The U.S. Department of Commerce announced on Friday, November 15th, that it has approved $6.6 billion in government subsidies for Taiwan Semiconductor Manufacturing Company (TSMC), also known as Taiwan Semiconductor, for semiconductor production at its U.S. subsidiary in Phoenix, Arizona.
The Department of Commerce stated that this binding contract, following the preliminary agreement announced in April, is the first major award under the $527 billion direct fiscal assistance program established in the Chips and Science Act of 2022.
In April, TSMC agreed to expand its planned investment from $250 billion to $650 billion and intends to establish a third semiconductor fab in Arizona by 2030.
The Taiwanese company will produce the world’s most advanced 2-nanometer chips at its second factory in Arizona, with construction expected to begin in 2028. Additionally, TSMC has agreed to utilize its cutting-edge A16 chip manufacturing technology in Arizona.
According to Reuters, U.S. Commerce Secretary Gina Raimondo stated in an interview, “When we started this program, many opponents said that TSMC might only manufacture 5 or 6-nanometer chips in the U.S., but in reality, they are producing the most advanced chips in the U.S.”
The incentives for TSMC also include up to $5 billion in low-cost government loans, as part of the $750 billion loan authorization provided under the Chips and Science Act. A senior official told reporters that the Department of Commerce expects to disburse at least $1 billion to TSMC by the end of the year.
TSMC has agreed to refrain from stock buybacks for five years (unless under exceptional circumstances) and share excess profits with the U.S. government under a profit-sharing agreement.
TSMC Chairman and CEO C.C. Wei stated in a release that this deal will “help us accelerate the development of the most advanced semiconductor manufacturing technology in the United States.”
The Chips and Science Act was passed by the U.S. Congress in 2022 to increase domestic semiconductor production. Raimondo emphasized the importance of attracting investments from TSMC and other chip companies to the U.S.
“This didn’t happen naturally… We had to convince TSMC that they would want to expand,” Raimondo said, adding that officials also need to persuade U.S. companies to purchase domestically manufactured chips, as national security considerations were not taken into account by the market.
Since the Biden-Harris administration took office, semiconductor and electronics companies have announced over $450 billion in private investments, largely driven by public investments. The Chips and Science Act is part of the Biden-Harris administration’s plan to invest in the U.S., stimulate private sector investment, create high-paying job opportunities, generate more income in the U.S., and revitalize neglected community economic programs.
Under the Chips and Science Act, the Department of Commerce has allocated $36 billion for chip projects, including $6.4 billion for Samsung in Texas, $8.5 billion for Intel, and $6.1 billion for Micron Technology. The Department of Commerce is working to finalize these agreements before Biden’s departure on January 20th next year.
On November 9th, Reuters reported that the Department of Commerce has instructed TSMC to cease providing advanced chips to Chinese customers.
Raimondo did not confirm the directive to TSMC, but stated that the U.S. needs to employ both offensive and defensive strategies in its approach to China.
“Investing in TSMC’s expansion here is an offensive move, while defense is ensuring that TSMC or other companies do not sell our most advanced technology to China, thereby violating our export controls,” Raimondo added, clarifying that she is not implying any wrongdoing on TSMC’s part.
“We take national security very seriously, and we will investigate every potential issue, whether it’s with companies we subsidize or not,” she said.