Taiwanese Chip Giant Receives $6.6 Billion From US Government for Arizona Factories

The Biden administration announced on April 8 that Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chipmaker, has agreed to expand its investment in Arizona by promising to manufacture the world’s most sophisticated chips on U.S. soil.

The Commerce Department announced that it would provide up to $6.6 billion in direct funding to the Taiwanese firm through the CHIPS and Science Act, which was signed into law by President Joe Biden in 2022.

According to the preliminary agreement, the company’s subsidiary, TSMC Arizona, will use this funding to invest more than $65 billion in three greenfield fabs in Phoenix.

“America invented these chips, but over time, we went from producing nearly 40 percent of the world’s capacity to just over 10 percent, and none of the most advanced chips, exposing us to significant economic and national security vulnerabilities,” President Biden said in a statement.

“These facilities will manufacture the most advanced chips in the world, putting us on track to produce 20% of the world’s leading-edge semiconductors by 2030.”

Commerce Secretary Gina Raimondo emphasized the significance of the announcement for America’s national security, calling it “a huge deal.”

“TSMC will be bringing the manufacturing of the world’s most advanced semiconductor chips to American soil,” she told reporters during a call.

TSMC will expand its operations in Arizona by adding a third facility. Ms. Raimondo said this new facility will focus on producing two-nanometer or even more advanced semiconductor chips.

The world’s major chipmakers are racing to produce the smallest chips possible, and TSMC is one of the leading firms that can produce cutting-edge standards.

This investment will fuel the AI boom and other rapidly expanding industries, such as consumer electronics, autos, the internet of things, and high-performance computing, according to a statement from the Commerce Department.

Investment in Arizona

TSMC announced in May 2020 that it would build a $12 billion advanced chip factory in Arizona. In December 2022, the company revealed plans to build a second factory, bringing the total investment to $40 billion.

During the call, Ms. Raimondo also announced that the company’s second facility will be able to produce two-nanometer chips.

TSMC, through its Arizona fabs, will be supporting its U.S. customers, including AMD, Apple, Nvidia, and Qualcomm.

The first fab will commence production in the first half of 2025, the second fab in 2028, and the third facility by the end of the decade, according to a senior administration official.

The COVID-19 pandemic exposed the fragility of global supply chains and the vulnerability of the United States to business disruptions.

The demand for consumer electronics surged during the pandemic, leading to a shortage of semiconductor chips. Automakers had been hit especially hard by this supply shock; many brands, including General Motors and Ford, had temporarily shuttered some of their plants in response.

“A core priority of the CHIPS program is to re-shore and shore up our supply chain,” Ms. Raimondo said.

The CHIPS and Science Act provides $53 billion in subsidies to chipmakers to support the building of semiconductor plants across the country, reducing reliance on imported chips and improving competition with China.

According to Lael Brainard, director of the White House National Economic Council, TSMC’s investment is also critical for U.S. economic security.

“Before President Biden signed the CHIPS and Science Act, the U.S. did not produce any of the most advanced chips and only a small portion of the rest,” Ms. Brainard told reporters during the call. “This led to price spikes and long wait times during the pandemic because we did not have control over our supply chains.”

TSMC is also driving investment in the U.S. supply chain, with 14 direct suppliers of the company planning to build or expand factories in Arizona or other U.S. states, according to the statement.

“We think the announcement will create at least 6,000 direct high-tech jobs, but more than 20,000 high-paying construction jobs, and tens of thousands of indirect jobs,” Ms. Raimondo said.

The announcement also includes $50 million to support the training and development of local talent. This investment aims to provide more workers and technicians with the opportunity to access high-quality job opportunities.

In addition to the direct funding, the CHIPS Program would provide roughly $5 billion in loans to TSMC. The company will also be eligible to claim the Investment Tax Credit, which is expected to be up to 25 percent of qualified capital spending.

However, the Taiwanese company has been facing delays. The company pushed back the opening of the first facility in Arizona until 2025 from late 2024. The second facility was to start making three-nanometer chips in 2026. The firm later changed the timeline to 2027 or 2028.

“The proposed funding from the CHIPS and Science Act would provide TSMC the opportunity to make this unprecedented investment and to offer our foundry service of the most advanced manufacturing technologies in the United States,” TSMC Chairman Mark Liu said in a statement.

“Our U.S. operations allow us to better support our U.S. customers, which include several of the world’s leading technology companies.”