Intel, TSMC in talks with White House to build US factories

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US factories on rebound large part thanks to tech industry

Concern about the semiconductor industry’s reliance on Asia has been brewing for some time. The problem isn’t technology coming from the region, but the fact that chip production is so densely packed in places like China, Taiwan, and South Korea. As such, it is liable to regional disruptions that have far-reaching effects. The coronavirus pandemic is demonstrating the importance of a global supply chain for the semiconductor industry.

The Trump administration has supported the idea of reducing U.S. dependence on Asia for its technology. Sources from The Wall Street Journal now say that the White House is in talks with both Intel and TSMC regarding setting up chip factories in the United States.

Reversing Course

For the past few decades, chipmakers and other American technology companies have been expanding into the Asian market. Things like cheap labor costs and close proximity to a booming regional supply chain drove this movement. However, that model is currently being challenged by disruptions related to the COVID-19 outbreak. The pandemic has shown how vulnerable the entire chip sector is to a regional disruption.

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Reported talks between Intel, TSMC, and the White House seek to reverse the course of past years and bring a portion of the supply chain back to America. The two chipmakers are major players in the industry. Although Intel already has a foothold in the U.S., setting up sizeable manufacturing facilities for cutting-edge products would be a noteworthy move.

Greg Slater, Intel’s vice president of policy and technical affairs, said, “We’re very serious about this… We think it’s a good opportunity. The timing is better and the demand for this is greater than it has been in the past, even from the commercial side.”

On April 28, Intel CEO Bob Swan sent a letter to the Defense Department to convey his company’s readiness to build a commercial foundry in collaboration with the Pentagon. His letter read, “We currently think it is in the best interest of the United States and of Intel to explore how Intel could operate a commercial U.S. foundry to supply a broad range of microelectronics.”

Meanwhile, officials from both the Commerce and Defense departments and Apple are discussing with TSMC the possibility of building a chip factory in the U.S.

The chipmaker said in a statement, “We are actively evaluating all the suitable locations, including in the U.S., but there is no concrete plan yet.”

Major Decisions

It goes without saying that the decision to open a new manufacturing facility (regardless of location) isn’t simple. Any news of such a move likely won’t arrive any time soon. Still, the fact that multiple industry-leading chipmakers are seriously considering it is noteworthy.

A 2019 Pentagon report regarding the supply chain of microelectronics said, “Taiwan, in particular, represents a single point-of-failure for most of the United States’ largest, most important technology companies.”

Drawing Intel and TSMC back to the U.S. could help alleviate some of that pressure. The facilities would theoretically produce cutting-edge chips—specifically those build on 10nm or smaller architecture. Doing so would also help diversify the global supply chain and make it more immune to future regional disruptions.

John Neuffer, president and CEO of the Semiconductor Industry Association, says, “Semiconductors are fundamental to America’s economic resilience and national security, so it’s a no-brainer for the U.S. to invest more in our domestic chip sector. China and others are investing heavily, and the U.S. needs to do more to rise to the challenge to play to win.”

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