TSMC’s upcoming $12 billion US semiconductor plant and “Made in USA” iPhones


Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading chip foundry that counts Apple as its #1 client, is investing a cool $12 billion in a manufacturing plant based in Arizona, its second US facility. Former Apple executive Jean-Louis Gassée in his Monday Note column analyzes the repercussion of the move and potential problems that it may solve.

In his piece published yesterday, titled “$12B TSMC US Plant: What Problem Does It Solve?”, Jean-Louis argues that TSMC’s announcement comes at an auspicious time and could trigger new speculation about “Made in USA” iPhones.

But first, a little backgrounder…

Apple years ago ditched Samsung and picked TSMC to fabricate its in-house designed mobile chips due to its reliability and ability to miniaturize the elementary building blocks of a chip.

The iPhone 11 system-on-a-chip, dubbed the A12 Bionic, is being manufactured on TSMC’s seven-nanometer process technology, which means that the smallest transistor on the chip is about seven nanometers in size, or about seven millionths of a millimeter. TSMC’s is also prepping volume production of five-nanometer chips.

Jean-Louis says having TSMC now committed to an Arizona plant raises an obvious question:

If such an important part of the company’s iPhones (and iPads, Apple Watches, etc.) can be made in Arizona, why can’t the whole manufacturing process Finally™ be brought to the US? One can see the benefits to such a change: political, economic, a simpler supply chain, and a safer one as well in troubled times… It’s a pleasant thought but a rough simulation will help us grasp the enormity of the challenge.

Taking into account that Apple needs tens of millions of new iPhone units each quarter, we quickly come to the realization that Apple’s current style of iPhone manufacturing just isn’t possible in the United States (as always, emphasis mine):

This little simulation, imprecise as it certainly is, gives us a workable idea of the immensity, to say nothing of the seasonality, of the iPhone manufacturing process. In particular, it involves the size and type of manpower flows that only a company such as Hon Hai Precision (a.k.a. Foxconn) knows how to provide.

Foxconn’s knowledge, ability to draw from a massive manpower pool, and the will to impose tough working conditions while also dealing with a seasonal ebb and flow are nowhere to be found or accepted in the US.

That said, TSMC’s Arizona plant is a step in the right direction.

Making the Axx processors at a US-based TSMC foundry is a good first step. Apple could claim that the heart of the iPhone — the Axx processor and iOS — are Designed and Made in the USA™. The next step, making the iPhone a fully domestic product, would require deep design and component changes in order to automate the assembly, test, and pack process. Easy to say, but not to do — otherwise it’d be done already.

Such a move would for once deserve the strategic epithet, as in something that influences the course of a war. In any event, it would be much more interesting and sensible than the putative Apple Car discussed last week.

I couldn’t agree more with this assessment of the mythical “Made in USA” iPhone.

For those wondering, the upcoming Arizona facility will utilize TSMC’s latest five-nanometer technology for semiconductor wafer fabrication. It will have capacity to churn out 20,000 semiconductor wafers per month.

Construction is planned to start in 2021 while production is targeted to begin in 2024.

“This US facility not only enables us to better support our customers and partners, it also gives us more opportunities to attract global talents,” TSMC said in a statement. This will be the second manufacturing plant for TSMC in the United States.

Be sure to read the new installment of Jean-Louis’ Monday Note column in its entirety — as usual, it’s an entertaining, insightful read from Apple’s former executive.