In a surprising twist to Apple’s commitment to manufacturing its chips in the United States, recent reports reveal that despite being produced in the US, these chips will need to embark on a journey to Taiwan for the crucial assembly phase. This development casts a spotlight on the intricate global supply chain that underpins the technology industry, even for a behemoth like Apple.
Tim Cook, Apple’s CEO, had previously made headlines by announcing the company’s plan to source chips for its iconic iPhones, Macs, and other flagship products from the Taiwan Semiconductor Manufacturing Company (TSMC). This move was seen as a significant victory for the Biden administration, which had passed the CHIPS Act to bolster domestic chip manufacturing and reduce reliance on overseas suppliers. However, The Information now reports a somewhat unexpected twist in this tale.
While the manufacturing of Apple’s chips will occur in TSMC’s brand-new facility in Phoenix, Arizona, the final assembly of these components will take place in TSMC’s home country, Taiwan. The reason behind this detour? The Arizona facility lacks the necessary infrastructure for the crucial “packaging” phase of chip fabrication.
For the uninitiated, “packaging” signifies the last leg of the chip’s creation, where various components are meticulously assembled within a housing. This process aims to optimize the chip’s speed and power efficiency. Remarkably, Apple has been utilizing TSMC’s packaging method since 2016, and this method remains exclusive to the tech giant among TSMC’s clients. The intricacies of the iPhone’s chip design necessitate assembly within Taiwan, while chips for iPads and Macs can be packaged elsewhere.
This revelation raises questions about other companies that rely on TSMC’s advanced packaging services, including industry heavyweights like NVIDIA, AMD, and Tesla. While it remains unclear how many of their chip models will require Taiwan-bound assembly, reports suggest that it encompasses chips tailored for artificial intelligence, such as NVIDIA’s H100. Moreover, Google is reportedly set to adopt TSMC’s advanced packaging for its future Pixel phones.
The US government had previously earmarked over $50 billion in funding through the CHIPS Act to incentivize companies to establish chip manufacturing plants in the United States. This move aligns with President Biden’s vision of nurturing the domestic semiconductor industry to reduce geopolitical tensions with China over Taiwan. The President even issued an executive order curtailing American investments in Chinese tech firms involved in semiconductors, quantum computing, and artificial intelligence.
Evidently, there is an awareness within the government of the need to bring chip packaging processes stateside. To this end, the National Advanced Packaging Manufacturing program was recently established. However, it is worth noting that this initiative receives a relatively modest $2.5 billion in funding under the CHIPS Act, potentially reflecting a lower priority for chip packaging.
As for TSMC, sources cited by The Information indicate that the company has no immediate plans to construct packaging facilities in the US, citing substantial associated costs. It appears likely that any future packaging innovations from TSMC will continue to originate in Taiwan, emphasizing the enduring significance of global supply chains in the tech world.
Frequently Asked Questions (FAQs) about Tech Supply Chain
Q: Why are Apple’s US-made chips sent to Taiwan for assembly?
A: Apple’s chips manufactured in the United States are sent to Taiwan for assembly because the manufacturing facility in Arizona lacks the infrastructure required for the crucial packaging phase, which is essential for optimizing the chips’ performance. This packaging process is particularly intricate for Apple’s iPhone chips, necessitating assembly in Taiwan.
Q: Which other companies rely on TSMC’s advanced packaging services?
A: Other companies, including industry giants like NVIDIA, AMD, and Tesla, are known to rely on TSMC’s advanced packaging services. While the exact number of chip models requiring assembly in Taiwan remains unclear, it is reported that this includes chips designed for artificial intelligence applications, such as NVIDIA’s H100. Google is also poised to adopt TSMC’s advanced packaging for its future Pixel phones.
Q: How is the US government supporting domestic chip manufacturing?
A: The US government has allocated over $50 billion in funding through the CHIPS Act to incentivize companies to establish chip manufacturing facilities in the United States. This initiative aligns with President Biden’s goal of strengthening the domestic semiconductor industry to reduce geopolitical tensions related to Taiwan. Additionally, a National Advanced Packaging Manufacturing program has been established, though it receives a more modest $2.5 billion in funding, potentially indicating a lower priority for chip packaging.
Q: Does TSMC plan to build packaging facilities in the US?
A: TSMC currently has no immediate plans to construct packaging facilities in the United States. The company cites substantial costs as a deterrent. It is likely that any future packaging innovations from TSMC will continue to originate in Taiwan, underlining the enduring importance of global supply chains in the tech industry.