TSMC’s plans for a second fabrication facility in Arizona to develop 3-nanometer chips will have a significant impact, not only because it re-disks the chip shortage situation in Taiwan, but also due to the catalyst effect it will have on the US’s advanced manufacturing capabilities, says GlobalData, a leading data and analytics company.
GlobalData’s report, ‘Artificial Intelligence (AI) Chips – Thematic Research, explains that the Russia-Ukraine war had unintended consequences for TSMC, a very important company in the semiconductor supply chain. Russia’s claims on parts of Ukraine’s territory have parallels with China’s claims on Taiwan, which is where TSMC is based and has the majority of its chip manufacturing plants. If, as a result of the war and following peace negotiations, Russia were to keep significant parts of Ukraine territory, China may feel emboldened to invade Taiwan with the expectation of a similar outcome. Although it is likely not to come to an outright invasion of Taiwan, China is likely to take an increasingly assertive stance, potentially disrupting the currently very globalized semiconductor supply chain.
Josep Bori, Thematic Research Director at GlobalData, comments: “While TSMC is presently manufacturing its most advanced chips out of Taiwan, there will be geographical diversification as a hedge to potential pressure from China. As a result, investment in North America and Europe-based manufacturing will be more and more likely.”
However, GlobalData notes that by the time both US-based fabs are fully operational, producing N4 and N3 chips, these nodes will not be cutting edge, as TSMC continues to keep the latest technology in its headquarters in Taiwan. GlobalData explains that there are a number of geopolitical influences to this decision.
Bori continues: “For TSMC, geographical diversification of its fabrication facilities makes sense from an operational risk-management perspective. However, from a geopolitical standpoint, TSMC has a delicate balancing act on its hands. By diversifying its fabrication capacity geographically, its main Taiwan facilities become less critical from a global supply chain standpoint—and, therefore, less crucial for the US to defend if China were to make any moves on the island. Further, their capacity alone cannot certainly fully insulate the global supply chain if Taiwan were to be disrupted by its ongoing conflict with China.”
“As long as it keeps its most advanced nodes in Taiwan, the risk for the most cutting-edge products, from the latest iPhones to the most advanced GPUs and AI accelerators, remains unmitigated.”
The more advanced nodes are the technology required for AI accelerators, enabling the most advanced AI algorithms. GlobalData’s report, predicts that the accelerating adoption of AI in commercial and military use cases will drive the global AI chips revenue at a compound annual growth rate of 30% from $12 billion in 2021 to $130 billion in 2030.
Bori adds: “The US’s investment in domestic manufacturing and the advanced technology export bans to China are all about AI dominance. This underpins what many call the fifth industrial revolution, and, ultimately, global economic leadership in the next few decades.
“Once advanced fabrication gets going in the US again, it will reinvigorate the domestic ecosystem, comprising universities, the engineering job market, and equipment and services suppliers. Further, it will also rebuild the local manufacturing expertise. Combined with Intel’s own fabrication efforts, these developments should enable more domestic fabrication capacity investments over time.”
