TSMC, one of the world’s largest semiconductor manufacturers, is facing a critical problem at its production facility in the US state of Arizona. The company, which has accelerated chip production in the US as a result of government incentives and increasing political pressure, cannot provide the expected precision in post-production processes. The facility, which has difficulty meeting the demands of high-level customers such as Nvidia in particular, is forced to direct the packaging processes of the produced chips to centers in Taiwan.

TSMC’s Arizona facility fell short of expectations

In the semiconductor production process, simply casting the chip is not enough. Chips obtained with advanced production processes such as 3nm and 2nm are combined and packaged with special techniques before becoming the final product.

This process requires tolerances well below millimeters and special heat, energy and material management. However, TSMC’s new factory in Arizona cannot meet these advanced packaging needs. A significant portion of the chips produced are sent by air to Taiwan, thousands of kilometers away. After the processes are completed there, the products are delivered back to the US or to customers.

This mandatory air transportation creates a serious burden on logistics. Taiwan-based airline Eva Air announced that they are having difficulty keeping up with the increasing cargo demand due to this chip transportation. The process not only causes loss of time and cost; it also reaches controversial dimensions in terms of environmental impact. However, as of now, this situation does not create a serious environmental agenda for the public or manufacturers.

TSMC previously announced that it plans new investments to increase the packaging capacity of its facility in Arizona, but no concrete steps have yet been taken for advanced packaging infrastructure. The current difficulties are also testing the US’s self-sufficiency goals in semiconductor production.

Although the production line is in the US, the most sensitive and complex processes of the system are still being solved in Taiwan. Customers are still satisfied with this temporary solution, even if delivery times are slightly longer. On the other hand, it remains unclear what financial and logistical burden the increasingly complex production chain will impose in the long term.