# Taiwan's TSMC keeps eye on China with $12 billion US plant (HT Tech) > The move shows the delicate balancing act by TSMC to stay on side with Washington, which has stepped up criticism of Chinese trade practices and Beijing's handling of the novel coronavirus. # Taiwan's TSMC keeps eye on China with $12 billion US plant ## The move shows the delicate balancing act by TSMC to stay on side with Washington, which has stepped up criticism of Chinese trade practices and Beijing's handling of the novel coronavirus. May 15 2020, 20:30 IST ![Follow on Facebook](https://images.hindustantimes.com/tech/static/revamp/images/png/follow-us-facebook.png) ![Follow on Facebook](https://images.hindustantimes.com/tech/static/revamp/images/png/follow-us-facebook-hover.png) ![Share](https://images.hindustantimes.com/tech/static/revamp/images/png/Share.png) ![Share](https://images.hindustantimes.com/tech/static/revamp/images/png/Shareclicked.png) ![Share on WhatsApp](https://images.hindustantimes.com/tech/static/revamp/images/png/whatsapp.png) ![Share on WhatsApp](https://images.hindustantimes.com/tech/static/revamp/images/png/whatsapp-hover.png) ![Share on Twitter](https://images.hindustantimes.com/tech/static/revamp/images/png/twitter.png) ![Share on Twitter](https://images.hindustantimes.com/tech/static/revamp/images/png/twitter-hover.png) ![Share on Facebook](https://images.hindustantimes.com/tech/static/revamp/images/png/facebook.png) ![Share on Facebook](https://images.hindustantimes.com/tech/static/revamp/images/png/facebook-hover.png) ![Bookmark](https://images.hindustantimes.com/tech/static/revamp/images/png/Bookmark.png) ![Bookmarked](https://images.hindustantimes.com/tech/static/revamp/images/png/Bookmarked.png) ![While huge in terms of foreign investment in the United States, the plan is small by TSMC's standards (representative image)](https://images.hindustantimes.com/tech/img/2020/05/15/960x540/iPhone_se-7_1589435691245_1589435691435_1589551441769.JPG) While huge in terms of foreign investment in the United States, the plan is small by TSMC's standards (representative image) (Apple) ![Author Photo](https://images.hindustantimes.com/tech/static/revamp/images/png/HTTech-new-circle-logo.png) ### By REUTERS In a race to position itself in the latest trade battle between the United States and China, Taiwan Semiconductor Manufacturing Co Ltd made it just under the wire. The world's biggest contract chipmaker unveiled plans for a $12 billion plant in Arizona on Friday just hours before Washington outlined a proposal to amend tech export rules that could restrict TSMC's sales to China's Huawei. A US Commerce Department official said TSMC's decision to locate the plant in the United States generated "good will" at the department, the drafter of the law that would require TSMC and others to get US licences to sell chips to Huawei. "TSMC has to figure out how to best leverage and benefit from the U.S.-China tensions," said Liu Pei-chen, tech analyst at government-backed think tank Taiwan Institute of Economic Research. It could not escape them so its room for manoeuvre consisted of negotiating the best terms for the US factory it could, she said. Analysts estimate TSMC generates around 60% of its revenue from the United States and some 20% from China. Liu said TSMC would enjoy the first-mover advantage as US President Donald Trump seeks to wrestle global tech supply chains back from China ahead of Nov. 3 presidential election. US government officials were not immediately available to comment on whether the investment would make it more likely that TSMC would get a licence to supply Huawei. TSMC said it was working with outside counsels to interpret the rules in good time and maintains long-term collaborations with equipment partners around the world. Huawei did not immediately reply to a request for comment. The Trump administration on Friday moved to block shipments of semiconductors to Huawei from global chipmakers, in an action that could ramp up tensions with China. The proposed export rule amendment requires foreign companies that use U.S. chipmaking equipment to obtain a U.S. license before supplying certain chips to Huawei Technologies, or an affiliate like HiSilicon. US CHINA BALANCE Semiconductors play a key role in both consumer electronics and defense equipment. The vast majority of the most advanced chips are made in Asia, which has caused concern among US officials as a strategic rivalry with China deepens. "Building a fab (production line) in the US starting with 5 nanometre technology is not the cheapest option for TSMC, but it would help address fears of US IPs and technologies theft. TSMC may continue its operations in China to serve domestic and other clients." Citi analysts said in a note. With a small production plan that would contribute just 3-4% of its total output, the new US plant may hit TSMC's margins, but the splurge underscores the extent TSMC is willing to spend to protect its customer base in its two biggest markets. "The scale & technology is similar to what TSMC did in China, suggesting a balance between the US & China," said Bernstein analysts, noting it took 7 years for TSMC's Shanghai fab to break even in operating profit level and 2-3 years for its Nanjing plant. ALSO READ: Huawei’s Honor explains how AppGallery does justice to its non-Google smartphone, Honor 9X Pro PRONE TO CHANGE While huge in terms of foreign investment in the United States, the plan is small by TSMC's standards, and the company carefully planned to spend it over 9 years, leaving enough room to make downward adjustments depending on market situations. Its compatriot Foxconn pledged a $10 billion investment in Wisconsin and to create 13,000 jobs in 2017 when Trump became President, but it has not met early hiring targets and has said it has been reconsidering its plans. "Considering the state of Foxconn's construction in the U.S., as well as the U.S. election this year, it’s not impossible that these plans for building the fab could change," said Gu Wenjun, chief analyst at Shanghai-based consultancy ICWise. Foxconn was not immediately available for comment. While US Secretary of State Mike Pompeo said chips from the new plant will power everything from artificial intelligence to 5G base stations to fighter jets, some analysts said 5 nanometre chips from the plant will no longer be the most advanced technology by 2024 when it begins production. "This is more of a political response from TSMC to the US government's demands," Gu said. Some analysts also said it was too small to be economically efficient and the size of US incentive and price from customers who prefer US production would likely decide its profitability. Yet the announcement is unlikely to be welcomed by Beijing who would see it as Washington's attempt to control more of a crucial supplier to its national tech champion Huawei, and only spur its ambition to build its own chip supply chains. "I think it would be foolish for China to punish Taiwan or TSMC, given so many of its own companies still rely on it," said Stewart Randall who tracks the chip sector at Shanghai-based consultancy Intralink. "Huawei will continue using TSMC for all high-end chips and China will continue investing in local companies to be self-reliant at some point." China's state-controlled Global Times reported on Friday, citing a source close to the government, that China was ready to take a series of countermeasures against the US plan to block shipments of chips to Huawei. Authorities in Beijing could not be immediately reached after hours for comment. 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