Days after pushing for sweeping AI chip export restriction, the Biden administration has added 14 Chinese companies to its restricted trade list. Sophgo is, perhaps, the highest-profile addition. An entity of Bitmain, the firm sparked international headlines when it was identified as an intermediary between embattled Chinese hardware giant Huawei and Taiwanese chipmaker TSMC. Suspicions […]
Startups focused on lowering the cost of AI are working with US manufacturers.
AI chips are being made at fabrication facilities in New York and Arizona.
Attempting to compete with Nvidia is daunting, especially when it comes to manufacturing.
Nvidia and most of its competitors don't produce their own chips. They vie for capacity from the world's most advanced chip fabricator: Taiwan Semiconductor Manufacturing Company. Nvidia may largely control which companies get the latest and most powerful computing machines, but TSMC decides how many Nvidia can sell. The relationship between the two companies fascinates the industry.
But the bottom line is that there's no manufacturer better and there's no getting ahead of Nvidia for the types of manufacturing capacity relevant to AI.
Still, a few startups think they can find an advantage amid Nvidia's dominance and the ever-fluctuating dynamics surrounding the island nation of Taiwan by tapping chip fabs in the United States.
Positron AI, founded by Thomas Sohmers in 2023, has designed a chip architecture optimized for transformer models — the kind on which OpenAI's GPT models are built. With faster access to more memory, Sohmers claims Postiron's architecture can compete on performance and price for AI inference, which is the computation needed to produce an answer to a query after a model has been trained.
Positron's system has "woefully less FLOPS" than an Nvidia GPU, Sohmers joked. However, his architecture is intended to compensate for this with efficiency for Positron and its customers.
Smaller fabs are 'hungrier'
Positron's chips are made in Chandler, Arizona, by Intel-owned firm, Altera.
Intel acquired Altera, which specializes in a specific type of programmable chip, in 2015. In 2023, some early Positron employees and advisors came from Altera — bringing relationships and trust. The early partnership has given Positron some small influence over Altera's path and a cheaper, more flexible manufacturing partner.
The cost of AI comes from the chip itself and the power needed to make it work. Cutting costs on the chip means looking away from TSMC, Sohmers says, which currently holds seemingly infinite bargaining power.
"Fundamentally, Positron is trying to provide the best performance per dollar and performance per watt," Sohmers said.
Compared to other industries, AI offers a rare proposition: US production is often cheaper.
"In most other industries, made in the USA actually means that it's going to be more expensive. That's not the case for semiconductors — at least for now," Sohmers said.
Many fabs are eager to enter the AI game, but they don't have the same technical prowess, prestige, or track record, which can make finding customers challenging.
Startups, which often lack the high order volumes that carry market power, are a good fit for these fabs, Sohmers said. These less in-demand fabs offer more favorable terms, too, which Sohmers hopes will keep Positron competitive on price.
"If I have some optionality going with someone that is behind but has the ambition to get ahead, it's always good from a customer or partner perspective," he said, adding, "It gives both leverage."
Taking advantage of US fabs has kept the amount of funding Positron needs within reason and made it easier to scale, Sohmers said.
Positron isn't alone. Fellow Nvidia challenger Groq partners with GlobalFoundries in upstate New York and seeks to make a similar dent in the AI computing market by offering competitive performance at a lower price.
Less inherent trust
It's not all upside though. Some investors have been skeptical, Sohmers said. And as an engineer, not going with the best fab in the world can feel strange.
"You have a lot more faith that TSMC is going to get to a good yield number on a new design pretty quickly and that they have a good level of consistency while, at other fabs, it can be kind of a dice roll," he said.
With a global supply chain, no semiconductor is immune from geopolitical turmoil or the shifting winds of trade policy. So, the advantages of exiting the constantly simmering tension between Taiwan, China, and the US serve as a counterweight to any skepticism.
