Bernstein analyst reacts to TSMC boosting investment in the U.S.

Taiwan Semiconductor Manufacturing Co Ltd (NYSE: TSM) plans on building a second chip factory in Arizona, the company confirmed on Tuesday.

TSMC is diversifying away from China

Execution will boost its investment in that State by more than threefold to $40 billion – the largest foreign investment in the history of Arizona. TSMC is trying to diversify away from China as the Biden Administration continues to restrict export of sophisticated chips to Beijing.  

Together, its two plants will produce 600,000 wafers per year, sufficient to meet the annual U.S. demand. Reacting to the announcement, Bernstein’s Stacy Rasgon said on CNBC’s “TechCheck”:

It’s a good thing to diversify the supply chain. Taiwan is in an increasingly untenable geopolitical environment and the world depends on it for leading edge semiconductors. So, any beginning to this is helpful.

Last month, Invezz reported the legendary investor, Warren Buffett to have bought TSMC shares.

TSMC is capitalising on the CHIPS Act

TSMC’s investment follows the passage of Biden’s “CHIPS and Science Act” that incentivizes domestic production of the advanced chips.

According to the semiconductor behemoth, the factory it announced today will go live in 2026 and will produce its most cutting-edge 3-nanometre chips. The other one, it added, will begin producing 4-nanometre chips in 2024. Rasgon noted:

If you want leading-edge manufacturer in the U.S., only three companies can even try to do it and TSMC is one of them. If they can build these factories, they’ll have customers to put volume in there, guaranteed. You’ve got Apple, Nvidia, AMD.

Apple CEO Tim Cook has already confirmed that the iPhone maker will use chips built at the Arizona factory. TSMC shares are down nearly 45% versus their year-to-date high.