Texas Instruments’ Ambitious $60 Billion Manufacturing Initiative
In July, Texas Instruments (TI) unveiled an audacious $60 billion manufacturing endeavor, betting on the resurgence of microchip production within the United States. Just a month later, Apple declared its commitment to similar ventures.
During a pivotal White House press briefing, where President Donald Trump announced a sweeping 100% tariff on imported chips from manufacturers outside the U.S., Apple CEO Tim Cook heightened his company’s financial pledges. He escalated Apple’s investment in the U.S. to $600 billion over four years, a notable increase from the previously announced $500 billion in February.
Cook articulated that part of this investment would be allocated to the production of “critical foundational semiconductors” for iPhones and various devices at TI’s forthcoming fabrication facilities in Utah and Texas.
In July, CNBC became the premier outlet to witness the inner workings of TI’s latest fabrication plant in Sherman, Texas. This facility is on track to commence full production by the end of 2025, one of seven new factories the chip titan is establishing across the U.S. to satisfy the needs of major clients such as Nvidia, Ford Motor, Medtronic, and SpaceX.
While TI does not specialize in crafting the most sophisticated chips, its indispensable components permeate countless devices, from smartphones to graphics processors essential for generative AI applications.
“If you possess any device that plugs into a wall, contains a battery, or is corded, you likely carry several TI chips within it,” stated Mohammad Yunus, TI’s Senior Vice President of Technology and Manufacturing.
However, merely one month after TI’s megaproject announcement, its stock experienced a troubling 13% decline. This downturn was influenced by lackluster guidance and tariff apprehensions raised during the earnings call on July 23.
“The concern lies with their end customers. Amid tariff uncertainties, they are left in the dark. Are they stockpiling?” queried Stacy Rasgon, a senior analyst at Bernstein Research.
Despite the ongoing uncertainties surrounding tariffs, demand remains a question mark. Nevertheless, shares regained some value in August.
“I would categorize them as more of a tariff beneficiary than a casualty,” asserted Timothy Arcuri, managing director at UBS. He emphasized that TI’s U.S. foundry position would enable it to offer more competitive rates against rivals sourcing from Taiwan.
However, the market for TI’s offerings is not guaranteed to flourish. Following TI’s struggles to meet demand during the 2020 chip shortage, Arcuri noted that the company’s share of the analog market “plummeted,” dropping from a peak of 19.8% in 2020 to a mere 14.7% in 2024, according to UBS.
TI’s ambitious $60 billion undertaking encompasses four fabrication plants in Sherman, Texas, one in Richardson, Texas, and two in Lehi, Utah. These new facilities are projected to augment TI’s production capacity by a staggering fivefold, as disclosed by Yunus to CNBC.
“This represents a significant wager on recovering market share and anticipating a surge in demand,” Arcuri remarked. “Failing to regain that share raises inquiries about the feasibility of expanding capacity to such an extent.”
Transitioning to 300mm Wafer Technology
While TI is recognized for its graphing calculators, it has also played a pivotal role in transforming the electronics sector. In 1958, TI engineer Jack Kilby patented the first integrated circuit, enabling the miniaturization of chips by embedding all circuit components, not just transistors, into a singular silicon piece.
Currently, a substantial portion of TI’s revenue is derived from the automotive and industrial sectors, which procure the company’s analog and embedded chips. Analog chips are adept at processing various signals, such as sound, light, and pressure, whereas embedded chips predominantly function as signal processors and microcontrollers for commonplace devices.
In contrast to the costly, cutting-edge 2 and 3 nanometer chips produced by industry giants like TSMC, TI’s chips utilize more economical, legacy nodes, specifically within the 45 to 130 nanometer range.
This particular size “is optimal for analog and embedded solutions, delivering the performance and power specifications our portfolio demands,” Yunus elaborated.
With each TI chip costing approximately $0.40, these components play significant roles in supporting the globe’s most advanced technologies. For example, TI is collaborating with Nvidia to develop a chip aimed at enhancing efficiency for energy-demanding data centers.
In 2009, TI made another significant move, subsequently reducing its chip production costs. It inaugurated the world’s first 300 millimeter fabrication plant for analog chips, repurposing a facility from Qimonda after the latter’s collapse during the financial crisis.
“This strategic decision provided TI with a substantial cost advantage,” remarked Arcuri.
The larger wafer size offers TI “remarkable cost efficiency,” with 300mm wafers accommodating “2.3 times more chips compared to a 200mm wafer,” Yunus noted. TI has been methodically closing and divesting some of its 200mm facilities, with all seven new plants intended for 300mm wafer production.