Positron is also working on sourcing more components and materials in North America, or at least outside China and Taiwan.
Sourcing from Mexico, for example, offers greater safety from geopolitical turmoil. The simpler benefit is that shipping is faster so prototyping can happen quickly.
It's taken a while, but Sohmers said the industry is waking up to the need for more players across the AI space.
"People are finally getting uncomfortable with Nvidia having 90-plus percent market share," he said.
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"Disabling or destroying TSMC is table stakes if China is taking over Taiwan," Elbridge Colby wrote in an X post in February. President-elect Donald Trump picked Colby as his next undersecretary of defense policy at the Pentagon.
Dominic Gwinn/Middle East Images via Getty Images; Sam Yeh/AFP via Getty Images
President-elect Donald Trump named Elbridge Colby as his next undersecretary of defense policy.
In February, Colby said "disabling or destroying TSMC is table stakes" if China invades Taiwan.
Colby made the same point in 2023, saying the US should never allow TSMC to fall into Chinese hands.
"There's no scenario in which Taiwan falls to the PRC and Taiwanese can expect TSMC and its central role to persist," Colby, a former senior Pentagon official, wrote in an X thread in May 2023.
"If China attacks Taiwan, Taiwan itself and US should not allow TSMC to fall intact into PRC hands," Colby wrote in the thread.
TSMC, Colby wrote, needs to be included in the US' semiconductor sanctions against China in the event that Taiwan surrenders. The US and its allies can't afford to allow China to "have such dominance over global semiconductors," he wrote.
Trump announced Colby's nomination in a Truth Social post on Sunday, calling him a "highly respected advocate for our America First foreign and defense policy."
Colby, a Harvard and Yale Law graduate, was part of the first Trump administration. He served as Trump's deputy assistant secretary of defense for strategy and force development from 2017 to 2018.
Colby made a similar point about TSMC in another X post earlier this year.
"Disabling or destroying TSMC is table stakes if China is taking over Taiwan," Colby wrote on February 24.
"Would we be so insane as to allow the world's key semiconductor company fall untouched into the hands of an aggressive PRC?" he added.
Representatives for Trump and Colby did not respond to requests for comment from Business Insider. TSMC also did not respond to a request for comment.
TSMC is the world's largest contract chipmaker. It counts US tech giants like Apple and Nvidia as major customers.
Its core base, Taiwan, is also home to smaller chip producers like MediaTek and ASE, making the island a critical node in the global semiconductor supply chain.
In May, Commerce Secretary Gina Raimondo told lawmakers at a House hearing that a Chinese seizure of TSMC during a Taiwan invasion "would be absolutely devastating." The US is obliged by law to protect Taiwan by providing the island with military means to defend itself.
Under President Joe Biden, the US has strived to diversify its chip supply.
In August 2022, Biden signed the $52 billion CHIPS for America Act, which provides manufacturing incentives for chip production in the US.
The legislation drew criticism from Trump, who said in an interview with Joe Rogan in October that tariffs, not subsidies, would have been more effective.
"You could have done it with tariffs. You tariff it so high that they will come and build their chip companies for nothing," Trump said.
The restrictions, which target 140 Chinese companies, mark the third time the administration has cracked down on China's chipmaking industry since October 2022.
The list includes companies like Huawei, Naura Technology Group, and Semiconductor Manufacturing International Corporation.
The Biden administration's efforts to boost US semiconductor manufacturing and employment could bear fruit during the Trump administration.
During his term, Biden secured commitments from five of the world's leading chip manufacturers —TSMC, Intel, Samsung, Micron, and SK Hynix — to build factories in the US as part of an effort to shore up production of the critical technology.Semiconductor chips power a wide variety of products, including iPhones, pickup trucks, washing machines, and military equipment.
However, many of these factories are still in various stages of construction, and for some, it will be years before they're producing chips. Much of the hiring for manufacturing roles could come under president-elect Donald Trump or a future administration, experts told Business Insider.
