Andrey Burmakin/Dreamstime
U.S. and China boxing

A Bargaining Chip

March 23, 2022
The U.S. and China spar amid Taiwan’s market dominance.

After decades of capacity building, Taiwan dominates the foundry market. Much of its ability to hold this position is attributed to Taiwan Semiconductor Manufacturing Corporation (TSMC), a contract manufacturing powerhouse, which produces more than 90% of the world’s advanced level semiconductors used in iPhones, supercomputers and automotive AI. TSMC produces chips for the world’s most in-demand electronics, including stalwarts Apple, Qualcomm, Nvidia, Intel and AMD.

Rivalry between Washington and Beijing to win geopolitical sway over leading-edge semiconductor companies places TSMC in the crosshairs of a commercial battle. For one, TSMC manufactures Kirin high-end semiconductors for Huawei, China’s largest smartphone chip consumer. Huawei’s close relationship with Beijing has been viewed by U.S. policymakers as a security threat to American telecom networks. Sanctions introduced in 2020 required foreign manufacturers using American IP to get a license before selling semiconductors to Huawei and SMIC. Since TSMC uses American equipment, the rule effectively restricts TSMC from conducting business with Huawei.

Taiwan-based fabs have been courted by governments in the U.S. and European Union. A report by geopolitical think tank Eurasia Group noted that TSMC’s $12 billion investment in a wafer fab in Arizona validates the Pentagon’s effort to secure a “trusted” supply chain. The facility will produce 5 nm technology, have a capacity of 20,000 semiconductor wafers per month, create more than 1,600 high-tech jobs and add thousands more to the semiconductor ecosystem.

That federal and state subsidies for TSMC’s Arizona plant are intended to offset the higher cost of building and operating a fab in the U.S., and remain a contentious issue for some policymakers. Others point out that the facility is not TSMC’s first manufacturing site in the United States. The other facility, WaferTech, is a TSMC subsidiary located in Camas, Wash., and provides technology and foundry services for fabless companies and IDMs. Currently, U.S. companies account for about 60% of TSMC revenue.

Intel doubled down last year when it announced a $20 billion investment strategy, starting with plans to build two new fabs in Arizona that are designed to manufacture the majority of the company’s products internally; to engage with third-party foundries to include manufacturing for a range of modular tiles on advanced processing technologies; and to establish a standalone business unit (Intel Foundry Services), which will provide manufacturing foundry capacity in the U.S. and Europe.

About the Author

Rehana Begg | Editor-in-Chief, Machine Design

As Machine Design’s content lead, Rehana Begg is tasked with elevating the voice of the design and multi-disciplinary engineer in the face of digital transformation and engineering innovation. Begg has more than 24 years of editorial experience and has spent the past decade in the trenches of industrial manufacturing, focusing on new technologies, manufacturing innovation and business. Her B2B career has taken her from corporate boardrooms to plant floors and underground mining stopes, covering everything from automation & IIoT, robotics, mechanical design and additive manufacturing to plant operations, maintenance, reliability and continuous improvement. Begg holds an MBA, a Master of Journalism degree, and a BA (Hons.) in Political Science. She is committed to lifelong learning and feeds her passion for innovation in publishing, transparent science and clear communication by attending relevant conferences and seminars/workshops. 

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