The U.S. Commerce Department on Monday proposed investing $6.6 billion to fund a third Taiwan Semiconductor Manufacturing Company (TSMC) wafer fab in Arizona. The funding will arrive through the CHIP and Science Act to promote more domestic semiconductor production.

The move represents a broader push to bring more manufacturing to the United States, but unsaid in today’s announcement is the potential for escalating tensions with China.

The proposed factory is a greenfield facility, meaning it is custom-built from the ground up. It will focus on 2nm (“or newer”) architecture and is designed for a range of different applications, including computing, 5G/6G wireless communications, and, of course, artificial intelligence. TSMC Arizona – the proposed subsidiary – has said it will build the factory before the end of the decade.

The chipmaker said construction will bring more than 20,000 jobs to the area and it expects to create about 6,000 manufacturing jobs once the plant is operational.

Localized manufacturing has been a key focus of the Biden administration as the COVID-19 pandemic highlighted the fragility of global supply chains. The ubiquity of silicon in our daily lives exacerbates these problems. These numbers will only grow. According to the Semiconductor Trade Association, global sales reached $47.6 billion in January 2024, an increase of more than 15% from the previous year.

President Biden said: “TSMC’s new commitment to America and its investment in Arizona is representative of the broader story of American-made semiconductor manufacturing, with strong support from America’s leading technology companies to make the products we rely on every day. “News-related press releases.

Much of the government’s funding is focused on U.S. companies such as Intel, which made an $8.5 billion proposal in late March. TSMC, in terms of market share and technological progress, is an 800-pound gorilla. However, the company finds itself caught up in looming geopolitical concerns. The United States and its allies would be at a huge disadvantage if China seized control of Taiwan and its manufacturing capabilities.

TSMC has its own concerns about this situation. For one thing, the company’s two largest customers – Apple and Nvidia – are both American. On the other hand, some in the United States even suggested that the country’s bomb chip manufacturers would be attacked if such a thing happened.

“We should make it clear to the Chinese that if you invade Taiwan, we will blow up TSMC,” Massachusetts Congressman Seth Moulton said at an event in May.

The Democratic representative has since distanced herself from the video, saying it was selectively edited by the Chinese Communist Party. However, he is not the only one making such suggestions. Earlier that year, Trump’s former national security adviser Robert O’Brien said that “the United States and its allies will never let these factories fall into Chinese hands” and suggested that China destroy the factories. O’Brien even compared this hypothetical action to Britain’s actions during World War II.

The threat of force drew criticism from the international community. Beyond the obvious ethical issues, this avoidance will have huge consequences for the global economy. In addition to Apple and Nvidia, TSMC also provides services to companies such as Sony, MediaTek, AMD, Qualcomm and Broadcom.

Even as the U.S. government continues to invest heavily, Intel is only catching up to TSMC’s years of technology leadership. About 90% of the world’s most advanced chips are produced by TSMC. Currently, the United States’ best defense against future disruptions, whether from pandemics or geopolitical conflicts, is supply diversification. This applies to where and by whom the component is manufactured.

While the architects of the CHIP and Science Act undoubtedly wanted to boost domestic manufacturing by American companies, our economy is global. TSMC certainly realizes the value of a distributed supply chain.

Mark Liu, chairman of the chip giant, spoke to the news in a statement. “Our U.S. operations enable us to better support our U.S. customers, which include several of the world’s leading technology companies. Our U.S. operations will also expand our ability to pioneer future advances in semiconductor technology.”

For those watching U.S.-China relations, the upcoming presidential election could mark a critical turning point. First, former President Trump dramatically escalated trade tensions. Huawei’s inclusion on the Entity List is a huge setback for the mobile company as it loses access to key components from US companies such as Google and Qualcomm.

Avril Haines, Biden’s former U.S. director of national intelligence, said in a speech last year that if the United States invaded TSMC’s Taiwanese products, “it would have a huge global financial impact, which I think is between 600 billion and 600 billion.” Between $1 trillion.” The initial years are calculated annually. “

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