Apple Supplier Succumbs To Pressure, Reportedly Agreeing To Make More Advanced Chips At US Plant

Zinger Key Points
  • As China turns hostile destination for doing business, most US companies are eyeing diversification of supply chain.
  • Taiwanese companies that have major production facilities in China are looking elsewhere to set up factories.

Apple Inc. AAPL chip supplier Taiwan Semiconductor Manufacturing Company Limited TSM has yielded to pressure from OEMs to manufacture its more advanced chips in the U.S.

What Happened: TSM now plans to manufacture its advanced 4-nanometer chips in its under-construction Arizona plant, which is set to open in 2024, Bloomberg reported, citing people familiar with the matter. 

The Taiwanese foundry was originally contemplating making chips based on 5-nanometer technology — which would not be cutting-edge by 2024 — it added.

The world’s largest chipmaker has also reportedly agreed to increase production volume to 20,000 wafers per month at the Arizona facility — a step up from the original plan. About one-third of the production will go to Apple, the report said.

TSMC plans to make its most advanced 3-nanometer chips at a plant adjacent to the one currently being constructed.

See Also: As iPhone City Emerges Out Of Lockdown, Apple Analyst Mulls On Production And Cupertino's Future In China

The report said TSMC will make an announcement regarding the changed plan when U.S. President Joe Biden and Commerce Secretary Gina Raimondo visit Phoenix next Tuesday. Apple CEO Tim Cook, who earlier confirmed that the company will source chips from TSMC’s Arizona plant, will also attend the event.

TSMC did not immediately respond to Benzinga’s email requesting comment.

Why It’s Important: TSMC’s changed plan came amid pressure from Apple and other tech companies such as Advanced Micro Devices Inc. AMD and Nvidia Corporation NVDA to make the most sophisticated chips at its Arizona plant.

The geopolitical situation in China has turned hostile in recent years, as the country’s frosty relationship with the U.S. and the frequent COVID-19 lockdowns have threatened supplies. 

The China deterrents and U.S. government’s drive to bring most chip production home through incentivizing under the CHIPS act have prompted suppliers to set up bases in the U.S.

Price Action: TSMC closed Wednesday’s session 4.60% higher at $82.98 and Apple ended at $148.03, up $148.03, according to Benzinga Pro data.

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