According to a report published by independent technology journalist Tim Culpan on his Substack newsletter on November 24, sources revealed that TSMC’s Fab 21 in Arizona, U.S., suffered an unexpected incident in mid-September this year, resulting in the scrapping of thousands of wafers being produced for clients including Apple, Nvidia, and AMD.
The report states that the incident was caused by a power failure at Linde Group, a British industrial gas and engineering company that is TSMC’s subcontractor. The outage cut off the supply of critical gas materials required for chip manufacturing, forcing Fab 21 to shut down for several hours. It is understood that most of TSMC’s gas supply for its Taiwan (China) fabs is procured externally and transported by TSMC itself, but the company opted to outsource this service for its Arizona facility.
Notably, following the mass production of 4nm chips at TSMC Arizona’s Fab 1 in Q4 2024, the fab achieved a profit of NT$496 million in Q1 this year. However, TSMC’s consolidated investment income from the U.S. fab remained a loss of NT$1.931 billion. In Q2 this year, the fab’s net profit surged to NT$4.232 billion, bringing TSMC its first positive investment income of NT$6.447 billion from the U.S. operation. Nevertheless, in Q3 this year, the net profit plummeted 99% quarter-on-quarter to NT$41 million.
Prior to this, the industry speculated that the sharp sequential drop in the U.S. fab’s Q3 profit was mainly due to continued capacity expansion and the introduction of advanced processes, which led to a surge in demand for equipment and manpower, resulting in higher-than-expected operating costs.
Currently, Fab 21’s capacity remains relatively limited. Many products manufactured at the fab have already completed tape-out (marking the end of the design phase and preparation for production) and were previously produced in TSMC’s Taiwan (China) fabs. It is reported that TSMC’s Fab 2 in Arizona is under construction, with 3nm mass production expected to start in the U.S. in 2027. Meanwhile, the company is evaluating the construction of Fab 3 for the 2nm node.
However, it now appears that the losses caused by the September incident at TSMC’s U.S. fab may be one of the main reasons for the sharp decline in Q3 net profit.
In response to the above reports, TSMC stated: "The Arizona fab has begun contributing positive revenue to the company, but net profit is still affected by multiple factors and should be interpreted from a long-term perspective." "As we have previously indicated, the expansion of overseas fabs will lead to a contraction in gross profit margin over the five-year period starting from 2025."
Culpan’s sources also indicated that the impact of the incident on TSMC’s customers should be negligible, and TSMC’s financial losses may be covered by insurance. In past instances of disruptions at TSMC’s fabs, the lost output and revenue have been recovered in the subsequent quarter.
(Reprinted from https://news.eccn.com/）