Taiwan Semiconductor Manufacturing Co. (TSMC) is in discussions with Nvidia Corp. to produce its Blackwell artificial intelligence (AI) chips at the company's new Arizona plant, according to multiple sources familiar with the matter. If finalized, the arrangement would expand Nvidia's production footprint beyond Taiwan, where its Blackwell chips are currently manufactured.
The Arizona facility, a centerpiece of TSMC's $40 billion U.S. investment, is expected to begin volume production in 2025. Nvidia would join Apple and Advanced Micro Devices (AMD) as customers of the site, according to the sources. Apple previously confirmed plans to use chips from Arizona, and AMD has reportedly signed up for production as well.
The Blackwell chips, introduced in March, are highly sought after by companies specializing in generative AI and accelerated computing. These GPUs are designed to deliver faster processing for applications such as chatbots and large-scale AI model training.
While TSMC plans to handle the initial manufacturing of Blackwell chips in Arizona, the facility currently lacks the necessary chip-on-wafer-on-substrate (CoWoS) packaging capability to complete the production process. As a result, the chips would need to be sent back to Taiwan for packaging, a step essential for their final assembly. Sources indicated that all of TSMC's CoWoS operations remain based in Taiwan, underscoring a key limitation in the Arizona operation.
Packaging remains a critical bottleneck for semiconductor production, particularly for advanced AI chips. TSMC has partnered with Arizona-based Amkor Technology to establish local packaging capabilities in the U.S., but industry observers note that such efforts will take years to match the scale and expertise of TSMC's Taiwanese facilities. The company has reportedly committed up to $16 billion to expand its packaging infrastructure globally.
The discussions also highlight the competitive nature of advanced packaging capacity. Industry sources suggested that Nvidia previously requested a dedicated CoWoS packaging line from TSMC, but the company declined due to resource constraints and high demand from other clients.
TSMC's expansion into the United States aligns with Washington's push to reduce reliance on Asian supply chains amid geopolitical uncertainties. The Biden administration recently provided $6.6 billion in subsidies for TSMC's Arizona plants under the CHIPS Act, part of broader efforts to bolster domestic semiconductor manufacturing.
The Arizona plant will initially focus on producing chips using TSMC's 4-nanometer and 5-nanometer technologies, processes that are well-suited for high-performance computing applications. These slightly older technologies are often preferred for GPUs due to their stability and ability to handle demanding workloads.
Although the project represents a significant milestone for U.S. semiconductor manufacturing, logistical challenges remain. Industry analysts have pointed out that separating manufacturing and packaging across continents introduces complexities that could affect efficiency and supply chains.
Neither TSMC nor Nvidia has commented on the ongoing negotiations, emphasizing the confidential nature of the discussions.
