Apple, its main supplier Taiwan Semiconductor Manufacturing Co., the US Congress, and the Arizona state government have been working so far since the beginning of 2020. Many articles were written, billions of dollars were spent, and many speeches were made in praise of America. return to chip height. Once the global leader in the production of semiconductors, the world’s biggest power has given control to Taiwan, which plays a role in more than 90% of the planet’s leading capacity.
In a meeting with employees in Germany recently, Cook revealed what was known to the world: “We’ve already made a decision to buy the plant in Arizona, and the plant in Arizona is starting in ’24,” he said, as reported by Bloomberg News’ Mark Gurman. Apple is the most valuable company in the world, the leading smartphone maker by revenue, and accounts for 26% of TSMC’s sales. And America. So the company would exit this new industry. (To be fair, Cook didn’t say the word TSMC (but it’s unlikely he was talking about Intel Corp., which works with factories in the state.)
Equally, TSMC works closely with customers that also include Nvidia Inc., Qualcomm Inc. and Advanced Micro Devices Inc. – all Americans – and does not make a major decision without consulting them. This year’s record $36 billion capex was not pulled out of thin air, carefully planned after detailed discussions with the very customers who would buy capacity from the Hsinchu-based company.
While it’s a great step forward for Apple to buy things made in the US, it doesn’t quite move the needle on global acquisitions. First, TSMC’s new factory will make chips in the 5-nanometer technology area. That was the best last year, but the chip maker has already moved to 3nm (smaller is better) and will be even more advanced by the time the plant opens in 2024 due to the breakneck speed of technology development. It’s highly unlikely that Apple will use Arizona-made processors to power its latest iPhones anytime soon.
TSMC won’t be strong anyway. The new site will produce 20,000 wafers of silicon chips per month. That’s less than 1.6% of the 1.3 million monthly outflows. And even if it adds another plant in Arizona, as expected, the American plant will not be close to being able to fulfill Apple’s complete orders. It is likely that it will receive orders for a few chips used in small devices such as AirPods, TV, HomePod or Watch.
Then it’s Europe. In his latest trip, Cook revealed that the continent will be another source of chips. TSMC has no factories there and has not announced plans for any. Financially, it doesn’t make sense. The manufacturer’s strength lies in the concentration on one island with its facilities and engineers all within a bullet train’s journey from one another. That upsets customers, however, because Taiwan also faces major risks as tensions with China heat up.
A new factory in Japan and a project in Arizona will simply spread its human resources thin, and another location on the other side of the world will make operations even more difficult. That said, there’s a good chance that Germany will spend enough money and offer enough incentives to skip the factory, and the bragging rights that come with luring TSMC to its shores. Such a European plant will not be ahead, and therefore cannot produce the most advanced Apple processors used in iPhones, iPads and Macs. And that’s fine.
What these factories can offer you are small parts made using legacy manufacturing processes. And while the old technology isn’t that cool, it’s important to the global semiconductor supply chain. More chips are made today using techniques discovered in 2010 than those that debuted two years ago. The recent shortages, which have hit products ranging from cars to computers, are largely caused by technology capacity constraints released over the past dozen years.
You won’t hear politicians whining about spending billions of dollars (or euros) to attract the industry that makes “old” chips. But that’s true, and it’s perfectly acceptable because these are the parts that the world needs the most. Of course Apple, Nvidia, Qualcomm and AMD will be eager to announce their US-made chips, but the actual supply will be limited and limited.
The point of TSMC’s global expansion is not to spread the best chipmaking technology around the world. It is to alleviate concerns, which continue to be expressed by business and political leaders, about having too much capacity in one place.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. He was previously a technology reporter for Bloomberg News.
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