In another move aimed at boosting domestic chip production, the United States has announced plans to award Taiwan Semiconductor Manufacturing Co. (TSMC) with $6.6 billion in grants and up to $5 billion in loans.
This initiative, part of President Joe Biden’s efforts to enhance critical technology manufacturing within the country, will support TSMC’s expansion in Arizona, where it will construct a third manufacturing facility.
The preliminary agreement, disclosed by US officials on Monday, outlines TSMC’s plans to build a cutting-edge fab in Phoenix, supplementing the two existing facilities in the state. With an anticipated operational timeline before the end of the decade, the third fab will leverage next-generation 2-nanometer process technology, essential for emerging technologies like artificial intelligence and military applications.
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US Commerce Secretary Gina Raimondo emphasized the significance of producing advanced semiconductor chips domestically, highlighting the role of American workers in this endeavor.
“For the first time ever, we will be making at scale the most advanced semiconductor chips on the planet here in the United States of America,” Raimondo said during a briefing.
However, before TSMC receives any of the allocated funding, the company will undergo a due diligence period to finalize the agreement. Disbursement of funds will be contingent upon meeting construction and production milestones, with provisions for clawback if TSMC fails to fulfill its obligations.
“It will be months before TSMC receives any of the promised funding, as the company enters a due-diligence period before reaching a final, binding agreement,” the statement revealed. “Money will then be disbursed based on construction and production benchmarks, and could be clawed back if TSMC doesn’t hold up its end of the deal.”
This grant to TSMC represents a significant milestone in President Biden’s efforts to revitalize the US semiconductor industry under the 2022 Chips and Science Act. Encompassing direct grants, loans, and guarantees, the program aims to incentivize semiconductor companies to establish manufacturing facilities in the United States, reversing decades of overseas production shifts.
“TSMC’s award marks another milestone in Biden’s push to boost the US semiconductor industry with the 2022 Chips and Science Act,” the statement continued. “It’s one of the largest announced under the program, which set aside $39 billion in direct grants — plus loans and guarantees worth $75 billion — to persuade semiconductor companies to build factories in America after decades of shifting production abroad.”
Intel Corp. and Samsung Electronics Co. are among the beneficiaries of this initiative, with Intel securing a preliminary agreement for nearly $20 billion in grants and loans. The expansion of semiconductor manufacturing in Arizona aligns with Biden’s broader economic revitalization agenda, particularly in key battleground states like Arizona.
“Arizona has reaped some of the biggest rewards from the Chips Act, with a massive expansion by Intel in addition to dozens of supply-chain initiatives,” the statement revealed. “The TSMC grant includes $50 million in funding to train local workers, and will create 6,000 high-tech manufacturing jobs and more than 20,000 construction jobs, Raimondo said.”
The project is expected to create 6,000 high-tech manufacturing jobs and over 20,000 construction jobs in Arizona, accompanied by a $50 million funding allocation for local worker training initiatives.
The competition behind the push
Despite several setbacks, including labor conflicts and delays, the TSMC expansion in Arizona underscores the raging competition between China and the US to boost domestic chip production.
China’s efforts to boost domestic chip production have triggered a response from the United States, leading to initiatives such as the Chips and Science Act. China’s ambitious plans to become self-sufficient in semiconductor production, driven by its Made in China 2025 initiative, have raised concerns among US policymakers about national security and economic competitiveness.
China’s semiconductor industry has grown rapidly in recent years, fueled by significant investments in research and development, as well as government subsidies and incentives for domestic chipmakers. However, the United States views China’s efforts as a potential threat to its dominance in the global semiconductor market and a challenge to its technological leadership.
In response, the US government has introduced measures to strengthen its semiconductor industry and reduce dependence on foreign suppliers, particularly those from China. The Chips and Science Act, with its substantial funding provisions for semiconductor companies to build manufacturing facilities in the US, is one such initiative aimed at countering China’s influence in the semiconductor sector.
By providing financial support to companies like TSMC to expand their operations in the United States, the US government aims to bolster domestic chip production and maintain its technological edge in critical areas such as artificial intelligence and military applications.
Additionally, these efforts align with broader economic objectives, such as job creation and revitalizing manufacturing sectors in key states like Arizona.