Jeff Koch, an analyst at the semiconductor research and consulting firm SemiAnalysis, told Business Insider that the current building of US chip factories has already created construction jobs. However, Koch said that the anticipated boost in semiconductor manufacturing employment hasn't materialized yet.
Koch and Stephen Ezell, the vice president for global innovation policy at the Information Technology and Innovation Foundation, said manufacturing jobs would likely be realized during the Trump administration.
"The longer it takes to get the funds disbursed and the projects fully underway, then the longer it takes to get to full hiring for construction of the facilities and the operational staffing of them once they're complete," said Ezell, referring to CHIPS Act funding that the five leading chipmakers — in addition to other semiconductor companies — have been allocated from the Biden administration.
The chipmakersare expected to receive some of the $39 billion in manufacturing incentives tied to the CHIPS Act, which President Joe Biden signed into law in 2022. The Biden administration is trying to finalize funding agreements before Trump — who has criticized the CHIPS Act — takes office in January.
The US could see about 42,000 direct jobs at the companies building these factories and 101,500 indirect jobsat chipmakers' suppliers, per a report published in 2021 by the Semiconductor Industry Association — a trade association and lobbying group — thatsaid a $50 billion investment would help create an estimated 10 additional chip factories in the US.
To be sure, it's not uncommon for the benefits of a president's policy initiative to see gainsafter the leader leaves office. This is a reality Biden understands.
"Much of the work we've done is already being felt by the American people, but the vast majority will not be felt, will be felt over the next 10 years," Biden said in November about his administration's policies.
Additionally, the construction of chip factories is particularly complicated, and it often takes years for these projects to be completed.
"This is the world's most complex technology," Jimmy Goodrich, senior advisor for technology analysis to the RAND Corporation, said of semiconductors. "You're talking about producing transistors — billions on a single chip — each of them is 20 to 30,000 times smaller than the human hair."
Business Insider reached out to TSMC, Intel, Samsung, Micron, and SK Hynix to confirm the latest status of their US-based chip factories under construction. The table below shows where the chipmakers have committed to building factories in the US. Intel declined to provide estimated completion dates for its four factories.
When reached for comment, the Trump-Vance transition team didn't respond to a question about Trump's plans to boost US semiconductor manufacturing employment.
Building chip factories takes time
Koch said Taiwan-based TSMC began hiring over two years ago. The company is expected to begin full production levels — BI previously reported it already startedmaking chips for Apple — at its first Phoenix factory early next year after facing some delays.
TSMC is projecting that its second and third chip Phoenix-based factories will begin production in 2028 and by the end of the decade, respectively. The second factory was initially slated for a 2026 opening.
Micron, which is based in Boise, Idaho, has five factories in the works — four in Clay, New York, and one in Boise. The Boise factory is expected to begin production in 2026, the company told BI, but Micron's Clay factories have faced some delays.
SK Hynix, which is based in South Korea, expects to begin mass chip production at its West Lafayette, Indiana factory in the second half of 2028. Samsung is projecting that it will begin chip production at its chip factory in Taylor, Texas in 2026. In October, Reuters reported that Samsung has postponed taking deliveries of chipmaking equipment because it has yet to land any major customers for the project.
The Commerce Department said that TSMC, Intel, Micron, Samsung, SK Hynix, and TSMC are "five of the world's leading and most advanced leading-edge logic and leading-edge memory chip manufacturers." The Commerce Department added that building chip factories is a very intensive and complex construction project — and that it often takes three to five years before factories are fully constructed and operational.
While creating US semiconductor manufacturing jobs would be good news for the people who eventually land these roles, Chris Miller, a nonresident senior fellow at the American Enterprise Institute who focuses on semiconductors, told BI that he thinks the Biden administration's main goal was to boost US chip manufacturing. Doing so could help secure US supply chains and make the country less reliant on advanced chips made in Taiwan.
