The semiconductor industry is witnessing a growing reliance on advanced packaging for chips, prompting speculation about the construction of production lines by Taiwan Semiconductor Manufacturing Company (TSMC) in the United States. Although TSMC plans to establish two advanced process wafer fabs, it is unlikely to significantly change Apple's dependence on overseas chips.
The establishment of a wafer fab in Arizona by TSMC can be seen as a triumph for the United States, receiving praise from Apple CEO Tim Cook. This move is expected to bolster American manufacturing and provide chips with the prestigious "Made in the United States" label.
However, while chip manufacturing can take place in the United States, the packaging process still predominantly occurs outside the country. In interviews with The Information, TSMC engineers and former Apple employees revealed that TSMC still needs to package the chips outside the United States before delivering them to Apple. This is due to the prevalent chip manufacturing processes being situated in North America rather than fully transitioning to the United States. If there is a shortage of supply chain capacity, the wafers must be sent back to Taiwan for advanced packaging.
TSMC employees have indicated that building advanced packaging plants in the United States is currently considered too costly, and therefore, there are no immediate plans for such facilities. The Arizona plant primarily serves as a contingency solution in the event of geopolitical tensions or conflicts, as the chips produced there still require shipment to Taiwan for packaging.
Apple may utilize chips manufactured at TSMC's Arizona plant, but it remains uncertain which specific chips will be produced there and whether they will undergo packaging in Taiwan. Less critical chips could potentially be packaged using technology outside of Taiwan.
Apple heavily relies on TSMC for fan-out packaging and chip processing, being the sole significant customer. Through a packaging integration production agreement, Apple can benefit from discounts provided by TSMC. However, Apple's dependence on TSMC for packaging is increasing, which may result in pressure from TSMC for Apple to utilize Taiwanese packaging facilities.
Initially, TSMC appeared uninterested in constructing packaging plants in the United States, but the U.S. government recognized the need for action. The CHIPS Act has allocated a $52 billion subsidy for the semiconductor industry, including at least $2.5 billion specifically set aside for the National Advanced Packaging Manufacturing Program. This program aims to enhance advanced packaging production capacity within the United States. However, the level of packaging subsidies is relatively low, making it challenging to attract manufacturers to invest in expensive production facilities in the country.
