Nvidia (NVDA, Financials) is in discussions with Taiwan Semiconductor Manufacturing Co. (TSM, Financials) to produce its Blackwell artificial intelligence chips at TSMC's new Arizona facility, Reuters said, citing people familiar with the matter.
The relocation would enable Nvidia to diversify its supply chain to satisfy the rising demand for artificial intelligence hardware, therefore extending its manufacturing outside of Taiwan.
With preparations for first manufacture slated to commence early next year, TSMC's Arizona factory is scheduled to start volume production in 2025. Right now, only TSMC's facilities in Taiwan manufacture Nvidia's March debuted Blackwell processors. Companies engaged in generative artificial intelligence and rapid computing have shown great demand for the chips, so the possible expansion to Arizona is a noteworthy event in the semiconductor sector.
Although TSMC intends to produce the front-end process of Nvidia's Blackwell chips in Arizona, the plant lacks the capability for chip-on-wafer-on-substrate (CoWoS) packaging, which is vital for these processors. The chips will therefore be returned to Taiwan for ultimate packaging. Currently housed in Taiwan, all of TSMC's CoWoS capability highlights the difficulties in completely moving sophisticated chip manufacturing to the United States, according to the report.
Should it be approved, the arrangement with Nvidia would add another significant customer to TSMC's Arizona operations—which also include Apple (AAPL, Financials) and Advanced Micro Devices (AMD, Financials), the report said. With rising geopolitical concerns in the area, the Arizona project marks a major turning point in TSMC's attempts to have a manufacturing presence other than Taiwan.
The construction of TSMC's Arizona facility is a result of a larger U.S. government initiative to increase home semiconductor manufacture. Under the Chips Act, the Biden government concluded an incentive deal with TSMC last month hoping to drive tens of thousands of employment by the end of the decade, $65 billion in private investment, and three semiconductor factories in Arizona.
NVDA stock is up 200% this year. Growing demand for Nvidia's artificial intelligence processors is fueling this stock price. With its market value momentarily exceeding $3 trillion in June 2024, Nvidia became among the most valuable corporations in the world.
At its Memphis supercomputer site, Elon Musk's AI firm xAI intends to incorporate at least one million GPUs, maybe involving a large acquisition of Nvidia's Blackwell chips, worth between $24 billion and $32 billion. Investing $10 billion in a new data center in Louisiana, Meta Platforms (META, Financials) hopes to use 350,000 Nvidia H100 processors by the end of 2024, hence increasing demand for Nvidia's goods.
