Yet the Most Advanced Chips Still Remain Strictly Offshore
The US and Taiwan have reached a ‘historic’ trade agreement under which TSMC, along with the government, plans to invest $500 billion in the US chipmaking industry, but that investment still won’t deliver cutting-edge production.
TSMC Shows Deepened Commitment Towards Operations in Arizona, Yet the “N-2” Policy is Still Effective
The Taiwan government has been pursuing an aggressive trade deal with the US, aiming for tariff treatment similar to that of Japan and South Korea. The Trump administration has recently announced a tariff deal with Taiwan, and, according to Commerce Secretary Howard Lutnick (via Reuters), the total investment package now stands at $500 billion, including the earlier $165 billion commitment from TSMC. A total of $250 billion will be spent by TSMC, with the remaining amount contributed by the Taiwanese government, and the new tariff rate is set at 15%.
It’s important to note that TSMC’s investments in the US are a part of the company’s broader strategy to diversify production, and the region doesn’t hold an “exclusive” status when it comes to fab expansion. The Taiwan chip giant has similar plans with areas such as Japan and Germany, yet the spotlight right now is on Arizona. TSMC’s additional investments reportedly focus on new plants in Arizona (Fab 1-4), advanced packaging facilities (AP 1-2), and dedicated R&D centers to nurture local semiconductor industry talent.
Following the rather “historical” deal, TSMC’s CFO Wendell Huang appeared on CNBC to discuss the trade agreement, claiming that the Taiwan giant plans to focus on manufacturing in Arizona and that the company’s efforts have put Taiwan-US yield rates on equal footing. Yet, TSMC doesn’t expect cutting-edge chip production to come to the US in the near future, citing “practical reasons” such as the intense collaborative environment, the maturity of its Taiwanese production lines, and, of course, the extensive talent pool it has in Taiwan.
Taiwan’s local laws enforce the “N-2” policy, which requires offshore production to be two generations behind, indicating that pouring $500 billion into the US still won’t give the nation access to cutting-edge chip production. Given that more than 70% of TSMC’s customers (as quoted by CNBC) are US-based fabless firms, and since many of them are looking towards higher-end nodes right now, such as the A16, it would be interesting to see whether the chip giant could maintain its policy of producing sensitive technology offshore.
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