Nvidia and other chipmakers book 4nm production at TSMC's Arizona fab to avoid tariffs
When the U.S. tightened its export controls in 2020 it blocked Huawei from receiving cutting-edge chips designed by its own HiSilicon unit. Foundries using American chip manufacturing equipment were banned from shipping 5G and other chips to Huawei. After the Mate 40 flagship was released by Huawei in 2020, the company was forced to ship phones using Snapdragon application processors tweaked to work at 4G speeds.
This ended when Huawei turned to SMIC, China's largest foundry and the third largest in the world after TSMC and Samsung Foundry, to build the 7nm Kirin 9000s for the Mate 60 line. Having SMIC build the application processor allowed Huawei to bring 5G back to its phones without violating the sanctions. One negative for Huawei, its mosr most advanced smartphone chipset is three process nodes behind the competition (5nm, 3nm, and 2nm).
For example, due to sanctions that prevent Chinese firms from obtaining advanced chip manufacturing equipment, Extreme Ultraviolet (EUV) Lithography machines are banned from being shipped to SMIC and other Chinese foundries. As a result, SMIC cannot build chips using a process node more advanced than 7nm. Considering that TSMC and Samsung Foundry are shipping 2nm chips later this year, you can see how the U.S. chip sanctions are negatively impacting Huawei and SMIC.
Last week, President Donald Trump brought up the possibility of imposing a semiconductor tariff that would have the effect of adding an import tax on semiconductors imported into the U.S. The goal would be to force chipmakers to build more chips inside the U.S. A report in DigiTimes says that chip buyers who previously refused to source their chips from the U.S. because of the price are now beating down the doors at TSMC's Arizona facility hoping to buy chips manufactured in the U.S.to avoid paying the tariffs.
If you took Economics 101, can you answer this? What happens to prices when there is heavy demand and limited production capabilities. If you said that prices soar, you are right. And that is the situation in which we find ourselves today. TSMC is expected to raise prices sharply on a process node that is already expensive. In fact, 2nm wafer prices, at $30K a pop, are approximately 50% higher than the pricing for 3nm wafers when that node launched a couple of years ago.
Even before tariffs on semiconductors are imposed, higher smartphone prices in the U.S. appear likely.
The silicon wafers are the building blocks of application processors since the chips are built in layers on the wafer and are sliced and diced to become individual chips. The high price of 2nm wafers has been cited as the reason why Apple decided to use TSMC's 3rd generation 3nm process node for the A19 and A19 Pro SoCs that will power the iPhone 17 line. Originally, it was thought that Apple would use the 2nm process node for the A19 and A19 Pro APs.
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