“Washington Pressures to Produce Military Chips in the United States”

Hülya Karahan: Production Editor


Japanese media reports that Washington is stepping up pressure on TSMC to produce military chips in the United States. TSMC said that the company has never ruled out the possibility of setting up production in the United States, but it has no specific plans at present and will consider the needs of customers.

The Nikkei Asian Review newspaper cited a senior Taiwanese government official as saying that based on national security considerations, the US government hopes that chips used in military programs can be manufactured in the United States, and the United States does not intend to concede.

TSMC said it did not understand why the report claimed that the US government was putting pressure on it. The company has never ruled out the possibility of setting up factories in the United States, but it has no specific plans at present.

The New York Times reported in October last year that in order to maintain its military advantage, the U.S. military intends to ask TSMC to set up factories in the United States. TSMC Chairman Liu Deyin also said that TSMC was not directly under pressure from the US Department of Defense, but US customers did receive the concern of the US Department of Defense and hoped that defense-related products could be produced in the United States.

Liu Deyin said that setting up a factory in the United States has challenges in service and cost, but TSMC has to help customers solve the problems of competitiveness and defense security. TSMC emphasized that it will consider according to customer needs.


The New York Times reported in October last year that U.S. officials have met with chip industry executives, including Taiwan, and hope that chips made in the United States will ensure that they are made in the future Supply of advanced computer chips to maintain US military superiority.

According to participants, these conversations even preceded Trump  ‘s appointment, but their urgency has been more prominent recently. A source at the meeting who asked not to be named said Pentagon officials encouraged chip executives to consider building new semiconductor production lines in the United States.

They said that the talks started because the US Department of Defense increasingly relied on chips manufactured overseas, especially in Taiwan, and also related to the recent tension between China and the United States.

People familiar with the matter told New York that as turmoil in Hong Kong emerged, some Pentagon officials and chip makers worried that Taiwanese suppliers might be forced to restrict or cut off silicon supply.

Liu Deyin, chairman of Taiwan Semiconductor Manufacturing Co., Ltd. (referred to as TSMC) also confirmed that he recently discussed with the US Department of Commerce the construction of a new plant in the United States. He said the main obstacle was funding; substantial subsidies were needed because operating costs in the United States far exceeded those in Taiwan.

TSMC is the world’s largest foundry and plays a significant role in the commercial chip industry. Its chips can be used in spacecraft, satellites, drones and wireless communications. “It all depends on when we can close the cost gap,” Liu Deyin said in an interview with “News.”

He said he was weighing whether to build a new plant in the United States, but it was too early to make a decision. He said that if the financial challenges are overcome, the new plant may also be smaller than TSMC ’s large plant in Taiwan and is expected to be built near TSMC ’s plant in Camas, Washington.

“We want to do what is best for our customers and help them increase their competitiveness while taking into account national security issues,” said Liu Deyin.

The United States has been using only locally produced electronic components in its most advanced weapons. The chip can assist in the navigation, communication between tanks, aircraft, rockets and ships, and attack enemy targets.

But over the years, the domestic production lines of many American chips have moved abroad, causing the Department of Defense to worry that the supply chain will be disrupted in the event of a political or military crisis abroad. For example, some special components, such as the programmable chip of the F-35 fighter, were developed by Xilinx of Silicon Valley, but production was mainly done in Taiwan.

There are also some chips, such as the wireless baseband processor required for the next-generation 5G communication capabilities. These production technologies are an important selling point for TSMC.

“These capabilities are what our Department of Defense must have,” said Lisa Porter, the undersecretary of research and engineering at the U.S. Department of Defense, at a public event in July.

Porter also emphasized at a technology event in Los Angeles on Wednesday (23) 2019 that ensuring the security of key components and software supply chains is a “macro” issue that the Pentagon and technology companies must work together to solve. But she did not comment on specific measures to strengthen US chip manufacturing.

Over the years, TSMC has been foundry for large American chip design companies such as Apple, Qualcomm and Nvidia, whose chips have become increasingly important in defense and civilian applications. At the same time, some Chinese technology companies, such as Huawei, also rely on TSMC for production.

Another reason is that the world’s second largest wafer foundry, Global Foundries (Greece in Taiwan) announced in 2018 that it would withdraw from the 7nm process competition.

Currently, only TSMC and Samsung enter the 7nm process competition. The former has been mass-produced in 2018. Taiwan ’s other wafer foundry, UMC, also announced that it will suspend the competition for the most advanced process ahead of GF.

GF’s two former IBM factories took over in 2015 to produce confidential chips for the U.S. military that comply with trusted foundry regulations. Company executives believe that the technology of their Malta plant is sufficiently advanced to meet the needs of the military in the next few years, and are currently negotiating with officials to modify the government’s trust foundry rules for future confidential work.

GF also filed a lawsuit against TSMC in the United States and Germany in August 2019, suing TSMC for infringing 16 patents. It claims that part of the lawsuit is to protect US manufacturing bases.

TSMC 7-nanometer chip shipments reach 110,000 pieces per month

Taiwan media said that while Intel’s CPU supply was in short supply, the United States Chaowei Semiconductor Company (AMD) actively launched the Zen 3 architecture processor to grab the market, squeezed out Apple, and became TSMC’s largest customer of 7 nanometers.

Taiwan’s “China Times” reported that TSMC has been actively expanding its production capacity in response to the 7-nanometer “big order” situation. According to data, in the first half of 2020, TSMC’s 7-nanometer shipments will reach 110,000 pieces per month. The main customers are Apple, Huawei Hisilicon, Qualcomm, Chaowei and MediaTek.

It is reported that in the second half of the year, the 7-nanometer production capacity will see 140,000 pieces per month, but Apple and Huawei Hisilicon are moving into the 5-nanometer process, and the United States Chaowei Semiconductor ’s 7-nanometer order proportion has increased significantly, and it is estimated that 30,000 pieces will be contracted each month. Production capacity increased to 21%, overtaking Apple, and becoming TSMC’s largest customer at 7nm.

TSMC’s revenue in the fourth quarter reaches 73.2 billion yuan

The report believes that the United States Chaowei Semiconductor Co., Ltd. for the first time snatched TSMC’s 7-nanometer maximum ratio of two major reasons. The first is that the company will successively launch new products of Zen 2 and Zen 3 architecture processors in 2020. + Nano process; In addition, Apple and Huawei Hisilicon’s next-generation products move to 5 nano process. In addition to becoming the largest customer of TSMC 7nm, Chaowei will continue to work closely with TSMC in the 5nm process in the future.

According to Taiwan media reports, TSMC, the foundry leader, recently announced its revenue for December 2019, and achieved monthly revenue of 23.9 billion yuan (RMB ‧ the same below), an increase of 15% year-on-year; the fourth quarter revenue was 732 100 million yuan, exceeding expectations; for the full year of 2019, it achieved revenue of 247 billion yuan, once again setting a record high.

In terms of gross profit margin, it is expected to be between 48% and 50%, and even exceed 50%.

TSMC’s continued growth in performance is due to strong demand for high-end smartphones and 5G mobile phones, and high-performance computing driving demand for 7nm capacity. It is expected that the performance in 2020 will continue to improve, with 20% growth space.