TSMC has crossed a major milestone, manufacturing the chips Apple uses in iPhones and iPads in the US, but the implications go far beyond Apple.

According to journalist Tim Culpan, TSMC is now producing Apple’s A16 SoC at its Arizona facility. Interestingly, the A16 is a 5nm chip using the same N4P process—N4P is alternately called 5nm and 4nm—in Arizona, as TSMC uses at its main facility in Taiwan.

Listen to our conversation on TSMC passing Intel as chip leader. What the hell happened?

Culpan reports that, although the A16 is currently being produced in small numbers in Arizona, volume is expected to ramp up significantly “when the second stage of the Phase 1 fab is completed and production is underway.” While yields at the Arizona plant are “slightly behind what’s enjoyed back home in Taiwan (basically, neck and neck),” the Arizona plant is expected to completely close that gap in the coming months.

The news follows earlier reports that TSMC made plans early on to bring its most advanced manufacturing capabilities to its US facilities rather than reserve them for its Taiwanese facilities, as some thought it might.

Why It Matters: The Issue of Semiconductor Sovereignty

China has increasingly been threatening Taiwan, doubling down on rhetoric regarding its intent to bring the island back under its control. Many believe China is eager to gain control of TSMC, especially in the wake of a global effort to restrict the country’s access to advanced semiconductor technology. One of the questions hanging over the tech industry is what would happen to TSMC—and the chips that much of the tech industry relies on—in the event of a Chinese invasion.

TSMC Chair Mark Liu addressed those concerns in mid-2022, saying such a course would ultimately backfire.

“The war brings no winners, everybody’s losers,” Liu said.

“Nobody can control TSMC by force,” Liu added. “If you take a military force or invasion, you will render TSMC factory not operable. Because this is such sophisticated manufacturing facilities, it depends on the real-time connection with the outside world, with Europe, with Japan, with US, from materials to chemicals to spare parts to engineering software and diagnosis.

“If you take it over by force, it can no longer make it operable.”

In addition to the ongoing threat to Taiwan, trade wars and technological sovereignty has become a growing concern. With growing cybersecurity threats, many of which are backed by state actors, countries are increasingly concerned about securing access to semiconductors whose provenance is known, and that were not made in a hostile country, or one with unaligned interests.

Such issues were on full display in recent discussions between US Commerce Secretary Gina Raimondo and Intel, Nvidia, and Apple. Intel CEO Pat Gelsinger reportedly complained to Raimondo that Apple and Nvidia rely on TSMC instead of Intel, prompting Raimondo to try to pressure Apple and Nvidia to use Intel instead.

The issue of semiconductor sovereignty is at the heart of the United States CHIPS Act, in which the US has invested billions to prop up its chip industry.

Intel’s Window of Opportunity Is Closing

With no end to the nationalization of the semiconductor industry in sight, the question remains: What company will become America’s chipmaker?

Intel has been working hard, and investing billions, to ensure it’s the answer to that question. The company has been spending, and losing, billions to build out Intel Foundry. CEO Pat Gelsinger and company have been working to secure foundry contracts, pursuing MediaTek, Amazon, Tesla, and Qualcomm.

Unfortunately, while Intel has secured MediaTek and Amazon as clients, it lost out with both Tesla and Qualcomm. In both cases, Intel lost the business because of its technical inadequacies. In Qualcomm’s case, the chipmaker made “technical missteps,” while Tesla backed out of a potential deal because Intel can’t provide the same level of chip designs as competing foundries.

Losing out on foundry business is far from the only issue Intel is facing. The company continues to suffer issues with its chip design, with its 13th and 14th-generation chips plagued with crashes that lead to “irreversible degradation.” Even worse, the company is beginning to suffer brain drain, with some of its top engineers leaving to start competing firms.

In addition to all the internal challenges Intel faces, its competitors continue to make major leaps forward, chipping away at its one-time unassailable dominance across multiple markets. AMD continues to take market share away, and even AWS recently unveilled Graviton4 chip soundly beats competing Intel offerings.

TSMC Poised to Become America’s Premier Chipmaker

TSMC stands to gain the most from Intel’s woes, especially in the context of its Arizona foundry. When TSMC first announced plans to build two plants in the US, critics were quick to speculate that the company would never build as advanced chips in the US as it does in Taiwan.

In view of recent developments, however, it seems that TSMC’s US plants could easily rival—or even exceed—its Taiwan output. What’s more, as the semiconductor industry becomes increasingly nationalized, there’s no reason TSMC can’t follow the path established by the auto industry decades ago, in which Asian and European automakers use US-based subsidiaries to build “American-made” vehicles—even if the brand is Toyota, Honda, BMW, or Mercedes-Benz.

More to the point, TSMC has proven itself capable of doing what Intel cannot, namely building the most advanced chips in the world on a consistent basis, delivering exactly what its customers expect year-after-year.

With TSMC’s Arizona investment topping $65 billion, and the American tech industry already relying heavily on the company’s semiconductors, TSMC—not Intel—may well emerge as America’s premier next generation chipmaker.