Recent announcements of significant investments by Samsung and Taiwan Semiconductor Manufacturing Company (TSMC) in U.S. chip manufacturing signal a substantial shift for American technology. The moves aim to diversify the production of leading-edge chips, currently dominated by Asia; secure semiconductor sources in the Americas supply chain; and bolster U.S. technological independence.
For decades, the U.S. chip manufacturing industry has steadily declined. The U.S. accounted for over a third of global chip production in the 1990s, a share that had dropped to about 12 percent in 2020. Concerns have been raised about the vulnerability of domestic semiconductor manufacturing.
Samsung Austin Office. Source: Samsung
In 2010, the late Andy Grove, former Intel CEO, wrote in Businessweek: “American companies discovered that they could have their manufacturing and even their engineering done more cheaply overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering.”
The bipartisan CHIPS Act aims to reverse this trend by providing billions of dollars in grants and incentives to attract chipmakers back to the United States.
“Much of the semiconductor supply chain…is concentrated in a couple of Asian locations, and that leaves the U.S. supply chain incredibly vulnerable to disruption,” said U.S. Commerce Secretary Gina Raimondo.
Texas and Arizona are the biggest winners
Samsung’s commitment to invest $40 billion in a new facility in Taylor, Texas, including $6.4 billion in U.S. government funding through the CHIPS Act, positions them as a leader in this initiative. Notably, Samsung plans to begin production of the most advanced 2-nanometer chips at this facility by 2026, two years ahead of TSMC’s projected production in Arizona. This strengthens Samsung’s global market position and significantly accelerates the U.S.’s ability to produce cutting-edge technology domestically.
“We’re not just expanding production facilities; we’re strengthening the local semiconductor ecosystem and positioning the U.S. as a global semiconductor manufacturing destination,” said Samsung Semiconductor CEO Kye Hyun Kyung. “To meet the expected surge in demand from U.S. customers, for future products like AI chips, our fabs will be equipped for cutting-edge process technologies and help bring security to the U.S. semiconductor supply chain.”
In documents submitted two years ago to the Texas Comptroller’s Office, Samsung shared the possibility of investing more than $200 billion in 11 new semiconductor plants in Texas over the next 20 years.
TSMC Arizona factory. Source: TSMC
TSMC, the world’s leading contract chipmaker, is also expanding its U.S. presence with a $65 billion investment in a complex of chip factories in Arizona. Trade tensions between the U.S. and China and the recent earthquake in Taiwan have raised concerns about disrupting chip production in Asia. Arizona, with its lower earthquake risk, offers a more stable environment.
TSMC is getting up to $6.6 billion from the U.S. government to expand the operation’s scope and sophistication.
“TSMC will also build a third chip factory in Phoenix, increasing its total investment in Arizona to $65 billion and creating over 25,000 direct construction and manufacturing jobs, along with thousands of indirect jobs,” said U.S. President Joe Biden. “These facilities will manufacture the most advanced chips in the world, putting us on track to produce 20 percent of the world’s leading-edge semiconductors by 2030.”
“We are honored to support our customers who have been pioneers in mobile, artificial intelligence and high-performance computing, whether in chip design, hardware systems or software, algorithms, and large language models,” said TSMC CEO Dr. C.C. Wei. “They are the innovators driving demand for the most advanced silicon that TSMC can provide. As their foundry partner, we will help them unleash their innovations by increasing capacity for leading-edge technology through TSMC Arizona. We are thrilled by the progress of our Arizona site to date and are committed to its long-term success.”
TSMC has been a long-standing partner of Nvidia since “we invented the GPU and accelerated computing, and our ongoing innovation in artificial intelligence (AI) would not have been possible without them,” said Jensen Huang, founder and CEO of Nvidia. “We are excited to continue our partnership with TSMC as it brings cutting-edge facilities to Arizona”
With projects such as TSMC’s and Samsung’s, the U.S. is on track to make about 20 percent of the world’s cutting-edge chips by 2030, the Commerce Department said. “It’s a national security problem that we don’t manufacture any of the world’s most sophisticated chips in the United States,” Raimondo said. “We are now making these investments which will allow the United States to once again lead the world, not just in semiconductor design…but also in manufacturing, advanced packaging and research and development.”
Benefits and challenges
Samsung Texas office. Source: Samsung
The investments by Samsung and TSMC offer a promising future for U.S. technology in several ways. First, the domestic production of advanced chips will reduce America’s reliance on Asian facilities, thereby mitigating risks associated with trade wars, political instability, or natural disasters. This diversification also ensures a dependable supply chain for critical components in automotive, military, and infrastructure applications.
Secondly, these large-scale investments will create jobs in construction and chip production. The presence of these leading chipmakers will have a ripple effect, attracting other technology companies and research institutions. It will foster a thriving domestic ecosystem for technological development.
Finally, domestic production fosters closer collaboration between chipmakers and U.S. technology companies. This proximity can accelerate innovation and lead to the development of new technologies.
Regardless, it’s important to note that alongside these positive developments, challenges must be addressed. Both companies have voiced concerns about the availability of a skilled workforce to staff their new facilities. Overcoming this labor shortage will be a crucial factor in the success of these projects.
The CHIPS Act funding provides a significant boost, but long-term competitiveness hinges on maintaining an attractive business environment for chipmakers. Additionally, the rapid pace of technological advancement necessitates continuous investment in research and development to ensure U.S. chip production remains at the forefront.
In 2022, Morris Chang, TSMC’s retired founder, called America’s chipmaking ambitions a “wasteful and expensive exercise in futility.”
The investments by Samsung and TSMC represent a turning point for the U.S. chip industry. These projects will strengthen U.S. technology and national security by diversifying leading-edge chip production and fostering domestic innovation. Addressing labor shortages and ensuring long-term competitiveness will be essential for the success of this initiative. As the U.S. strives for technological independence, continued collaboration between government and industry will be vital in securing a robust and resilient domestic chip supply chain.
The global chip shortage also highlights the need for continued cooperation with international partners to ensure a stable supply chain.
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