(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. has achieved early production yields at its first plant in Arizona that surpass similar factories back home, a significant breakthrough for a US expansion project initially dogged by delays and worker strife.
The share of chips manufactured at TSMC’s facility in Phoenix that are usable is about 4 percentage points higher than comparable facilities in Taiwan, Rick Cassidy, president of TSMC’s US division, told listeners on a webinar Wednesday, according to a person who participated. The success rate, or yield, is a critical measure in the semiconductor industry because it determines whether companies will be able to cover the enormous costs of a chip plant.
The accomplishment is a sign of progress for Washington’s efforts to revitalize American semiconductor manufacturing. TSMC, the main chip manufacturing partner for Nvidia Corp. and Apple Inc., is in line to win $6.6 billion in government grants and $5 billion in loans — plus 25% tax credits — to build three fabrication facilities, or fabs, in Arizona. The award, like almost all others from the 2022 Chips and Science Act, isn’t yet finalized.
A TSMC spokesperson declined to comment directly on Cassidy’s event and referred to remarks from Chief Executive Officer C.C. Wei on a call with investors last week.
“Our first fab entered engineering wafer production in April with 4-nanometer process technology, and the result is highly satisfactory, with a very good yield,” he said at the time. “This is an important operational milestone for TSMC and our customers, demonstrating TSMC’s strong manufacturing capability and execution.”
The two other chipmakers at the heart of the Biden administration’s tech strategy, Intel Corp. and Samsung Electronics Co., have struggled in recent months. Intel, slated to be the biggest beneficiary of the Chips Act, is under such severe financial pressure that it’s delaying global projects and considering selling off assets.
TSMC, meanwhile, has been on a roll. Its shares reached a record high this month after the chipmaker topped quarterly estimates and raised its target for 2024 revenue growth.
The latest yield advancement is notable for TSMC because it has historically kept the most advanced and efficient plants in its home island of Taiwan. Its Arizona site got off to a rocky start, as the company couldn’t find enough skilled staff to install advanced equipment and workers struggled with safety and management issues. TSMC reached an accord with construction labor unions late last year.
The chipmaker originally planned to have its first Arizona plant start full production in 2024, but pushed back the target to 2025 over the labor issues. It later delayed the start date for its second fab to 2027 or 2028, from an initial target of 2026. That fueled concerns that the company might not be able to make chips in the US as efficiently as in Taiwan.
TSMC could now be keen to expand its US presence further, depending in part on the possibility of more government backing, Cassidy added, citing early conversations in Washington about a second Chips Act. There is room for at least six total fabs at the Phoenix complex.
Wei conveyed optimism about the US push during the call last week.
“We now expect volume production of our first fab to start in the beginning of 2025, and are confident to deliver the same level of manufacturing quality and reliability from our fab in Arizona as from our fabs in Taiwan,” he said.
(Updates with earnings information in seventh paragraph. A previous version of this story was corrected to remove an inaccurate summary.)
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