Taiwan Semiconductor Manufacturing Co. (TSMC), the world's leading contract chip maker, has announced a significant setback for its planned $40 billion Arizona factory as it faces delays in the start of mass production.
The facility, backed by the Biden administration and intended to bolster US semiconductor production, is now expected to begin producing 4nm chips in 2025, a year later than initially scheduled.
TSMC Faces US Skilled Workers Shortage
The Wall Street Journal reports that TSMC Chairman, Mark Liu, cited a shortage of skilled workers in the United States as the primary reason behind the delay.
The company is grappling with challenges in handling and installing the most advanced equipment, hindering progress in the construction of the Arizona facility.
To address the shortage, TSMC is considering the possibility of temporarily bringing in experienced technicians from Taiwan.
TSMC's Arizona Factory
The Arizona factory was envisioned as a vital step in reducing the US's dependence on foreign semiconductor production, in line with the US government's aim to achieve self-sufficiency in the industry.
PhoneArena reports that plans initially called for the factory to commence mass production of 4nm chips in 2024, with an additional facility to open in 2026 to manufacture 3nm chips. However, the current delays are likely to push back these timelines.
Moreover, TSMC is waiting for the US government to provide the final decision on subsidies and tax credits, which are crucial for the company's financial viability during the early years of the plant's operation.
The subsidies would help bridge the cost gap between producing chips in the United States and Taiwan, which would have otherwise been more cost-effective.
Despite the challenges related to the Arizona factory, TSMC remains optimistic about its long-term prospects, particularly in the blossoming artificial intelligence (AI) sector. The company anticipates substantial gains from AI-related business as demand for advanced chips used in AI functions surges.
What's Next?
Chief Executive C.C. Wei revealed that chips for AI applications currently account for 6% of TSMC's revenue, with projections showing this figure rising beyond 10% in the coming years.
The company is well-positioned to capture a significant share of the growing AI-related chip demand, reinforcing its dominant position in the market for advanced semiconductor chips.
TSMC faces headwinds in its revenue and profit projections in the near term. The company expects a 10% decline in revenue for the current year, attributing the drop to soft consumer demand and economic recovery challenges, particularly in key markets like China.
The first quarter of 2023 saw TSMC report its first year-over-year decline in profits in four years, with profits declining 23% to approximately $5.9 billion.
Despite all the hype surrounding the launch of 3nm mass production this year, TSMC has faced hesitancy from clients due to the high prices of silicon wafers used in chip production, priced at approximately $20,000 per wafer.
However, TSMC's fortunes are set to change in 2023, with Apple expected to account for 90% of the company's 3nm production as it gears up to unveil its new A17 Bionic chipset powering the highly anticipated iPhone 15 Pro and iPhone 15 Pro Max.
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