Taiwan Semiconductor Manufacturing Co. Ltd. and the City of Phoenix are moving closer to breaking ground on an advanced semiconductor fabrication plant.

Both sides recently took action to move forward on the project. TSMC's board approved the creation of a wholly owned subsidiary supplied with an initial investment of $3.5 billion to begin the process of buying land and designing the plant, and the Phoenix City Council gave the go-ahead to begin development. Construction on the plant is due to begin construction early in 2021, with full production scheduled for 2024, at a total construction and operational cost of $12 billion, according to TSMC.

Phoenix will spend about $205 million in public funds to improve roads and landscaping and expand water and wastewater infrastructure near the plant, the location of which TSMC has not yet chosen.

TSMC, the largest contract chipmaker in the world, announced plans to build the plant in May following months of negotiations with Trump administration officials working to expand the number and capacity of semiconductor manufacturing facilities within the United States.

Nearly all of TSMC's chipmaking facilities are in Taiwan, except for two facilities in China and one small facility in the United States.

The Arizona plant will be the first advanced-chipmaking plant TSMC has built outside of China, a move it long resisted due to what it said would be much higher construction costs and more difficulty finding qualified employees, material and the ecosystem of business partners in Taiwan able to provide chip packaging, testing and other functions that might not be available elsewhere.

Trade tensions between the U.S. and China have made semiconductor-manufacturing independence a national-security issue for both countries. China raised the subsidy it provides to China-based foundry Semiconductor Manufacturing International Corp. and allowed it other ways to raise money to try to make China's domestic chip production more independent of the U.S.

SMIC is at least four years behind TSMC in technological development, said Linley Gwennap, president and principal analyst of the semiconductor-industry consulting firm The Linley Group.

By the time the TSMC plant in development is set to be finished, 5-nanometer chips will not be its most cutting edge, either, noted Brian Matas, vice president of market research at IC Insights. By 2024, TSMC will be selling chips made at 3-nm or even 2-nm, Matas said.

TSMC expects the market for 5-nm chips will be good for some time, however. The chips brought in about 8% of TSMC's third-quarter revenue and will make up much more than that during 2021, said TSMC CEO C. C. Wei, during an Oct. 15 earnings call.

The new plant will also help reduce the risk for both TSMC and the global semiconductor industry of having so much of the global chip manufacturing capacity packed onto a single small country prone to earthquakes, typhoons and other natural disasters, as well as the potential threat from China, Matas said.

There have been semiconductor plants and skilled workers for them in the Phoenix area since Intel Corp. established a plant there nearly 40 years ago. The cost of an advanced fabrication plant is so high for advanced chips, however, that there is some question as to whether other companies will be able to afford to follow in TSMC's lead and build another advanced-chip plant in the U.S., Matas said.

"For parts that are a little more secure, for the government or military, you might want those to be built by companies within the United States," Matas said, noting some national-security concerns surrounding questions about how to expand chip manufacturing in the U.S. "There is some concern about interrupted supply chains ... But honestly, I don't think it's as big a deal as maybe some people in government think to have the design done here [by U.S.-based companies] and have manufacturing done in Taiwan or South Korea. It's a global industry."

For its part, the Phoenix City Council said the city expects the new TSMC plant would yield "substantial economic impacts" locally, including $38.2 billion in economic output and $314 million in annual personal income over a period of 20 years. The new plant is expected to create about 1,900 full-time jobs in the area over five years.