TSMC’s $65 billion Arizona facility can now match Taiwan production yields according to early trials

The US Semiconductor Manufacturing Expansion

The big picture: The US is committed to establishing semiconductor manufacturing within its borders, and perhaps no effort is more crucial to this goal than TSMC’s three-fab facility in Arizona. The government is pouring billions into the development, alongside TSMC’s $65 billion investment.

Taiwan Semiconductor Manufacturing Co. has reached a significant milestone in its expansion into the US. Recent trial production at the company’s new Arizona facility has yielded results comparable to those of its established plants in Taiwan, according to Bloomberg, which cited a person familiar with the company who requested anonymity. This development is a positive sign for the chipmaker’s ambitious US project, which has faced delays and doubts about whether it could match the production efficiency of its Taiwanese operations.

The Arizona plant began engineering wafer production in April using advanced 4-nanometer process technology. With production yields now on par with its facilities in Tainan, Taiwan, TSMC should be able to maintain its targeted gross margin rates of 53 percent or higher.

TSMC has much at stake with its US operations. The company plans to invest $65 billion in three plants in Arizona, making it the largest foreign direct investment in Arizona history and the largest foreign direct investment in a greenfield project in US history.

Concurrently, the US government is providing substantial support through grants and loans. TSMC is set to receive up to $6.6 billion in grants and $5 billion in loans for its Arizona project.

TSMC’s Arizona facility is on track to begin production at its first fab in the first half of 2025. The second fab, set to start production in 2028, will produce chips using 2nm process technology with next-generation nanosheet transistors, in addition to 3nm technology. The third fab will focus on 2nm or more advanced processes, with production expected to commence by the end of the decade.

The initial plan had been for the first fab to achieve full production this year, but the timeline was delayed due to several workforce challenges. These included difficulties in finding skilled workers locally, cultural differences between TSMC’s Taiwanese management and American employees, and a shortage of skilled construction workers that slowed the building process. This delay raised concerns about TSMC’s ability to maintain efficiency with its US operations compared to its facilities in Taiwan.

Recent success in trial production has alleviated some of these concerns. TSMC has confirmed that the Arizona project is progressing as planned, although the company has not commented specifically on yield rates.