You can picture it now. It is 2025 and Apple chief executive officer Tim Cook has just taken the stage to announce the company’s latest gadget. It is faster, more powerful and in every way better than the previous iteration, and one more thing: It features chips made in the US. The crowd applauds.
Apple, its key component supplier Taiwan Semiconductor Manufacturing Co (TSMC), US Congress and the Arizona government have been working up to this moment since early 2020. Dozens of news releases have been written, billions of dollars spent and numerous speeches given lauding the US’ return to chip supremacy. Having once been a global leader in semiconductor manufacturing, the world’s great superpower ceded control to Taiwan, which plays host to more than 90 percent of the planet’s leading-edge capacity.
In a meeting with employees in Germany, Cook said what the world knew: “We’ve already made a decision to be buying out of a plant in Arizona, and this plant in Arizona starts up in ‘24,” he said in comments reviewed by Bloomberg News’ Mark Gurman.
Apple is the world’s most-valuable company, the leading maker of smartphones by revenue, and accounts for 26 percent of TSMC’s sales — and it is a US company. So of course it was going to source from this new factory. (To be fair, Cook did not name TSMC, but it is highly unlikely he was talking about Intel, which also operates factories in the state.)
Equally, TSMC works closely with clients that also include Nvidia, Qualcomm and Advanced Micro Devices (AMD) — all US firms — and does not make a major decision without consulting them. This year’s record US$36 billion capital expenditure figure was not pulled out of thin air. It was carefully planned after detailed discussions with the customers who would be purchasing capacity from the Hsinchu-based company.
While it is a great step forward for Apple to be buying US-made components, it barely moves the needle on global sourcing. For one thing, TSMC’s new factory would make chips at the 5-nanometer technology node. That was leading-edge last year, but the chipmaker has already moved to a 3-nanometer process (smaller is better) and would be even more advanced by the time the plant opens in 2024, thanks to the breakneck speed of technical development.
It is exceedingly unlikely that Apple would be using Arizona-made processors to power its most-recent iPhones any time soon.
TSMC would not have the capacity anyway. The new site is to produce 20,000 wafers of silicon chips per month. That is less than 1.6 percent of the 1.3 million it churns out monthly. Even if it adds another Arizona plant, as expected, the US facility would be nowhere near able to fill Apple’s total orders. More likely it would receive orders for a couple of key chips used in lesser devices such as AirPods, TVs, HomePods or watches.
Then there is Europe. In a recent tour, Cook hinted that the continent would be another source of chips. TSMC does not have factories there and has not announced plans for any. Financially, it does not make sense. The chipmaker’s strength lies in being concentrated on one island with its facilities and engineers all within a high-speed-train ride from each other. That irks clients, because Taiwan also faces greater risks as tensions with China heat up.
A new plant in Japan and the Arizona project would already spread its human resources thin, and another location on the other side of the world would make operations even more challenging. That said, there is a good chance Germany would spend enough money and offer sufficient incentives to snag a factory, and the bragging rights that come with luring TSMC to its shores. Such a European plant would not be leading-edge either, and thus incapable of churning out Apple’s most-advanced processors used in iPhones, iPads and Macs — and that is OK.
What these factories are likely to offer is lesser components made using legacy manufacturing processes. Although older technology is not as cool, it is critical to the global semiconductor supply chain. More chips are made today using techniques available in 2010 than those that debuted in the past two years. A recent shortage, which hit products from cars to computers, was largely due to capacity constraints for technology released a dozen years ago.
You would not hear politicians crow about spending billions of dollars (or euros) to lure a factory that makes “old” chips. That is the reality, and it is a perfectly acceptable one because these are the components the world needs most. Of course Apple, Nvidia, Qualcomm and AMD would be eager to announce their made-in-the-US chips, but the actual supply would be meager and tokenistic.
The point of TSMC’s global expansion is not to distribute the world’s best chipmaking technology around the globe. It is to allay concerns, increasingly expressed by business and political leaders, about having too much capacity concentrated in one place.
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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