TSMC receives $6.6 billion subsidy for Arizona factory
The U.S. Department of Commerce has finalized a $6.6 billion government subsidy for Taiwan Semiconductor Manufacturing Co's U.S. subsidiary $TSM. This funding is part of a broader $52.7 billion program authorized in 2022 under the Chips and Science Act.
Manufacturing expansion and state-of-the-art technology
TSMC plans to use this grant to expand its investment in Phoenix, Arizona to a total of $65 billion. In addition to the existing factory, two more will be added, with the second starting to produce the most advanced 2nm chips as early as 2028. TSMC also announced that it will use its state-of-the-art "A16" manufacturing process in Arizona.
"When we started this project, many doubted that TSMC would produce high-end chips in the U.S.," said Commerce Secretary Gina Raimondo. "But in the end, they are bringing the most sophisticated technology to the U.S."
Terms of the subsidy and wider implications
In addition to direct financial support, the agreement with TSMC also includes favorable government loans of up to $5 billion. The company will draw down the subsidies in stages as project milestones are met, with a minimum of $1 billion expected to be received by the end of 2024.
As part of the deal, TSMC has committed to forgo share buybacks and share excess profits with the US government for five years.
TSMC CEO C.C. Wei said in a statement: "This agreement allows us to accelerate the development of the most advanced semiconductor technologies available in the United States."
Strategic importance to the U.S.
The passage of the Chip and Science Act in 2022 was intended to revive US semiconductor manufacturing, which has lagged in recent decades. The US currently lacks domestic production of high-end chips, which has been a key argument for attracting investment from companies such as TSMC.
Raimondo stressed that this project is crucial not only economically but also in terms of national security. "The market fails to appreciate the importance of national security. That's why we had to convince TSMC to invest, and at the same time ensure that U.S. companies will buy U.S.-made chips," she said.
Export restrictions and relations with China
Regulating exports of advanced technology is also part of the US strategy. According to Reuters, the Commerce Department has ordered TSMC to stop shipping advanced chips to China.
Raimondo did not directly confirm the move, but stressed the importance of defensive measures: "Investing in TSMC's U.S. expansion is an offensive - defense means ensuring that TSMC or any other company does not sell our most advanced technology to China and violate export rules."
The future of the U.S. semiconductor industry
In addition to TSMC, the US government supports other chipmakers. For example, Samsung received $6.4 billion to expand a plant in Texas, Intel $8.5 billion and Micron Technology $6.1 billion. These projects are key to ensuring US technological independence.
"This program is proof that with targeted support and strategic investment, it is possible to restore U.S. leadership in semiconductor manufacturing," Raimondo added.
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Source: Yahoo Finance, Reuters.
"As part of the agreement, TSMC has committed to refrain from stock buybacks for five years and share excess profits with the US government."
I'd be quite interested in this. Are they going to be held accountable if their margins are too high?;) If the supply chains get screwed up again and they raise prices in the face of high demand, will they kindly share the profits with the government rather than return them to shareholders in the form of stock buybacks? I wonder why they agree to such terms when the US needs them more than the other way around.