The White House is discussing building factories in the United States with TSMC and Intel

On May 11, according to foreign media reports, due to growing concerns about the possible impact of relying on Asia for production facilities for key technologies, the Trump administration of the United States is negotiating with chip manufacturers such as TSMC and Intel, hoping that they will build chip foundries in the United States to achieve self-sufficiency in chip production.

A new wave of cutting-edge chip factories in the United States is committed to reshaping the entire industry, marking a 180-degree turn in the strategy of many American companies to expand into Asia after decades. These companies are eager to obtain investment incentives and participate in stronger regional supply chains. The new coronavirus epidemic has highlighted the long-standing concerns of American officials and company executives about protecting the global supply chain from disruption. U.S. government officials said they are particularly concerned about dependence on key technology facilities in Asia. Among them, TSMC is the world's largest contract chip manufacturer and one of only three companies capable of making the fastest and most cutting-edge chips.

Trump administration officials are in talks with Intel and TSMC, the largest chipmakers in the United States, about building factories in the United States, according to people familiar with the matter. Greg Slatt, Intel's vice president of policy and technology, said: "We are very serious about this." Slatt said Intel's plan would be to operate a U.S. factory that could safely provide advanced chips to the U.S. government and other customers.

He added: "We think this is a great opportunity. The timing is very good and the demand for chips is greater than it has been in the past, even from a commercial side."

People familiar with the matter said TSMC has been in talks with officials from the U.S. Department of Commerce and the Department of Defense, as well as Apple, one of its largest customers, about building a chip factory in the United States. TSMC said in a statement that it is open to building overseas factories. The company said: "We are actively evaluating all suitable locations for building factories, including in the United States, but there are no specific plans at present."

According to people familiar with the matter, many U.S. officials are also interested in helping South Korea's Samsung Electronics expand its foundry business in the United States to produce more advanced chips. Samsung Electronics already operates a chip factory in Austin, Texas. A senior official said in a statement: "The administration is committed to ensuring that the United States continues to maintain its technological leadership. The U.S. government continues to coordinate with state, local and private sector partners and our allies and partners abroad to cooperate in research and development, manufacturing, supply chain management and workforce development opportunities."

Intel CEO Bob Swan wrote to U.S. Department of Defense officials on April 28, saying the company is ready to work with the agency to build a commercial foundry, an industry term that generally refers to a factory that can manufacture chips for other companies. "Given the uncertainty created by the current geopolitical environment, it is more important than ever to strengthen domestic production in the United States and ensure technological leadership," Swan wrote. "We currently believe that it is in the best interest of the United States and Intel to explore how Intel can operate a U.S. commercial wafer fab to supply a wide range of microelectronic products."

In an email, a U.S. Defense Department official sent Intel's letter to staff members of the Senate Armed Services Committee the next day, saying the proposal was an "interesting and intriguing option" for an American company to build the most advanced commercial chip foundry in the United States.

Talks about the chip factory development plan have been ongoing for some time, but have gained momentum recently as concerns have grown about supply chain vulnerabilities in Asia and the U.S. defense industry’s difficulty in obtaining domestically sourced advanced chips. Chipmakers also sensed an opportunity amid coronavirus-related stimulus to bring funding to an industry increasingly seen as a national security priority, according to people familiar with the matter.

While there is widespread agreement among U.S. government leaders and tech executives that the U.S. needs to increase its ability to make chips domestically, the situation is complicated and policymakers have no unified view on how exactly to move forward with the plan. The U.S. already has dozens of semiconductor factories, but only Intel's has the capacity to make the fastest, most power-efficient chips, which are transistors 10 nanometers or smaller. However, Intel primarily makes chips for its own products. Among the foundries that make chips for other companies, only TSMC and Samsung can produce chips 10 nanometers or smaller.

Many U.S. chip companies, including Qualcomm, Nvidia, Broadcom, Xilinx, and AMD, rely on TSMC to manufacture many of their most advanced products. Intel also works with TSMC to manufacture chips, according to TSMC's 2019 annual report. Intel's competitors in the chip business may be cautious about signing business with Intel unless the company proves its capabilities in the field and finds ways to ensure protection of competitors' technology in the process.

There are also divisions within the Pentagon, with some officials more focused on addressing the department’s own needs and others viewing the issue as a broader supply chain problem, according to people involved in the discussions. “The Department of Defense closely tracks domestic manufacturing and production across all defense sectors that are critical to our supply chain, and microchips will certainly continue to play a critical role in most major defense programs,” said Lt. Col. Mike Andrews, a Pentagon spokesman.

The Semiconductor Industry Association, a U.S. industry group, is conducting a study on domestic chip production and is expected to recommend that the U.S. government spend tens of billions of dollars to establish a new fund to promote domestic chip investment, according to a person familiar with the matter. "Semiconductors are critical to the economic resilience and national security of the United States, so there is no doubt that the United States should increase investment in the domestic chip industry," said John Neuffer, president and CEO of SIA. "China and other countries are investing heavily, and the United States needs to do more to meet the challenge."

Another proposal supported by SEMI, an industry group representing makers of semiconductor manufacturing equipment, is that chipmakers should be given tax credits when they buy and install equipment in U.S. factories. The U.S. Department of Defense is conducting other studies on supporting more domestic chip manufacturing, and the State and Commerce departments have also been paying attention to the issue, according to people familiar with the matter. "There is a lot of discussion about what the government needs to do to ensure a secure supply of microelectronics," said a person familiar with the matter. "This is a question of public-private partnership. Is it tax credits, cash subsidies, or a combination of the two?"

In recent years, U.S. chipmakers have abandoned efforts to build cutting-edge chip factories at home, largely because they can cost more than $10 billion and because rapid development cycles mean the benefits of leading don't last long. Meanwhile, governments in other countries, including China, Singapore and Israel, have invested heavily in developing their own manufacturing, paying for factory buildings and subsidizing expensive equipment.