fab will be outfitted with equipment from companies such as ASML, Applied Materials, KLA, Lam Research, and Tokyo Electronic, and will go live in early 2024. The fab will manufacture chips utilizing TSMC’s N5 family of process technologies, which now includes the N5, N5P, N4, N4P, and N4X nodes. This phase of the fab will have a production capacity of approximately 30,000 wafer starts per month (WSPM), though the exact number will depend on actual technologies and designs.
Companies such as AMD, Apple, and NVIDIA will produce their advanced chips in the United States for the first time in years via Fab 21 phase 1.
Nonetheless, TSMC has additional plans for Fab 21. The company has announced plans to construct a second fab on the site, expanding their US production capacity and establishing an even more modern production line.
The new Arizona fab will increase TSMC’s capacity at the site to approximately 50,000 wafers per square millimeter (WSPM) and increase TSMC’s total investment at the site to $40 billion. Notably, this is a $28B increase from the initial $12B investment TSMC made in their first Arizona fab, highlighting how costs continue to rise for newer fabs and TSMC’s growing comfort with making larger infrastructure investments in the United States. According to a Reuters report, TSMC expects annual revenue from Arizona fabs to be in the vicinity of $10 billion per year. Meanwhile, TSMC’s clients using the fabs will generate approximately $40 billion in revenue by selling foundry-made products in the United States.
The second Arizona fab, scheduled to open in 2026, will produce chips on TSMC’s N3 family of production nodes, including N3, N3E, N3P, N3S, and N3X, a generation ahead of its predecessor. It is anticipated that TSMC will deliver its first N3 chips to a client in early 2023; therefore, while the fab represents cutting-edge technology at the time of its inception, by the time it comes online it will be a trailing-edge fab. The company’s updated Arizona fab plans are consistent with this stance. Taiwan is where TSMC conducts its actual R&D, so it makes sense that the company would keep its cutting-edge production in Taiwan.
In terms of capacity, the new Arizona fab will be another “MegaFab” in TSMC parlance, similar to its existing sibling. That is a fab that produces approximately 25,000 wafer starts per month. TSMC has not disclosed a specific output figure for the new fab, but given that Fab 21 will produce 20,000 wafers per square millimeter (WSPM), it appears that this fab will produce closer to 30,000 WSPM. Still, TSMC’s Arizona facility is one of TSMC’s smaller operations, with a combined capacity of 50,000 wafers per month – 50,000 wafers is only half the production capacity of a single one of TSMC’s industry-leading GigaFabs. Even with a second fab line, TSMC’s U.S. operations will only account for a small portion of the company’s total chip fab capacity.
TSMC has already begun construction on the second Arizona fab and based on the typical timeline for fab construction, we can anticipate that the shell will be complete by early 2024. It will then take TSMC approximately two years to equip it.
In the second half of 2025, TSMC is scheduled to begin manufacturing chips in Taiwan using its N2 node. This node will be the first to use TSMC’s nanosheet-based gate-all-around field-effect transistors (GAAFETs), and over time, backside power delivery will be implemented. Since not all products require a leading-edge node, TSMC will have no trouble finding customers for their N3 domestic capacity in the United States.
The global semiconductor industry requires a robust, geographically diverse, and resilient supply chain, according to AMD’s CEO and chairman, Lisa Su. “TSMC’s investment and expansion in Arizona are mission-critical for both the semiconductor industry and our extended ecosystem of partners and customers. AMD anticipates being a significant user of the TSMC Arizona fabs, and we look forward to manufacturing our most powerful chips in the United States.”