Amid an Uncertain US Fab Market, TI Announces 300mm Wafer Fab in Utah

February 21, 2023 by Dale Wilson

Texas Instruments has announced a second 300-millimeter semiconductor wafer fab in Lehi, Utah, to meet expected growth in IC demand.

On Feb. 15, Texas Instruments (TI) announced its selection of Lehi, Utah, as the site for the construction of a new $11B semiconductor manufacturing facility to be called LFAB2. This new fab will be located next to the existing LFAB1 facility that TI purchased from Micron in 2021. 

Site location for Texas Instrument’s new 300mm wafer fab

Site location for Texas Instrument’s new 300mm wafer fab in Lehi, Utah. Image courtesy of TI


Production at LFAB1 began in the fourth quarter of 2022. Both facilities will initially support 65nm and 45nm technologies to produce TI’s analog and embedded processing ICs.


Goodbye Chip Shortages, Hello Revenue Declines

The severe chip shortages and sharp revenue growth of 26.3% in 2021 have not completely faded from our collective memories. It was those shortages and supply chain issues that initially created the environment for more wafer fab announcements. The value of the U.S.-based semiconductor projects that are planned or under construction through 2030 has been estimated at over $223B.

However, TI is announcing this capacity investment in a different economic climate. In 2022, TI’s revenue increased 9% from $18.3B to $20.0B. That growth was twice the industry average of 4%

Now, Garter is forecasting a 3.6% decline in 2023. In a recent earnings call, TI confirmed that order cancellations had increased, and revenue from its industrial business fell 10% in Q4 compared to 2021. So, TI is clearly feeling the pinch from the economic downturn.


Playing the Long Game 

The semiconductor industry is no stranger to boom-and-bust cycles. Companies like TI have to balance the short-term outlook, as seen in 2023, with the long-term potential for continued growth in the electronics industry. 

Construction at Lehi is targeted to begin in the second half of 2023, and the first production from LFAB2 is expected no earlier than 2026. A 2023 demand downturn will have no direct impact on the new facility. 


TI employees working inside Lehi LFAB1

TI employees working inside Lehi LFAB1. Image courtesy of TI


When discussing the Lehi investment, Haviv Ilan, TI executive vice president and chief operating officer and incoming president and chief executive officer, commented that TI is anticipating the growth of semiconductors, particularly in industrial and automotive markets. 


CHIPS and Science Act—Hurry Up and Wait?

The Department of Commerce asserts that “the U.S. must move quickly” to build new semiconductor facilities considered critical to U.S. economic and national security. 

When discussing the Lehi investment, TI’s Ilan commented that the passage of the CHIPS and Science Act contributed to their view that now is an excellent time for TI to invest in manufacturing capacity. However, six months after the CHIPS and Science Act was signed into law in August, the department has yet to to release the first Notice of Funding Opportunity. 

The current plans are for the Department of Commerce to release its first funding announcement in late February for both front-end semiconductor manufacturers and back-end packaging facilities. The new TI facility in Lehi would likely fall into that first category, but it is unclear if or how much this fab could be impacted by future CHIPS funding if awarded.

In late spring, the Department of Commerce anticipates a second funding announcement for material suppliers and equipment manufacturers. This is expected to be followed in the fall by funding opportunities to support the construction of semiconductor R&D facilities. 


State Tax Credits Also Play a Role

The U.S. federal government isn’t the only level of government getting involved in supporting the construction of these new facilities. TI was awarded a post-performance tax reduction for the new Lehi fab from the Utah Governor’s Office of Economic Opportunity. 


Texas Instruments announces new Lehi facility at the Utah state capital

Texas Instruments announces new Lehi facility at the Utah state capital. Image courtesy of TI


TI expects LFAB2 to create 800 new, high-tech jobs. Using the 20-year projections, the LFAB2 is forecasted to generate $111M in new tax revenue for the state of Utah. TI can receive up to a 30% credit on those taxes for a potential savings of $33M over the two-decade span of the agreement.


More Chips and Increased Efficiency

TI also announced that the Lehi LFAB2 will be designed to meet the LEED Gold standard for green buildings. The company plans to recycle water at nearly twice the rate of LFAB1. Advances in 300 mm equipment and processes are expected to contribute to additional reductions in waste, water, and energy consumption.

TI is betting on LFAB2 being ready in the second half of this decade to produce tens of millions of analog and embedded processing chips daily. And this is just a portion of their planned capital expenditures to expand their manufacturing capacity.