TSMC announced on Thursday that its Fab 21 facility located near Phoenix, Arizona, has initiated large-scale production of semiconductor chips. This development follows several months of speculation and was preliminarily verified by the U.S. Commerce Secretary earlier in January. The company highlighted that it is manufacturing chips using its advanced N4 process technology, equivalent to 4nm-class, and that the production yields in Arizona are on par with those achieved in Taiwan. Nonetheless, the cost of manufacturing chips in the U.S. is higher than that in Taiwan.
“We managed to accelerate the production timeline for our inaugural Arizona fab, which commenced large-scale production in Q4 2024 utilizing N4 process technology. The yield is comparable to our facilities in Taiwan,” stated C.C. Wei, TSMC’s CEO and Chairman, during the earnings call (as reported by SeekingAlpha). “We anticipate a seamless ramp-up process and with our robust manufacturing prowess and operational efficiency, we are poised to match the manufacturing quality and reliability of our Arizona facility with that of our Taiwan operations,” he added.
A notable detail about TSMC’s Fab 21 in Arizona is the higher pricing for N4 production in the U.S. compared to Taiwan. Consequently, processors manufactured in the U.S. are more costly than identical models produced in Taiwan. This price difference arises from factors such as the higher costs associated with running the newer fab, its smaller production scale, an emerging local ecosystem, and the need to transport silicon to Taiwan (or other locations) for packaging. TSMC also incorporates a premium for what it calls ‘geographic flexibility.’
“Yes, we do charge slightly more because there is a value in geographic flexibility,” Wei explained. “As you know, products made in the USA carry a premium. Our customers are aware and are willing to collaborate with TSMC despite the higher cost structure there,” he continued.
During the earnings call, it was also revealed that TSMC is transitioning its capacity from N4/N5 to N3 as the demand for 3nm-class products grows. Although the exact capacity of TSMC’s N4/N5 is confidential and not publicly disclosed, it is clear that this capacity is reducing in Taiwan, positioning the U.S. fab to potentially play a crucial role in N4 and N5 production going forward.
Reports that have yet to be confirmed indicate that at least three different processors are being produced at TSMC’s Fab 21 in Arizona. These include the A16 Bionic chip used in Apple’s iPhone 15 and iPhone 15 Plus, the main processor in Apple’s S9 system-in-package which powers smartwatches with two 64-bit cores and a quad-core neural engine, and a CPU from AMD’s Ryzen 9000 series. Currently, only Phase 1A of Fab 21 is reportedly in full production, with a capacity of about 10,000 wafer starts per month. It is mentioned that Phase 1B of Fab 21 is ‘experiencing tooling bottlenecks’ and is expected to be fully operational later in the quarter, which would increase the facility’s capacity by an additional 14,000 WSPM.