Investing.com -- Taiwan Semiconductor Manufacturing (NYSE:TSM) (TSMC) is in talks with Nvidia Corp (NASDAQ:NVDA) to produce the tech giant’s Blackwell AI chips at TSMC's new facility in Arizona, Reuters reported Thursday, citing sources familiar with the matter.
TSMC is gearing up to begin production early next year, the report said.
Currently, Nvidia’s Blackwell chips, introduced in March, are produced at TSMC's facilities in Taiwan. These chips, which have gained significant traction among customers working in generative AI and accelerated computing, are touted to deliver performance up to 30 times faster for tasks such as chatbot responses.
If finalized, the deal would add Nvidia to the roster of clients for TSMC's Arizona plant, which is expected to commence large-scale production next year. The report said that Apple (NASDAQ:AAPL) and Advanced Micro Devices (NASDAQ:AMD) are the current customers at the facility.
However, TSMC plans to conduct only the initial manufacturing stages for the Blackwell chips in Arizona. The chips will need to be shipped back to Taiwan for advanced packaging, as the Arizona plant lacks the Chip-on-Wafer-on-Substrate (CoWoS) capability crucial for Blackwell chips, according to Reuters. At the moment, all of TSMC's CoWoS operations are based in Taiwan.
TSMC, the world's largest contract chipmaker, is investing tens of billions of dollars into three new facilities in Phoenix. This initiative has received substantial US government subsidies, aligning with efforts to boost domestic semiconductor manufacturing.
Specifically, the US Commerce Department announced earlier this year that TSMC’s US division will receive a $6.6 billion subsidy to support advanced semiconductor production at its Phoenix, Arizona facility, along with up to $5 billion in low-interest government loans.
In return, TSMC has committed to increasing its planned investment in the project by $25 billion, bringing the total to $65 billion. The company also agreed to construct a third Arizona fabrication plant by 2030.