While TSMC acts as the supply chain leader of the semiconductor production part of artificial intelligence, Intel continues to lick its wounds. Aresu’s analysis.
More than five years after TSMC’s 2020 announcement of semiconductor manufacturing in Arizona, the industry there is in full swing. What was initially seen as a venture doomed to failure is now producing tangible results. This also happens thanks to the boom in artificial intelligence, which will probably lead NVIDIA to overtake Apple as TSMC’s first customer.
TSMC’s bet in the desert has now been described in greater detail by a report by the formidable journalist from Nikkei AsiaCheng Ting-Fang, who due to his unparalleled access to the Taiwanese ecosystem always provides the most interesting information for understanding the ecosystem. The long report frankly shows how some companies underestimated the operating costs, times and difficulties of operating in an environment so different from that of Taiwan, but the learning curve was still there and has already led to concrete results.
TSMC itself candidly acknowledged higher-than-expected costs and project delays due to various factors: labor shortages, lengthy permitting processes, a local supply chain that was incomplete and had to be built. For example, TSMC CEO CC Wei himself revealed that his company spent about $35 million hiring specialists to help work with local officials to draft new regulations for semiconductor plants, in a location that had never hosted infrastructure comparable to TSMC’s project.
The Taiwanese champion has maintained a very demanding supplier policy, to support its operational efficiency, and has not only located its spending capacity in Arizona, but also in suppliers outside the state. The impact in the area is equally tangible. According to data from Phoenix officials, it is estimated that since construction began in April 2021, the project has created 8,100 jobs and generated $37 billion in capital expenditures in the territory. TSMC’s overall commitment across all phases is ramping up rapidly, in a mega-cluster that will include multiple facilities and will grow jobs, not just in construction, but also in operations.
The ecosystem of suppliers following TSMC is impressive and has dozens of very substantial projects, of which the largest is the Amkor assembly and testing plant in Peoria, also in Arizona. In the ecosystem, the Taiwanese presence is truly substantial and is essential to fill supply gaps. The reportage of Nikkei Asia he cites, among other things, the case of Chang Chun Group, which built its first US plant of high-end chemical materials south of Phoenix, and which is entering test production, with final qualification expected by 2025. There are many other Taiwanese “hidden champions” now present on American soil.
In this context of massive expansion and unstoppable demand for artificial intelligence semiconductors, which permeates every public discussion at events such as Semicon West, comes a structural problem still open for the United States: the future of Intel.
While TSMC acts as the supply chain leader of the semiconductor manufacturing side of AI, Intel continues to lick its wounds. The challenge has been exacerbated by the recent loss of human capital to a competitor who in a favorable scenario should have been a potential, and essential, customer. Sachin Katti, Intel’s Chief Technology and AI Officer, left the company after a short time to take a role at OpenAI, where he will focus on designing and building the startup’s computing infrastructure.
Despite OpenAI’s huge spending on compute capacity deals, which also fuels the AI bubble discussion, and which has involved all major players, Intel is conspicuously absent. As recalled by QuartzOpenAI represents a long-standing missed opportunity for Intel, which declined to invest in the startup way back in 2017. Now Intel, for its relaunch which the United States government has indicated as indispensable also through a share in the capital, has an essential need for customers, and to demonstrate that it can participate in the “banquet” of artificial intelligence, while it lasts. However, this is not happening.
For the American technological leadership, the bet won for now by TSMC in Arizona offers concrete hopes in production, but Intel’s weakness remains an open problem, and not to be underestimated.