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Apple, AMD confirm they’re among TSMC’s first Arizona customers, while Intel preps for return to cutting edge in 2023


Apple Inc. Chief Executive Tim Cook confirmed at an event Tuesday that the tech giant will be one of Taiwan Semiconductor Manufacturing Co.’s first Arizona fab customers, while Intel Corp. hopes to join TSMC on the cutting edge of chip making by the end of 2023.

Cook said Apple will buy chips fabricated at TSMC’s new U.S. manufacturing plant. On Tuesday, the White House announced, ahead of a visit from President Joe Biden, that TSMC will boost its investment in Arizona to $40 billion from $12 billion and will build a second silicon-wafer fabrication plant, or fab, in Phoenix. TSMC later confirmed that news.

Apple shares

finished the day down 2.5%, while the Dow Jones Industrial Average

dipped 1%. American depositary receipts of TSMC

fell 2.5%, while the PHLX Semiconductor Index 

declined 2.4%, and the tech-heavy Nasdaq

finished down 2% and the S&P 500

fell 1.4%.

At the event, Advanced Micro Devices Inc.

Chief Executive Lisa Su said AMD also expects to be “a big customer of both fabs.” AMD shares fell 4.6% Tuesday.

“We could not do what we do without our partnership with TSMC,” Su said. “Which is why we are so excited about today’s milestone. A strong, geographically diverse, and resilient supply chain is essential to the global semiconductor industry.”

Nvidia Corp.

Chief Executive Jensen Huang, who built the foundation of his company using the fab, said TSMC was “much more than a fab” and performed three miracles.

“Miracle one: serve thousands of customers designing bespoke custom chips,” Huang said. “Miracle two: build them to order at extremely high or low volume; and miracle three: do so with technology at the limits of physics.”

While Huang did not specifically state Nvidia would be an Arizona-plant customer, he was on hand to reiterate to those assembled that Nvidia was a lifelong TSMC customer.

 Also read: The end of one-chip wonders: Why Nvidia, Intel and AMD’s valuations have experienced massive upheaval

On Tuesday, UBS analyst Timothy Arcuri, who has a neutral rating on Intel, said bringing in a major customer for the chip maker’s first parity chip is “key” to Intel’s margin-killing transformation. Currently, he said, underutilization of Intel’s foundry capacity is about a 300-basis-point headwind to Intel’s December gross margins, which is likely to persist into March. Intel

shares closed down 2% on Tuesday.

Last year, Intel stopped using nanometer designations to name its chips, breaking the convention used since 1997 of using nanometers, or “nm,” to denote the size of each transistor that goes on a computer chip, with the general rule being that smaller transistors are faster and more efficient. Intel’s 18A, scheduled to come out in early 2025, would be comparable in transistor size to TSMC’s planned 2-nm architecture — the “A” stands for angstrom, which is a tenth of a nanometer.

More: Intel begins layoffs and offers unpaid leave to manufacturing workers

18A is also considered to be where Intel catches up to TSMC in terms of cutting-edge technology. Before CEO Pat Gelsinger returned to Intel, the company revealed in July 2020 that its 7-nm chips would be delayed because of defects, while AMD had already launched its 7-nm chip the previous year.

Arcuri said that the 18A node is “the key fulcrum point in the manufacturing narrative,” and that Intel expects to sign at least one major foundry customer in 2023, likely in the second half of the year.

“Customers adopting the 18A node will be a good milestone,” Arcuri said. “Intel hopes to announce more customers adopting 18A hopefully early next year.”

Arcuri said Intel expects to close its $5.4 billion acquisition of Israel’s Tower Semiconductor in the first quarter of 2023 and thinks that’s “part of the reason” for the reported departure of Randhir Thakur, the current head of Intel Foundry Services.

Arcuri’s note followed a presentation at UBS’s conference on Monday in which Intel Chief Financial Officer David Zinsner said that modeling first-quarter 2023 revenue would be “no better than seasonal” change versus the fourth quarter of 2022, which analysts surveyed by FactSet expect at $14.67 billion.

Mizuho desk analyst Jordan Klein noted that Zinsner agreed that investors should use 5% to 7% quarter-over-quarter decline as a seasonal starting point into 2023. With that translating into a decline to as much as $13.64 billion, Klein said investors “shrugged off” the current consensus of $14.38 billion, “showing that few are overweight and worried.” 

Of TSMC, Klein said neither the Biden visit nor the news was a stock-moving event or a game-changer.

“It was speculated before today and will basically come out of TSMC’s total global capex budget over next 3-5 yrs,” Klein said. If anything, he said it is a “modest positive” for chip-making equipment suppliers like ASML Holding NV
KLA Corp.
Applied Materials Inc.

and Lam Research Corp.

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