(Bloomberg) — NXP Semiconductors NV is teaming up with a company partly owned by Taiwan Semiconductor Manufacturing Co. to build a $7.8 billion wafer chip factory in Singapore, marking a boost for the island nation’s tech ambitions .
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Vanguard International Semiconductor Corp. and NXP, backed by TSMC, will begin building the facility in the second half of this year, with production beginning in 2027, the two companies said Wednesday in a statement. Taiwan-based Vanguard will own 60% of the joint venture and Netherlands-based NXP will own the remainder.
The outlay is the latest victory for Southeast Asia as global technology companies try to avoid overdependence on specific regions such as Taiwan and China by diversifying the locations of their production bases. Chip customers are demanding this diversification as insurance against potential geopolitical risks, such as escalating tensions between the US and China, disrupting operations in Taiwan, which dominates semiconductor manufacturing.
“NXP continues to take proactive actions to ensure it has a production base that provides competitive costs, supply control and geographic resiliency to support our long-term growth objectives,” NXP CEO Kurt Sievers said in the statement.
Southeast Asia is emerging as a force in technology manufacturing, helped by relatively low labor costs, ample technology talent and its proximity to key Asian consumer markets. Amazon.com Inc., Microsoft Corp. and Nvidia Corp. are among the companies spending billions of dollars in the region of nearly 700 million people, as China grows more hostile to U.S. companies and India remains practically and politically difficult to navigate.
The new factory will manufacture 12-inch diameter silicon wafers, which are more advanced than the 8-inch wafers manufactured at Vanguard’s existing facility in Singapore. Most new chip fabs around the world use 12-inch wafers because this provides higher chip output per wafer.
Wafers from the new facility will form the basis of relatively mature 130- to 40-nanometer chips that are not as advanced as those made by TSMC in Taiwan. They will be used for functions such as power control in automotive, industrial, consumer and furniture products.
Vanguard will inject $2.4 billion into the joint venture and NXP $1.6 billion, and the companies have agreed to contribute an additional $1.9 billion later. The remaining financing includes third-party loans to the joint venture. Vanguard will operate the facility, which is expected to create 1,500 jobs in Singapore.
That’s a potential boon for Singapore’s newly appointed Prime Minister Lawrence Wong, whose small but wealthy country faces challenges including increased regional competition. Southeast Asian countries from Vietnam to Thailand are attracting more technology investment, and neighboring Malaysia last week pledged more than $5 billion in fiscal support to attract chipmakers to the country.
NXP and Vanguard join companies like United Microelectronics Corp. in expanding in Singapore. UMC, Taiwan’s biggest chipmaker after TSMC, is building a $5 billion wafer factory in the equatorial city-state.
Vanguard acquired its existing Singapore facility from GlobalFoundries Inc. in 2019. NXP also has a foothold in the country through a manufacturing partnership with TSMC called Systems on Silicon Manufacturing Co. Other chipmakers with a presence in Singapore include GlobalFoundries, Micron Technology Inc. Infineon Technologies AG.
Vanguard and NXP’s latest global expansion follows TSMC’s growing global presence. The chipmaker is planning new facilities in Arizona, Japan and Germany.
TSMC owns about 28% of Vanguard and Taiwan’s National Development Fund owns nearly 17%, as of February. The fund is also TSMC’s largest shareholder, with a stake of more than 6%.
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