• The plant is expected to employ 1,600 people
  • The plant will manufacture chips with 5-nanometer transistors
  • Trump Administration has been pressuring TSMC to stop supplying chips to Huawei.

Taiwan Semiconductor Manufacturing Co. (TSM) plans to spend $12 billion on a chip factory in the state of Arizona which will employ 1,600 people.

The Wall Street Journal reported that the project has been embraced by both the federal government and the state of Arizona and would appear to be a victory for the Trump Administration which has sought to reduce U.S. dependence on foreign-made microelectronics.

“We shouldn’t have supply chains. We should have them all in the U.S.,” President Donald Trump said on Thursday.

Construction on the plant – which will manufacture chips with 5-nanometer transistors -- will commence next year with production set to begin in 2024. The 5-nanometer chips are reportedly the “tiniest, fastest and most power-efficient ones manufactured today.”

TSMC also said the plant would make 20,000 wafers a month – a relatively modest figure considering the company made more than 12 million wafers last year alone.

Wafers are a thin slice of silicon used to make products like integrated circuits.

The company did not specify where in Arizona the plant will be constructed, nor what financial incentives it may have received from the U.S. government.

TSMC cited the U.S.’s investment climate, skilled workforce and investment policies as factors behind its decision to build the Arizona plant. TSMC currently has a small factory in Washington state, while most of its other manufacturing facilities are located in Taiwan.

Commerce Secretary Wilbur Ross praised TSMC’s decision.

“TSMC’s plan to build and operate a $12 billion semiconductor facility in Arizona is yet another indication that President Trump’s policy agenda has led to a renaissance in American manufacturing and made the United States the most attractive place in the world to invest,” said Ross. “This plan is the result of years of close collaboration among TSMC, the Governor of Arizona and his staff, and the Administration.”

Eric Sayers, an Asia security expert and adjunct senior fellow at the Center for a New American Security think-tank, said TSMC’s decision suggests it seeks to “play a major role in the outgrowth of an advanced microelectronic ecosystem” in the U.S.

“Remaining the leader in this industry will be critical to future economic and military competitiveness,” he said. “At a geopolitical level, I can’t think of a better big idea for tying the U.S. and Taiwan together than working to ensure the free world stays the leader.”

Mark Li, an analyst at Sanford Bernstein, pointed out that Taiwan seeks to maintain a neutral position in the ongoing U.S.-China imbroglio.

“TSMC needs both [the] U.S. and China to maintain scale and stay competitive and this is probably the minimal cost to keep this strategy,” Li wrote. “The scale and technology is similar to what TSMC did in China, suggesting a balance between the U.S. [and] China. Overall, this is probably the minimal price to stay neutral.”

TSMC controls one-half of the world’s contract chipmaking industry and supplies such major companies as Huawei Technologies of China as well as Apple (AAPL).

Moreover, matters may be complicated by the Trump Administration and the Commerce Department’s efforts to block the sale of U.S.-made chips to Huawei , citing national security concerns. The Trump Administration has been pressuring TSMC to stop supplying chips to Huawei.

The Wall Street Journal reported TSMC may lobby to get Trump to drop these plans.

Kung Ming-hsin, a Taiwanese cabinet minister in charge of the economy, said: “TSMC, in its negotiations with the U.S. government, needs to ensure that if they build a [fabrication plant] in the U.S., they will not be restricted in their ability to sell to any other customers.”