Heading to the US or Japan... TSMC Weighs Diversifying Production Bases

Geopolitical Risks Grow in Taiwan
Uncertainty Surrounds Location of Core 1-Nanometer Factory

[Asia Economy Reporter Han Ye-ju] Taiwan's TSMC, the global leader in the foundry industry, is expected to accelerate the diversification of its semiconductor production bases. As tensions between Taiwan and China escalate, increasing geopolitical risks, concerns have arisen that establishing a cutting-edge 1-nanometer (nm, one billionth of a meter) factory within Taiwan could lead to power shortages, prompting TSMC to seriously weigh options to reduce management uncertainties.

According to industry sources on the 13th, TSMC is constructing a factory in Phoenix, Arizona, USA, and plans to hold the first arrival ceremony for machinery and equipment next month. It is anticipated that U.S. President Joe Biden and U.S. House Speaker Nancy Pelosi will attend the groundbreaking ceremony. TSMC is reported to begin mass production of 5nm process semiconductor products at the Arizona plant starting in 2024, expanding to 3nm process products from 2026.

TSMC is also considering additional factory construction in Japan. Beyond the Kyushu plant scheduled to start operations at the end of 2024, the company is actively reviewing plans to build another factory in Japan. If TSMC expands the Kyushu plant, it is expected to produce advanced semiconductors using 3nm fine process technology.

Currently, most of TSMC's factories are located in Taiwan. Enhancing semiconductor foundry process technology and securing stable production capacity are critical factors due to the industry's sensitivity to semiconductor performance competition.

However, after U.S. House Speaker Nancy Pelosi's visit to Taiwan in August, relations between China and Taiwan deteriorated, increasing geopolitical risks surrounding TSMC. Additionally, with the U.S. tightening regulations on semiconductor production facilities in China, TSMC has planned to expand production facilities in the U.S. or its allies. TSMC Chairman Mark Liu stated, "The U.S.-China trade conflict and rising cross-strait tensions have brought more serious challenges to all industries, including the semiconductor industry."

Recently, concerns have been raised that establishing a 1nm factory could cause power shortages in Taiwan, making the location of the 1nm factory uncertain. There is speculation that TSMC might consider conducting cutting-edge processes outside Taiwan. TSMC had selected Longtan (龍潭) in Taoyuan, northern Taiwan, as the site for a factory applying core technologies such as 1nm or 1.4nm processes and was in the process of site selection. However, worries about a surge in TSMC's power consumption leading to energy shortages have spread. Professor Ye Zhongguang of the Department of Engineering and Systems Science at Taiwan's Tsinghua University criticized, "If TSMC's 1nm factory is established, delays in transitioning to renewable energy and uncertainties in liquefied natural gas (LNG) supply will inevitably sacrifice power usage for other industrial, residential, and general purposes."

Meanwhile, geopolitical risks are increasing not only for TSMC but also for Samsung Electronics, as Samsung operates almost all of its advanced foundry factories in South Korea.

An industry insider in the semiconductor sector remarked, "Semiconductor clients are increasingly demanding to build geopolitically stable supply chains. Major semiconductor clients are likely to consider the possibility of disruptions in contract manufacturing due to unforeseen events and will increasingly seek to build foundry factories in the U.S. and Europe to gain a competitive edge in securing orders."

This content was produced with the assistance of AI translation services.