TSMC's first advanced US chip fab is on track to be completed, according to the company.

A 3.5-million-square-foot building, situated on 1,100 acres in the Arizona desert north of Phoenix, features a massive logo of a microchip wafer and the letters TSMC.

The first Arizona chip fabrication plant, or fab, is making history as the most advanced chip fab in the U.S. and has pledged to be its largest customer.

In 2021, CNBC first reported on the construction of TSMC's fab, which was announced shortly after groundbreaking. Initially, TSMC stated that the plant would cost $12 billion and produce 5-nanometer chips by the end of 2024. However, three years later, the price tag has increased to $20 billion, and full production is now delayed until 2025.

TSMC is currently in pilot production, producing sample wafers and sending them to customers for verification. The company has pledged to construct two additional fabs on the site by the end of the decade, with a total investment of $65 billion.

TSMC Chairman Rick Cassidy informed CNBC in November that the project is "almost back on schedule."

"Upon arriving in the U.S., we understood that we would undergo a learning process," Cassidy stated. "This included acquiring knowledge about permitting, collaborating with trades, dealing with unions, and complying with local labor laws. We have since surmounted these challenges."

TSMC announced that with the help of 2,000 employees, it will produce 4-nanometer chips at a rate of 20,000 wafers per month, which is more advanced than originally planned.

According to a Morgan Stanley report, wafers cost over $18,000 and have been steadily increasing, surpassing TSMC's prices over the past few years.

According to Daniel Newman, CEO of The Futurum Group, TSMC's ability to set its own price is due to its reputation for dependability and quality, which makes it necessary for everyone to pay it.

'On par with our Taiwan compatriots'

According to Cassidy, the yields from the fab are expected to be on par with those of our Taiwanese counterparts. However, it's worth noting that 92% of the world's most advanced chips are currently produced by TSMC's Taiwan fabs, meaning the U.S. is far from self-reliant.

"According to Stacy Rasgon of Bernstein Research, it is impossible for the U.S. or any country to be fully self-sufficient in everything required to manufacture semiconductors."

Although the U.S. was the birthplace of microchips in the 1950s and remains a top chip design hub, it now manufactures only 10% of the world's chips and none of the most advanced ones. The chip shortage that occurred during the pandemic, caused by supply chain chaos and booming demand for consumer electronics, exposed the risks of relying on outsiders for such a critical technology.

If there is an earthquake or any other event that affects Taiwan for a prolonged period, the entire market and the world could experience a shortage of leading-edge nodes, according to Newman.

In April, a 7.4 magnitude earthquake caused a brief halt in production in Taiwan and resulted in a $92 million loss for TSMC. According to Cassidy, the Arizona buildings are "well prepared" for earthquakes.

The U.S. Commerce Department finalized TSMC's allotted $6.6 billion from the bipartisan CHIPS Act after President-elect Donald Trump expressed opposition to the $52 billion bill in October during his campaign.

In an interview with CNBC, Commerce Secretary Gina Raimondo stated that repealing the CHIPS Act would put Americans at risk, and she believes the incoming administration will not repeal it.

Raimondo stated that he didn't believe they would take that action.

Discussions with TSMC regarding the establishment of advanced chip manufacturing in the U.S. commenced in 2018, during Trump's presidency.

"Wilbur Ross, who was commerce secretary at the time, facilitated a phone call between the chairman of TSMC and the head of Apple, resulting in Apple's strong support for TSMC's involvement."

As a 26-year veteran of the company and now president of TSMC Arizona, Rose Castanares was also involved in the early discussions. Customers expressed a desire for supply resilience, according to Castanares.

The U.S. drive for technological dominance has been complicated by relying on chips from Asia. To prevent China from gaining an advantage in advanced tech, President Joe Biden imposed a complex web of export controls on the chip industry.

Despite bans on selling to Huawei, some TSMC chips were discovered in their devices in October.

"This issue has been around for centuries," Newman remarked. "The process of rerouting goods to different countries with limited access to advanced technology is incredibly complex."

Workers, water and power

Nearby in Chandler, Arizona, is also building two huge fabs.

While TSMC focuses on manufacturing chips for other companies, the U.S. company has a unique business model that involves designing and manufacturing its own chips. Despite their differences, the relationship between the two companies is strong, according to Cassidy.

"We have weekly meetings with Intel and they are pleased with our assistance in increasing their ranks," Cassidy stated. "We are helping them train on advanced technology, which makes them happy with our efforts."

Both companies have delayed the timelines for full production at their new Arizona fabs. However, while TSMC has maintained its position as the dominant player in advanced chips, Intel has faced numerous setbacks.

In the U.S. chip industry, both companies will be vying for a limited pool of workers.

"The first advanced manufacturing fab constructed in the United States in over a decade was completed. According to TSMC's Castanares, semiconductors are an extremely challenging technology, and the experience in this area is limited in the United States."

In 2021, Jeff Patz, a process integration engineer, spent 18 months training in Taiwan, where TSMC initially sent 600 engineers for the project's beginning.

""To actually create things and learn how they're made, that was the purpose, right? And you need a kitchen to cook," Patz said."

TSMC has invited experts from Taiwan to work on temporary assignments for three years. TSMC aims to hire at least 6,000 employees when all three factories are completed.

"We are actively recruiting engineers at universities in Arizona and across the U.S., including Arizona State University, which has a TSMC day."

Water is another scarce resource needed in abundance.

TSMC is experienced in recycling the large amounts of water required to manufacture chips. The company will use 4.7 million gallons of water daily to operate the first Arizona fab, but it will reduce this demand to 1 million gallons a day by recycling 65% of it.

It also takes a massive amount of power to make chips.

TSMC constructed solar panels on-site, but it is not sufficient to meet the 2.85 gigawatt-hours per day required to operate the first fab, which is equivalent to the power used by approximately 100,000 U.S. homes. TSMC stated that it is purchasing renewable energy credits to offset this. However, with the rise of AI-driven data centers, Arizona's largest utility has warned that it may run out of transmission capacity before the end of the decade.

TSMC plans to commence production at its third Arizona fab, which Cassidy predicts will be a 2 nanometer or more advanced facility.

TSMC is expanding its global presence by opening a fab in Japan and starting construction on an $11 billion fab in Germany.

Within the U.S., Cassidy said TSMC is also likely to keep expanding.

"There's room for lots of fabs," Cassidy said.

TSMC's Arizona fab houses never-before-seen footage.