Introduction
Recent foreign media reports shed light on Apple’s semiconductor supply chain, notably its ties with Taiwan Semiconductor Manufacturing Company (TSMC). Despite TSMC’s new US semiconductor facilities, Apple’s reliance on overseas chip supply may not significantly change.
In this blog post, we’ll explore the details and reasons behind this situation.
The TSMC Expansion
TSMC’s decision to establish semiconductor fabs in Arizona marked a significant milestone for U.S. semiconductor manufacturing. Apple’s CEO, Tim Cook, lauded the move and its potential for affixing “Made in America” labels to semiconductor products.
However, a closer look reveals that while these chips are manufactured in US, the entire production process isn’t completed domestically.
Despite the initial semiconductor fabrication stages occurring in US, critical components and crucial steps still rely on foreign facilities. This is due to the intricate global network of partners within semiconductor supply chain, contradicting the full domestic production achievement.
Read more: Explained: What the hell is 3D IC packaging?
The Semiconductor Journey
Engineers at TSMC and ex-Apple staff disclosed that chips made in Arizona need extra steps before reaching Apple. These chips must return to TSMC in Taiwan for final packaging because not all chip production processes are in the U.S.
Some critical steps are in North America, and if supply chain capacity is lacking, they go back to Taiwan.
The Cost Factor
Cost plays a pivotal role in this decision. Constructing advanced semiconductor packaging facilities in the United States proves to be a costly venture. Analysts estimate that the Arizona factory may not generate a sufficient chip output to warrant building advanced packaging plants in the area. The Arizona factory serves more as a contingency plan for TSMC in cases of geopolitical tensions or conflicts since the chips produced there still need packaging in Taiwan.
Read more: 3 nm Chip from Mediatek and TSMC has arrived
Apple’s Role
Apple may potentially use the TSMC Arizona fab for chip production, but the specific chips to be manufactured there have not been disclosed. Depending on the chips’ complexity and importance, it may or may not be necessary to ship them back to Taiwan for packaging. For less critical chips, alternative packaging technologies outside of Taiwan can be considered.
Apple’s Partnership with TSMC
Currently, Apple relies on TSMC’s fan-out packaging technology for chip production. Apple is one of TSMC’s significant customers using this technology, and their collaboration allows Apple to benefit from TSMC’s discounts. However, as Apple increasingly depends on TSMC’s packaging technology, TSMC may exert pressure on Apple to utilize their packaging facilities in Taiwan.
Government Initiatives
The U.S. government is aware of the need to take action in this evolving landscape. As part of the Science and Chips Act, $25 billion has been allocated for the National Advanced Packaging Manufacturing Program, aimed at boosting domestic advanced packaging capabilities. However, the relatively lower subsidy amounts may struggle to attract more companies to establish high-cost production facilities in the United States.
Conclusion
The complex nature of semiconductor manufacturing and packaging highlights the challenges faced by companies like TSMC and Apple as they seek to balance global supply chains with domestic production. While TSMC’s expansion into the United States is a step toward onshoring semiconductor manufacturing, it may not entirely eliminate the need for overseas packaging facilities. The semiconductor industry’s future will likely see ongoing discussions and strategic decisions on how to navigate these complexities while ensuring a stable and secure supply chain for critical technologies like those used in Apple’s devices.
