But Cook sidesteps an uncomfortable fact: The Arizona factory will do little to make the U.S. self-reliant in chips. The factory has been a focus of Biden's plan and will cost $40 billion to build. That's because many advanced chips manufactured in Arizona for Apple or other customers like Nvidia, AMD and Tesla will still need to be assembled in Taiwan, a process known as packaging, according to interviews with multiple TSMC engineers and former Apple employees.
TSMC has no plans to build packaging plants in Arizona or elsewhere in the United States, mainly due to the high cost of such projects, employees said.
The disclosure suggests that TSMC's Arizona factory may score political points but will not reduce U.S. dependence on Taiwan. The plant will begin large-scale production in 2025 and will employ 4,500 people across two plants.
TSMC's inability to fully assemble chips for Apple and other companies in the United States shows how difficult it will be for Biden to bring chip manufacturing to the United States without completely reshaping the entire semiconductor supply chain. The semiconductor supply chain is mainly concentrated in Asia. Taiwan occupies a particularly important position in this field.
Cook has said Apple will be TSMC's largest customer at its Arizona factory, but did not specify which chips would be produced there or how many would be produced. Packaging of the companies' less critical chips, including those for iPads and MacBooks, can be handled outside Taiwan.
Nvidia, AMD and Tesla also plan to use the Arizona factory to produce chips, but they did not specify which factories. But TSMC employees say the most advanced artificial intelligence chips, including Nvidia's coveted H100 chip, still rely on packaging technology that TSMC uses only in Taiwan. TSMC is spending billions of dollars to expand its ability to package these chips in Taiwan in response to the explosion in demand for artificial intelligence computing.
'Huge expense'
When or whether TSMC will bring cutting-edge chip packaging to the United States depends on cost. Paul Triolo, senior vice president for China operations at consulting firm DGA-Albright Stonebridge Group, said TSMC's Arizona factory does not produce enough chips to justify the price of building advanced packaging facilities there.
He said:
"Building such a facility is a huge expenditure of (capital), time and effort, and it seems unlikely that TSMC will be doing it in the Arizona desert anytime soon, especially given all the issues the company has encountered so far with construction, cost and personnel."
The problems prompted TSMC to delay the start of construction by a year to 2025, after the company said in July that it was struggling to find enough skilled workers to build the factory.
Chip analysts such as Triolo and industry groups such as the Institute of Printed Circuits say Washington has not done enough to encourage companies involved in packaging to move their operations to the United States, where only 3% of global advanced packaging occurs.
The U.S. government recognizes the gap in advanced packaging. The United States passed the CHIPS Act last year, providing about $52 billion in subsidies for chip companies building factories in the United States. The bill calls for the establishment of a national advanced packaging manufacturing program. The program will receive at least $2.5 billion in funding this year from the CHIP Act, which IPC said shows packaging "is not being given a clear priority."
The U.S. Department of Commerce played a key role in developing the CHIP Act. A Commerce Department spokesperson would not comment on potential applicants seeking funding for advanced packaging facilities, but pointed to a February speech by U.S. Commerce Secretary Gina Raimondo, in which she said the United States would develop multiple high-volume advanced packaging facilities and become a global leader in the field.
But without more subsidies, it's unclear how advanced packaging companies can justify the high cost of building facilities in the U.S. compared with Asia, Triolo said.
Chip packaging involves encapsulating the chip in a protective material and placing the chip components as close together as possible to reduce the distance that signals must travel between them. As the industry faces physical constraints on how many transistors can be etched onto chip wafers, cutting-edge packaging has become important for improving chip performance. TSMC and another Taiwanese company, ASEGroup, handle many of the world's most advanced packaging in Taiwan, Samsung Electronics has significant facilities in South Korea, and Intel, a pioneer in the field, is building a large advanced packaging facility in Malaysia.
But no other company can match TSMC in this area. The company initially developed the advanced packaging used in iPhones for another customer, Qualcomm, but Qualcomm ultimately did not use the technology, according to current and former TSMC employees. Instead, Apple began using it for the iPhone's main chip as early as 2016.
Today, the main chip of the iPhone still uses an advanced packaging method developed by TSMC, called integrated fan-out packaging, also known as InFO_PoP. This approach places the iPhone's memory on the processor, making the overall chip smaller and thinner to improve its energy efficiency and performance.
Apple discounts
Former Apple and TSMC employees said that Apple has paid a lot to use TSMC's advanced packaging, and Apple is the only customer that uses TSMC's methods in a large amount.
However, previously reported information showed that Apple received a large discount on TSMC's packaging because it was tied to a commercial contract with TSMC to manufacture processor chips, which gave Apple unique advantages. Apple also uses TSMC's advanced packaging for the Apple Watch and its most advanced Mac desktop computers.
SemiAnalysis's Patel said that as chip packaging becomes more advanced, TSMC customers such as Apple and Nvidia will find it harder to separate themselves from factories in Taiwan. This is because TSMC always develops the latest manufacturing and packaging processes locally, where costs are lower and talent is easier to find.
This means that TSMC’s future advanced packaging methods that Apple is considering using will almost certainly only be available in Taiwan. According to a TSMC employee with direct knowledge of the matter, Apple is evaluating that future Macbooks and Mac computers may use Small Outline Integrated Circuits (Small Outline Integrated Circuit), which divides the processor into smaller pieces and stacks them together to make the overall chip smaller while also improving performance.