TSMC’s Troubled Arizona Fab Gets Vote of Confidence From AMD

TSMC had to postpone the production start at its Fab 21 in Arizona due to delays with equipment installation and various workforce-related issues. However, the foundry’s loyal customers, such as AMD, still endorse it partly because they need to produce some of their chips in the U.S. and partly because they want to diversify their supply chain. AMD re-emphasized today that it will be one of the early adopters of TSMC’s Fab 21 when it comes online in 2025.

“When you when you think about the geopolitical situation, geographic diversity is important to us,” said Lisa Su, chief executive of AMD, at the Goldman Sachs 2023 Communacopia and Technology Conference. “So, the Arizona factory is very important to us. We are going to be one of the early users, we are putting our first tape outs in shortly with the idea of being a significant user of Arizona. I think we will continue to look at the geographic diversity as an important piece of it.”

All of AMD’s key products — including CPUs, GPUs, DPUs, and FPGAs — are made by TSMC in Taiwan. Although TSMC has proven to be an extremely reliable manufacturing partner for tech giants like AMD, Apple, Intel, Nvidia, and Qualcomm, geopolitical tensions mean increased risks. As a result, it is unsurprising that TSMC’s intention to build a fab in Arizona was welcomed by all of its U.S.-based clients and the U.S. government, as it wants chips that will be used for its critical applications and military equipment to be made in America.

TSMC began building its Fab 21 phase 1 in April 2021 and hoped to start making chips there in early 2024. However, the delays in equipment move-in forced TSMC to change its plans, and it now expects to begin production at the facility sometime in 2025.

The repercussions of this delay on TSMC’s U.S. clients remain uncertain. In theory, TSMC could redirect orders from U.S.-based firms such as Apple, AMD, and Nvidia to its Taiwanese fabs, which are equipped to mass-produce 5 nm-class chips (N5, N5P, N4, N4P, and N4X.). However, there are worries that these Taiwanese fabs could be filled with orders in 2024, making it harder for TSMC to produce everything it plans. Moreover, companies like AMD and Nvidia might have agreements to manufacture certain products for the U.S. government domestically, and a year-long delay might breach such contracts.

While this situation increases AMD’s risks, the company remains optimistic and hasn’t indicated whether it has “plan B.”

“I think we have gotten extremely good at managing supply chain, so I would say that is one of our core strengths,” Su added. “TSMC has been a phenomenal partner for us in terms of advanced technology, both on the silicon side as well as the packaging side, and we very much value that relationship.”