US awards $6.6 billion subsidy to TSMC for production at Phoenix plant

WASHINGTON, D.C.: The U.S. government has finalized a $6.6 billion subsidy for Taiwan Semiconductor Manufacturing Co. (TSMC) to boost advanced semiconductor production at its Phoenix, Arizona facility.

This significant investment, part of the $52.7 billion Chips and Science Act of 2022, underscores the Biden administration's commitment to strengthening domestic chip manufacturing as a matter of national security.

TSMC, the world's leading chipmaker, will utilize the funds to accelerate its U.S. operations. The company plans to expand its Arizona facility, producing cutting-edge 2-nanometer chips by 2028 and implementing its advanced "A16" manufacturing technology. This move marks a major milestone for the U.S., which currently lacks the ability to produce leading-edge semiconductors domestically.

"When we started this there were a lot of naysayers who said maybe TSMC will do 5 or 6 nanometers in the United States," Commerce Secretary Gina Raimondo said in an interview. "Actually, they are doing their most sophisticated chips in the United States."

The subsidy comes with conditions: TSMC must meet project milestones to access funding, with $1 billion expected to be released by year-end. The agreement includes up to $5 billion in low-cost loans and requires TSMC to forgo stock buybacks for five years while sharing excess profits with the U.S. government.

TSMC CEO C.C. Wei praised the deal, calling it essential to advancing the most sophisticated semiconductor manufacturing in the U.S. By 2030, the company plans to invest $65 billion and operate three fabs in Arizona, further solidifying its presence.

The announcement arrives just weeks before President-elect Donald Trump, a critic of the Chips Act, assumes office. Raimondo emphasized that the program is vital not just for economic reasons but for national security. "It didn't happen on its own... We had to convince TSMC that they would want to expand," Raimondo said, adding officials also had to convince American companies to buy U.S. made chips. "The market does not price in national security."

This move also reflects growing concerns over China. While Raimondo declined to confirm reports of a directive halting TSMC's shipments of advanced chips to Chinese customers, she stated, "Investing in TSMC here is our offense; ensuring no company sells advanced technology to China is our defense."

TSMC's deal is the first major award finalized under the Chips Act. Additional agreements with companies like Samsung, Intel, and Micron Technology are expected before President Biden leaves office in January. These investments aim to create a resilient and secure supply chain, ensuring the U.S. remains competitive in the global semiconductor race.