As reshoring brings chipmakers back to the US, Apple looks to jump on board

Apple is expected to get about one-third of its future processors from a new semiconductor fabrication facility set to be in production in 2024, according to a report by Bloomberg.

The new $12 billion fabrication plant, being built by Taiwan Semiconductor Manufacturing Co. (TSMC) in Phoenix, is among more than a half dozen projects by chip makers to re-shore the industry in America.

TSMC

As recently as the 1990s, the US produced 37% of all semiconductors; only about 12% of all computer chips are produced domestically now.

That decline in domestic chip production was highlighted by the recent worldwide supply chain crisis, and it led to calls for reshoring microprocessor manufacturing in the US. With the federal government spurring them on, the likes of Intel, Micron, Samsung, and TSMC have unveiled plans for new US-based fabrication plants. (Qualcomm, in partnership with GlobalFoundries, also said it would invest $4.2 billion to double chip production in its Malta, NY fabrication facility.)

According to the Bloomberg report, Apple “Chief Executive Officer Tim Cook has previously told employees that his company plans to source chips from the Arizona plant.

Cook is expected to attend an event at TSMC’s Pheonix plant today to make the chip commitment official, according to Bloomberg.

Neither TSMC nor Apple responded to requests for comment from Computerworld.

If true, Apple’s shift toward purchasing chips made in America is likely a sign of things to come as US chip production ramps up over the next decade.

Apple will start purchasing both 5nm- and 4nm-process chips from TSMC’s Arizona plant and possibly 3nm chips later at a second TSMC plant in Arizona; that facility is only partially completed, according to Gaurav Gupta, vice president of Emerging Technologies and Trends (Semiconductors and Electronics) at IDC.

The overall capacity TSMC is bringing to the Arizona plants in the next two to three years “is a small fraction of their overall capacity it already produces in its established Taiwan plants,” Gupta noted. But, he said, the Arizona plant definitely supports a much-needed diversification in chip production.

GlobalFoundaries

“US customers will still be reliant on TSMC capacity in Taiwan,” Gupta said. “Now over this decade, if TSMC continues to expand in the US or maybe even in the EU…, then we can expect a decent change in procurement for customers.”

Apple, Microsoft, Alphabet, Amazon, and others have been lobbying the US government to help increase domestic chip production, citing problems overseas that have hampered hardware production. In fact, a US Commerce Department report in January said the chip shortage was so bad that at one point in 2021 there was just a five-day supply worldwide — with no sign the situation would improve anytime soon. 

That, according to US Commerce Secretary Gina Raimondo, leaves auto manufacturers and other chip users with “no room for error. It’s alarming, really, the situation we’re in as a country, and how urgently we need to move to increase our domestic capacity,” she said while presenting her agency’s findings.

The US government has been spending billions to bring chip manufacturing back to the US. The CHIPS and Science Act of 2022, signed into law by President Joseph R. Biden Jr. in August, provides $52.7 billion for manufacturing incentives to boost microchip production in the US. Chip manufacturers can begin seeking to use tax breaks and funds to offset construction and other costs beginning next year.

Essentially, the CHIPS Act is an attempt to increase the percentage of microprocessors produced in the US by closing the cost differential with other countries such as Taiwan, South Korea, and China. In those nations, the governments are already subsidizing semiconductor manufacturers.

The US legislation is also meant to produce high-tech jobs and loosen the supply-chain grip foreign chip manufacturers have on US OEMs. “The critical question before we actually make any conclusions is to see if TSMC is able to close the cost gap and is equally efficient in production in the US,” Gutpa said. “Only time will tell.”

Jack Gold, principal analyst with J. Gold Associates, said Apple is likely TSMC’s single biggest customer. That said, Apple also procures its chips for MacBooks and iPhones from other vendors and for other purposes (e.g., memory, power management, etc.).

There is “clearly a need to diversity the supply chain, given so much is concentrated in Taiwan,” Gold said in an email reply to Computerworld. “And having parts built in the US is a good way to diversify, and it’s politically beneficial as well as being able to take in major economic subsidies. [Still], most of Apple’s (and most other vendors’) end products are still being manufactured in Taiwan and increasingly mainland China (e.g., Foxconn), so while the chip supply is diversifying, much of the manufacturing isn’t.”

Even so, having more chips built in the US is overall a step in the right direction for diversification. All of the major chip vendors are increasing their production in the US, and most are looking to boost production in Europe as well, Gold said.

“Such diversity is clearly good for the marketplace,” he added. “The US (and Europe) must bring more manufacturing home, especially in mission-critical tech like chips. It’s a strategic necessity.”