"The point is to have more chip manufacturing, which will mostly come over the next few years," he said.
Do you work in the US semiconductor industry? Reach out to this reporter at [email protected].
Pat Gelsinger is leaving Intel at a moment when its problems have mounted.
I-HWA CHENG/ Getty Images
Pat Gelsinger's successor has big problems to pick up.
The departing Intel CEO has struggled with a turnaround and left the company behind on AI.
Intel also faces an uphill battle in its bid to outdo its industry rival TSMC.
Intel's announcement that Pat Gelsinger is retiring has thrown the storied chip firm's future into deep uncertainty. Its interim leaders and its next CEO must pick up the pieces of a turnaround plan designed to fix a business in turmoil, play catch-up in a lucrative AI race, and navigate Donald Trump's second term.
The mission assigned to Gelsinger when he took over as CEO in 2021 was to restore the then-52-year-old company to relevancy. Its business of designing and manufacturing chips — once industry-leading — was struggling. It had to contend with Big Tech customers pushing forward with their own designs, and with production setbacks from manufacturing woes.
Now the challenges are even greater. It has failed to capitalize on the generative-AI boom that has enriched rivals like Nvidia and TSMC. It is also struggling to make the case that it's a national champion of US industry as chipmaking becomes increasingly critical to the nation's future prosperity.
In October, Intel announced a net loss of $16.6 billion in its third quarter, adding to a loss in its second quarter. The company announced it would suspend its dividend and reduce its head count by 15%. The market has not reacted kindly. The chip giant has lost half its value since the start of the year, sinking to a market capitalization of about $103 billion.
After Gelsinger's exit, which Bloomberg reported followed a clash with the board, it's on Intel's interim co-CEOs — David Zinsner and Michelle Johnston Holthaus — and its future leader to overcome these problems.
Closing the AI gap
In 2006, Intel's CEO at the time, Paul Otellini, famously turned down an offer from Steve Jobs to make chips for the iPhone. Intel's move to shun the smartphone market has been replayed in the AI boom.
"It hung on to PCs for too long and ignored what Nvidia was doing," said Peter Cohan, an associate professor of management practice at Babson College. "By the time Intel began to work on AI chips, it was too late, and the company had basically no market share."
Though Intel has tried to play catch-up, it has struggled to deliver. Analysts and researchers pointed to a few reasons.
Hamish Low, a research analyst at Enders Analysis, said Intel had issues during Gelsinger's tenure getting operations ready for the AI boom while dealing with the internal challenges of separating its foundry division from its design business.
"This long, drawn-out corporate process of trying to get your own house in order, when that's your focus, clearly generative AI just skipped right by," Low told Business Insider.
He added that Intel was long known as "the x86 CPU company," referring to its architecture for more general computer chips. The AI world runs on chips known as GPUs loaded into servers, so trying to shift focus while restructuring the business proved tough.
"When it suddenly is GPUs and accelerated computers, it was always going to be a tough challenge to pivot into doing those kinds of server GPU chips," he said.
Intel's AI chips have struggled to make ground on Nvidia, the market leader.
Justin Sullivan/Getty Images
Intel has felt the pains of this pivot. Its line of AI chips, known as Gaudi, has paled in comparison with offerings from competitors like Nvidia. In an October earnings call, Gelsinger said the company would "not achieve our target of $500 million in revenue for Gaudi in 2024."
"They're in this awkward position where their server-side chips are just too subscale to ever really gain meaningful market share," Low said. "It's hard to see who the real customers for those would be."
Daniel Newman, the CEO of the research firm The Futurum Group, argued that Intel struggled because it didn't "count on the democratization of silicon." Companies like Microsoft and Google have been designing their own chips, further limiting Intel's market.
"They all went down the path of making their own investments and bets on silicon, so what was left was this second-tier enterprise market," Newman told BI. "If you look at the enterprise market, they're not buying a lot of AI silicon yet."
