Biden is celebrating the comeback of US manufacturing in a huge semiconductor project

(FILE) U.S. President Joe Biden delivers remarks on cutting costs and creating jobs in the Hudson Valley at IBM on October 6, 2022 in Poughkeepsie, New York. – IBM received US President Joe Biden on Thursday to announce a $20 billion investment in semiconductors, quantum computers and other cutting-edge technologies in upstate New York. (Photo by MANDEL NGAN / AFP)

“American manufacturing is back folks. American manufacturing is back,” Biden said at the Phoenix, Arizona plant, accompanied by senior political allies and corporate titans including Apple CEO Tim Cook and Micron CEO Sanjay Mehrotra.

The project by TSMC, the world’s largest maker of high-end chips, would go a long way in helping the US achieve its goal of ending its reliance on factories based abroad — particularly in Taiwan, which is constantly under threat of takeover or even invasion is China.

TSMC, or Taiwan Semiconductor Manufacturing Company, announced that it will build a second plant in Phoenix by 2026, expanding its $12 billion investment in Arizona.

About 10,000 high-tech jobs will be created once both plants are operational, the company said.

White House National Economic Council director Brian Deese said the “major milestone” was one of the largest foreign direct investments in U.S. history, while TSMC chairman Mark Liu was “a giant step forward in building a dynamic semiconductor ecosystems in the United States.

Biden clearly hoped to get political recognition for the investment inflow, citing the impact of his signed CHIPS bill, which provides nearly $53 billion for subsidies and research in the semiconductor sector.

It’s a message he wants to spread in Arizona, which has long been a Republican-dominated state but has morphed into a battleground where the president’s Democrats are doing increasingly well.

– Size matters –

Most of the current US supply of microchips comes from overseas. Though the companies are mostly based with trusted US allies in Asia, the sheer distance and especially the geopolitical tensions surrounding Taiwan are making the US government and companies like Apple nervous.

“Virtually every big tech company, including auto companies and every company using technology, is sweating that something is going to happen between Taiwan and China. And so there’s a massive rush to move production out of both countries,” said technology analyst Rob Enderle.

The tiny, difficult-to-craft devices are at the heart of nearly all modern gadgets, vehicles, and advanced weaponry.

While sheer quantity matters, quality – sophistication and small size – is also becoming increasingly important. Even typical smartphones require the high-end semiconductors.

The new TSMC facility will produce state-of-the-art 3-nanometer chips, while the existing facility will begin to downsize its current 5-nanometer chips to a more sophisticated 4-nanometer.

The twin plants “could meet all US demand for advanced chips when completed. That’s the definition of supply chain resilience,” Ronnie Chatterji, deputy director for industrial policy at the National Economic Council, told reporters.

Biden placed the TSMC investment in a broader context of revitalizing US-based manufacturing — one of the key themes of his presidency.

“More than 30 years ago, America had more than 30 percent of the world’s chip production. Then something happened,” he said.

“American manufacturing, the backbone of our economy, began to be hollowed out. Companies relocated jobs abroad. Today we only produce around 10 percent of the world’s chips, even though we are world leaders in research and design.”

Deese, one of Biden’s top advisors, said Biden’s signature public investment policies — the CHIPS Act and gargantuan Inflation Reduction Act — are revolutionizing the way the government works with private companies.

For nearly four decades, the idea had “trickled through” where the government would “get out of the way” and cut taxes on big companies to attract investment, he said.

Now the goal is to use public money to stimulate activity and squeeze in investors.

The goal is not “to shut out private companies, but to encourage private investment on an historic scale,” Deese said.