Taiwan Semiconductor Manufacturing Company (TSMC) has commenced the production of Apple's A16 chips at its new fabrication plant in Phoenix, Arizona. This move marks a significant milestone for both TSMC and the U.S. government's efforts to localize semiconductor production and reduce reliance on overseas chip manufacturing. The decision to produce Apple's chips domestically aligns with Apple's commitment to reshoring production and the Biden administration's initiatives under the CHIPS Act.
According to independent journalist Tim Culpan, TSMC has started manufacturing the A16 chips at Phase 1 of its Fab 21 facility in Phoenix. These chips, which are being made using the 5nm process technology, are currently produced "in small, but significant, numbers," Culpan reported, citing unnamed sources. While production has begun, the Arizona plant has yet to reach full operational capacity, two sources familiar with the situation told Business Insider.
Production volumes of the A16 chip, first launched in the iPhone 14 Pro in 2022, are expected to ramp up substantially once the second phase of the facility is completed. Culpan indicated that this expansion would enable the Arizona plant to meet its production targets by the first half of next year. A spokesperson for TSMC confirmed the progress, stating, "The Arizona project is proceeding as planned with good progress." Apple, however, has not provided any comment regarding the specific chips being produced at the facility.
The launch of Apple's chip production at TSMC's Arizona plant is a critical development in the broader push for U.S. semiconductor independence. Apple CEO Tim Cook had previously announced that the company would become the "largest customer" of TSMC's Arizona fabs. This collaboration marks the first time in nearly a decade that Apple has sourced chips made in the U.S. for its devices, a shift aimed at bolstering supply chain resilience.
TSMC's commitment to the U.S. is further backed by substantial federal funding. The Biden administration announced that the company would receive $6.6 billion in grants through the federal CHIPS and Science Act. The act, designed to boost semiconductor production in the United States, allocated $52.7 billion for domestic chip research, development, and manufacturing incentives. TSMC plans to build a total of three chip fabs at its Phoenix campus, with full production at these facilities expected to begin in 2025 and 2028, respectively.
Despite the progress, TSMC's Arizona operations have not been without challenges. The company faced delays last year, pushing the opening of its first Arizona fab from 2024 to 2025. Additionally, when TSMC proposed bringing in technicians from Taiwan to train local workers, the move met resistance from a labor union in Arizona, which expressed concerns over the potential threat to American jobs. Management issues and safety concerns have also reportedly contributed to construction slowdowns. Nonetheless, TSMC has stated its commitment to maintaining safe working conditions and ensuring the project stays on track.
Industry experts view the initiation of chip production at the Arizona plant as a positive sign for the U.S. semiconductor industry. Dylan Patel, chief analyst at SemiAnalysis, noted that TSMC's production of Apple chips is a key milestone in the development of a robust domestic semiconductor sector. "Despite many negative stories early on, this shows the fabs are on track and operating as expected - a success story," he told Business Insider.
Patel emphasized the importance of this development, not just for TSMC and Apple but for the broader job market. He highlighted that TSMC's success in Arizona would lead to job growth beyond the company itself, benefiting equipment vendors, construction firms, and other businesses supporting the semiconductor ecosystem. While modern semiconductor fabs are not labor-intensive, they require highly skilled workers, creating long-term, high-quality job opportunities in the region.
The U.S. government's support for TSMC's investment, through subsidies designed to offset the higher manufacturing costs associated with U.S. production, has been crucial in making the venture viable. TSMC has previously indicated that it would charge customers more for chips produced outside of Taiwan due to these increased costs. However, Patel does not anticipate this price difference will significantly impact Apple's product pricing, given the federal subsidies and incentives in place to maintain competitiveness.
Looking ahead, one of the biggest challenges for TSMC and the U.S. semiconductor industry will be securing sufficient skilled labor. The Semiconductor Industry Association's report last year projected a shortage of approximately 67,000 workers in the U.S. semiconductor sector by 2030. This gap includes technicians, computer scientists, and engineers critical for the operation of advanced fabs. Despite these potential challenges, Patel remains optimistic that TSMC's early successes in Arizona will help mitigate labor shortages and encourage further investments.
Mark Muro, a senior fellow at the Brookings Institution, echoed this optimism, stating that TSMC's progress with Apple chips reflects the success of the U.S. government's semiconductor strategy. "This is an important signal that the American drive to reshore high-quality chipmaking is well founded," he said. Muro believes that Apple's confidence in producing one of its most advanced chips at the Arizona facility suggests the company sees long-term potential in the site.