Making the case as a national champion
The other big challenge facing Intel's next leaders is proving that the company can be a national champion of US chipmaking. That won't be straightforward.
Doing so would require strengthening its fab-manufacturing business. "Standing up a successful fab is not an overnight thing," Newman said. "This is a multiyear process."
A lot of the challenge, he said, is that success would require "quite a bit of customer acquisition" from those who have seemed reluctant to shift high-volume production to Intel. As it stands, Intel is its own biggest customer for chip manufacturing.
That's because everyone else largely turns to the Taiwanese giant TSMC, which has grown by more than 83% this year, hitting a market capitalization of $1 trillion. Newman acknowledged that it's unclear whether this is because TSMC is technologically superior. He sees a new Intel process called 18A as being competitive, following news in September that Amazon Web Services was adopting it for a particular chip.
What's more likely, he said, is that TSMC's customers think, "TSMC's not broken, why fix it?" If Intel wants to get serious about building a leading manufacturing business, it'll need to find a way to take on TSMC.
Donald Trump has said tariffs could motivate chipmakers to invest in the US.
The president-elect has emphasized a protectionist policy. Given the importance of chipmaking to US industry and national security, he could look to throw weight behind Intel.
How that might happen is unclear. Trump has criticized the CHIPS Act, which is set to give Intel $7.9 billion in grants to boost its domestic manufacturing capabilities. Trump has said he'd prefer tariffs as a tool to incentivize chip manufacturing on US soil.
In September, Intel announced plans to spin off its manufacturing unit into its own subsidiary. But not everyone is convinced these moves will be enough.
Cohan told BI he thinks "it is highly unlikely that Intel can be more successful than TSMC in making chips" without significant support from the US government.
"That company lacks the capital to do that on its own, and its knowledge of how to make Nvidia chips is way behind TSMC's," he said. "Why would Nvidia even choose to give up its relationship with TSMC for a less successful rival?"
Jensen Huang presenting at a Nvidia event in San Jose in March.
Justin Sullivan/Getty Images
TSMC founder Morris Chang asked Nvidia founder Jensen Huang to take over as CEO in 2013.
In a new memoir, Chang reveals he set out his vision for TSMC for 10 minutes before Huang declined.
Huang said, "I already have a job," Chang recalled.
The founder of Taiwanese chip giant TSMC has revealed he once asked Jensen Huang if he would succeed him as the company's CEO.
But Huang, the founder and CEO of AI chipmaker Nvidia, turned the role down in less than 10 minutes and said "I already have a job," Morris Chang wrote in his memoir, published Friday.
In the memoir, Chang writes he was looking for a successor to lead TSMC in 2013. He said that Huang's character, professional background, and deep knowledge of the semiconductor space made him an ideal frontrunner for the role.
Huang listened intently as Chang spent 10 minutes explaining his ambitions for TSMC, but said he was determined to keep his focus on Nvidia, Chang writes.
Nvidia has since become one of the world's most valuable companies, fuelled by the AI boom. Huang has been CEO and president since founding it in 1993.
Huang and Chang have shared an amiable relationship that spans their professional endeavors.
In the early years after its launch, Nvidia exclusively partnered with TSMC to produce its chips. In 1998, TSMC helped supply Nvidia with production workers when it was short-staffed.
Nvidia now works with various chipmakers but remains one of TSMC's biggest customers, along with Apple.
Having founded TSMC in 1987, Chang, 93, stood down as CEO in 2018 and was replaced by C C. Wei, the current CEO. According to Forbes, Chang has a personal wealth of $4.1 billion.
The latest memoir, his second volume of autobiography, details his life from 1964 to 2018.
Experts told BI that TSMC's most advanced chips will likely continue to be produced in Taiwan.
Taiwan's central role in a crucial global industry could help it secure support from the US.
