TSMC’s North America headquarters in San Jose, California, as of June 10, 2023. TSMC (Taiwan Semiconductor Manufacturing Company) is a leading Taiwanese multinational in semiconductor production.

TSMC’s latest achievement in semiconductor yield at its Arizona plant marks a pivotal moment for both the company and the U.S. semiconductor landscape. Known for its cutting-edge fabrication in Taiwan, TSMC’s move stateside not only helps meet growing global demand but also strengthens American chipmaking independence. By outperforming its Taiwan facilities with a 4% higher yield, TSMC’s Arizona facility reinforces U.S. goals to diversify and secure chip production.

TSMC’s Arizona yield success signals progress in the U.S. semiconductor initiative supported by the 2022 CHIPS Act. Currently set to receive $6.6 billion in government grants and $5 billion in loans, TSMC may also qualify for 25% tax credits as part of ongoing federal support. This funding underscores Washington’s commitment to securing a resilient domestic chip supply chain and boosting the U.S. presence in the global semiconductor market.

Could this success in Arizona mean a shift in where advanced semiconductors are produced? What challenges has TSMC overcome in bringing high-yield chip manufacturing to the U.S., and how might it impact the semiconductor industry worldwide?

TSMC’s Arizona Yield Achievement

TSMC’s Arizona plant has achieved a yield rate that outpaces its Taiwan facilities by approximately 4%, underscoring a major accomplishment for U.S.-based semiconductor production. Yield rates measure the percentage of functional chips produced per wafer—a metric crucial in semiconductor manufacturing, where high yields are essential for minimising waste and maximising cost efficiency. The Arizona plant’s results suggest that TSMC has successfully adapted its high-precision manufacturing techniques to U.S. facilities, challenging assumptions that advanced semiconductor fabrication can only thrive in East Asia.

The success is especially important for TSMC, given the costs and complexities tied to chip manufacturing. Building a single fab can run into billions of dollars, and maintaining high yields is crucial for offsetting these expenses. By exceeding the yield of similar fabs in Taiwan, TSMC not only improves the economic viability of its Arizona site but also demonstrates its commitment to operational excellence abroad.

This achievement aligns with broader U.S. goals of bolstering domestic semiconductor production, especially as reliance on chips continues to grow across sectors like AI, automotive, and telecommunications. For TSMC, this strong start in Arizona lays a foundation for future expansion and signifies the potential for increased U.S. chip autonomy amid shifting global supply chains.

Strategic Implications for the Semiconductor Market

TSMC’s success in achieving higher yields in Arizona signals a potential shift in the global semiconductor industry. Historically, advanced chip manufacturing has been concentrated in Asia, particularly Taiwan, where TSMC and other leaders dominate. However, TSMC’s U.S. plant is proving that American facilities can rival—and even outperform—some of Asia’s most efficient production sites. This success not only strengthens the U.S. semiconductor supply chain but also enhances its position in the global tech economy, helping to reduce dependency on overseas production amid increasing geopolitical concerns.

Chips Act Role

The U.S. government’s Chips Act has been instrumental in supporting TSMC’s Arizona project, offering substantial financial incentives to drive domestic chip manufacturing. The Act includes grants, loans, and tax incentives to bolster semiconductor production across the U.S. By investing billions into domestic manufacturing, the U.S. aims to secure a leading role in the global semiconductor market, make the tech supply chain more resilient, and stimulate job growth in high-tech sectors. TSMC’s early yield success underscores the Act’s potential to reshape the industry.

Overcoming Challenges in U.S.-Based Manufacturing

Bringing TSMC’s advanced semiconductor production to Arizona came with significant challenges, including skilled labour shortages and unfamiliar safety regulations that delayed schedules. Unlike Taiwan, the U.S. lacks a readily available specialised workforce, which initially disrupted installation processes. TSMC addressed these issues by expanding recruitment, working with local unions, and adapting to U.S. safety protocols. This strategic approach enabled smoother operations and established a foundation for high-yield, efficient chip manufacturing, solidifying TSMC’s role in U.S.-based production.

TSMC initially aimed to begin full production at its first Arizona fab this year, but labour issues delayed that target to next year. Plans for a second fab also saw a shift from the original 2026 timeline to a projected 2027 or 2028 start. These delays have sparked questions about whether TSMC can match its Taiwan efficiency standards in the U.S., despite recent yield successes.

By building local talent and aligning with U.S. industry requirements, TSMC has set a foundation for efficient, high-quality chip production in Arizona.

Competitive Impact on Intel and Samsung

TSMC’s yield breakthrough in Arizona places it a step ahead of rivals like Intel and Samsung, who are also striving to enhance their U.S. semiconductor manufacturing capacities. Intel, which faces financial challenges and production delays, is under pressure to meet competitive yield rates and justify its hefty investments in domestic fabs. Samsung, meanwhile, is ramping up its own U.S. operations but has yet to demonstrate yields that rival TSMC’s.

With TSMC setting a new benchmark, Intel and Samsung may face heightened expectations around yield performance and operational efficiency. The success of TSMC’s Arizona fab could also influence their strategies, pushing them to accelerate advancements and attract additional support for U.S.-based projects.

Future Prospects for TSMC in the U.S.

TSMC’s successful start in Arizona has sparked discussions about further U.S. expansion. With room for up to six fabs at its Phoenix site, TSMC is positioned to significantly increase its U.S. production capacity. Additional fabs would enable TSMC to supply a greater share of chips domestically, enhancing American tech autonomy and reducing reliance on overseas manufacturing. This potential expansion aligns with U.S. goals for a resilient semiconductor supply chain, fostering a more robust tech infrastructure to support growth in AI, automotive, and advanced computing sectors.