TSMC Promises New US Fab for Nvidia & Apple

TSMC wants to put $40 billion into the cutting edge fabs

TSMC will invest $40 billion in Arizona and build a second cutting edge chip fabricator. Apple, Nvidia, and AMD have already signed on as customers for potentially their first high-end "Made in America" chips in recent memory. Does this mean improved supply of and reduced costs for gaming hardware in the coming years?

On the Horizon
The first Arizona fab is expected to begin 4nm chip production in 2024 (it was previously expected to produce 5nm chips by 2023). The more advanced 3nm foundry will come online in 2026. Even without the likely delays in such a massive project, these foundries will not be producing wafers for potential GPUs until the back half of the decade. TSMC’s first Arizona fab would potentially produce the next generation of video cards (Nvidia's RTX 5000 or AMD's RX 8000), but more likely the generation after that (RTX 6000 or RX 9000).

  • Nvidia’s RTX 4000 & AMD’s RX 7000 video cards use TSMC’s 5nm nodes
  • Apple’s A16 (iPhone 14) & M2 (MacBook & iPad Pro) chips are also on TSMC’s 5nm lines
  • Sony’s PS5 recently switched from TSMC’s 7nm to 6nm process
  • Xbox Series X & S use TSMC 7nm lines
The Good News: Supply Chain Resiliency
The guaranteed upside is a supply chain more resistant to Covid-like “black swan” events. Geopolitical disputes, pandemics or production mishaps in East Asia should have a reduced impact on GPU or console supply and pricing. The potential bonus is these Arizona fabs are expected to annually produce 600,000 wafers – each good for several hundred chips – by 2026. This could translate to more abundant and affordable PCs, phones, and consoles. 
  • The investments are part of a larger move to produce advanced chips in the US
  • Intel is targeting a $20 billion production facility in Ohio by 2025
  • Samsung is investing $17 billion in its Texas production facility
  • Micron wants to spend up to $100 for a “megafab” in New York
Will Prices Improve?
These investments are a positive development for gamers, but market conditions and politics mean higher GPU prices are likely here to stay.
  • Market Power: With over 50% market share and a technological edge, TSMC currently faces limited competitive pressure to lower lower prices 
    • TSMC is reportedly hiking the cost of 3nm wafers by 25% compared to 5nm wafers
  • A Cog in the Machine: The actual production costs of GPUs pales in comparison to design costs
    • Final assembly will still take place abroad due to the higher price of American labor
  • The Small Political Matter: As big as Nvidia is in gaming, its orders are less important than those of TSMC's largest customer, Apple 
  • The Larger Political Matter: Huge US investments hinge partly on the expectation of cashing in on subsidies from the recently passed CHIPs Act
    • Should that funding not come through, expect the chip manufacturers to reconsider

Image courtesy of TSMC