Some US businesses are likely to continue depending on TSMC chips made in Taiwan for the foreseeable future, even as the company builds factories in Arizona.
On November 15, the Biden administration announced that the Commerce Department had awarded TSMC — the world's leading chipmaker — with up to $6.6 billion in funding to aid the construction of three chip factories in Phoenix. The first factory is expected to begin full productionlevelsin early 2025.
In a press release, the Biden administration said the announcement was "among the most critical milestones yet" in the implementation of the CHIPS Act. Supportersof the law hope it will create US jobs, secure supply chains, and make the US less reliant on advanced chips from Taiwan — which faces the possible threat of a Chinese invasion. TSMC produces an estimated 90% of the world's advanced chips, which power everything from iPhones to cars.
While TSMC's Phoenix factories are expected to boost semiconductor chip production in the US, the company isn't making its most advanced chips stateside, industry experts told Business Insider.
Jeff Koch, an analyst at the semiconductor research and consulting firm SemiAnalysis, told BI that chips made in TSMC's US factories are expected to be one to two levels behind the company's more advanced Taiwan-made chips. For example, chips produced using 4 nanometer (nm) technology are expected to be made in the first Phoenix factory, while TSMC's Taiwan factories are already producing chips using 3nm technology. The smaller the nanometer number, the more transistors manufacturers can fit on a chip, making it more powerful and energy-efficient.
While 3nm chips are expected to be produced in TSMC's second Arizona factory — which is slated to begin full production in 2028 — Koch said this would likely come after the production of 2nm chips begins in Taiwan, which is estimated to happennext year, according to TSMC.
Stephen Ezell, the vice president for global innovation policy at the Information Technology and Innovation Foundation, told BI that by the time TSMC's Phoenix factory starts making 2nm chips, he'd expect the companyto be producing even more advancedchips in Taiwan.
"The United States will be dependent on chips from Taiwan for a long time to come," he said. "Even if the CHIPS Act is wildly successful, it'll barely get the US back to 17% to 20% of global chip production." The US currently produces about 10% of the world's chips.
The Department of Commerce told BI that as TSMC's Arizona fabs become operational, it expects to see the production of TSMC's most advanced chips transition into the US over the coming years.
TSMC declined to comment on whether the company's most advanced chips will continue to be produced in Taiwan.
Keeping TSMC's most advanced chips in Taiwan gives the island leverage
Companies that prefer to use the most cutting-edge technology — like Nvidia, Apple, Qualcomm, and AMD — will likely continue to source chips from Taiwan, said Chris Miller, a nonresident senior fellow at the American Enterprise Institute who focuses on semiconductors.
"I think TSMC's plants in Arizona are significant, but given current policies and investment trends, the US will be using large volumes of chips made in Taiwan for many years into the future," added Miller, who is the author of "Chip War: The Fight for the World's Most Critical Technology,"
TSMC's most advanced chips are made first in Taiwan, in part, because that is where the company conducts its research and development — which makes it easier to roll out more sophisticated technologies. Additionally, keeping that level of production in Taiwan could help the island retain its essential role in the chipmaking industry, which is crucial to the global economy, Koch said.
He added that this dynamic could make the US more likely to provide Taiwan with military support if China invaded.
"It's very unlikely that the Taiwanese government would allow TSMC to build its most advanced fabs in the US without a few years' lag," he said, adding, "This is Taiwan's most valuable strategic capability. Without it, extracting a US security guarantee or support from the Trump administration goes from hard to impossible."
William Alan Reinsch, a senior advisor at the Center for Strategic and International Studies, a national security think tank, told BI the Biden administration's goal was to boost domestic chip production — not to completely erase US businesses' reliance on foreign-made chips.
What's more, efforts to develop and foster the US semiconductor industry could help protect America's supply chains from geopolitical events, even if some US businesses continue to source chips from Taiwan.
Do you work in the US semiconductor industry? Reach out to this reporter at [email protected].