Global Supply Dynamics and Texas Expansion
TI disclosed to CNBC that it stands as the nation’s foremost analog and embedded semiconductor manufacturer, distributing tens of billions of chips annually. Approximately 60% of its revenue is generated from clients located beyond U.S. borders, with China accounting for roughly 20%.
Despite TI’s capital budget largely being allocated to U.S. projects, the company also produces chips overseas in Germany, Japan, and China. Furthermore, it conducts testing and assembly operations in Mexico, Taiwan, the Philippines, and Malaysia, where it is investing $3 billion in two new facilities, one of which has recently begun production.
According to Yunus, TI’s global presence is advantageous amid today’s fluctuating tariff landscape.
“Our manufacturing capabilities spanning 15 distinct sites enable us to support our customers, irrespective of their location or prevailing economic conditions,” he stated.
Although TI considered establishing its new facilities globally, including potential sites in Singapore, the ultimate decision favored Sherman, Texas. This relatively small city, located 65 miles north of Dallas, boasts a population of just 50,000 and is home to a GlobalWafers factory, which produces the bare silicon wafers instrumental in chip manufacturing.
Sherman Mayor Shawn Teamann proudly claims the title, “the hub of the Silicon Prairie.”
Teamann’s grandfather collaborated with Kilby at TI during the 1950s. TI first set foot in Sherman in 1966, but when it attempted to close its outdated 150mm fabrication plant, the city incentivized the company to remain by offering tax rebates and discounts on water.
This strategy proved effective, leading to TI’s decision in 2021 to establish a new campus of 300mm facilities in Sherman. Now, with the first of four fabs completed, Teamann noted that the project has more than doubled the city’s population growth rate since its announcement.
As for federal assistance, TI received $1.6 billion in funding from the CHIPS Act and an impressive 35% investment tax credit from Trump’s significant legislation enacted in July.
At the state level, Governor Greg Abbott has consistently presented offers to chip manufacturers willing to operate in Texas, including reduced taxes and the $1.4 billion Texas CHIPS Act initiated in 2023.
Since 1996, Samsung has been another prominent player in Texas, currently constructing a $17 billion advanced chip fabrication facility near Austin. This area is also home to design operations for firms such as Apple, Amazon, and AMD.
Other chip manufacturers present in Texas include Infineon, NXP, X-Fab, Micron, GlobalFoundries, and equipment supplier Applied Materials.
Resource Challenges: Water, Power, and Workforce
Chip manufacturing is a notoriously water-intensive endeavor, and with approximately a quarter of Texas currently experiencing drought conditions, resource management is imperative.
Fortunately, Sherman holds water rights to Lake Texoma.
“It involved securing additional water rights, scaling up production, and ensuring that we can accommodate the substantial water requirements of a semiconductor facility,” remarked Teamann, noting that the fabrication plant has nearly doubled Sherman’s water consumption.
Upon completion, TI is projected to utilize approximately 1,700 gallons of water per minute at the new Sherman facility, with intentions to recycle a minimum of 50% of that water, according to Yunus.
The chip manufacturing process is also energy-intensive, making Sherman’s recently upgraded power plant beneficial. TI’s new facility will operate entirely on renewable energy, with Yunus stating that the shift to 300mm wafer production enhances energy efficiency.
“The same amount of energy can yield 2.2 to 2.3 times more chips,” he commented.
Texas’s distinctly independent grid limits the state’s access to power from neighboring areas, a situation that contributed to the grid’s failure during a severe winter storm in 2021, leading to production halts at chip manufacturers like Samsung and NXP, although TI managed to uphold “critical operations.”
“We reinforced redundancy within this facility,” Yunus clarified. “We have multiple transmission lines powering the site along with large diesel storage tanks and generators capable of sustaining operations for several days.”
Finding highly skilled chip engineers remains a challenge, especially in light of the significant decline in U.S. semiconductor manufacturing. According to the Semiconductor Industry Association, the U.S. market share dwindled from 37% in 1990 to a mere 10% by 2022.
In response, TI has fostered collaborations with various universities, community colleges, and the military to bridge the talent gap essential for personnel at its Sherman facility.
“A surge of young talent is gravitating towards the area. In fact, I believe it is now easier to recruit talent than it was five to ten years ago,” remarked Arcuri.
With the overarching $60 billion initiative, TI anticipates creating 60,000 jobs in the U.S.; however, the company has yet to provide a specific completion timeline.
“Predicting an exact timeline for ramping up remains elusive,” Yunus stated. “Nonetheless, we aspire to advance steadily, contingent on market demand.”
Source link: Cnbc.com.
