TSMC will receive $6.6 billion to support chip production in the United States

The Biden administration will award up to $6.6 billion in grants to the Taiwan Semiconductor Manufacturing Company, the leading maker of the most advanced microchips, in an effort to bring some of the most cutting-edge semiconductor technologies to the United States.

The funds, which come from the bipartisan CHIPS and Science Act, will help support the construction of TSMC's first major U.S. hub, in Phoenix. The company has already committed to building two plants at the site and will use some of the grant money to build a third plant in Phoenix, U.S. officials said Sunday. TSMC will also increase its total investments in the United States to more than $65 billion, up from $40 billion.

Bringing the world's most sophisticated chip manufacturing to the United States has been a major goal of the Biden administration. TSMC announced that it will now produce two-nanometer chips at the hub, a significant step forward given that the United States does not currently produce any of the most advanced semiconductors.

Federal officials view the investment as vital to building a reliable domestic supply of semiconductors, the small chips that power everything from phones and supercomputers to cars and fighter planes. Although semiconductors were invented in the United States, manufacturing has largely moved overseas in recent decades. Only about 10% of the world's chips are made in the United States.

The award is the second largest awarded by the federal government under a program intended to reestablish the United States as a leader in semiconductor manufacturing. It was unveiled just weeks after President Biden announced that Intel, another major chipmaker, would receive $8.5 billion in grants and up to $11 billion in loans during an intended tour of battleground states to sell his economic agenda.

The CHIPS Act, passed by lawmakers in 2022, gave the Commerce Department $39 billion to distribute as subsidies to encourage companies to build and expand chip plants in the United States. The program is an important pillar of Biden's economic policy agenda, which focuses on strengthening American manufacturing.

TSMC's award will bring the total grants announced to more than $16 billion. Three smaller companies, GlobalFoundries, Microchip Technology and BAE Systems, received top prizes.

In addition to the grants, the federal government will provide up to $5 billion in loans to TSMC. The company is also expected to apply for federal tax credits that could cover 25% of the cost of building and equipping factories with manufacturing equipment. About $50 million of the grants will be set aside to train and develop the company's workforce, federal officials said.

Gina Raimondo, the Commerce Secretary, said the investment would help the United States start producing the most advanced semiconductors, used in artificial intelligence, smartphones and more sensitive military hardware.

“It's a national security issue that we don't make any of the world's most sophisticated chips in the United States,” Raimondo said Sunday. “Now, thanks to this announcement, these chips will be produced in the United States.”

Earlier this year, Raimondo said new investments in semiconductor companies would put the United States on track to produce about 20% of the world's most advanced logic chips by the end of the decade.

TSMC's investment is expected to create about 6,000 direct manufacturing jobs and more than 20,000 construction jobs, federal officials said. TSMC will have to reach certain construction and production milestones before payments are made.

The company has relied on federal aid for years. According to company officials, discussions about a partially subsidized expansion in the United States began in 2019, during the Trump administration. TSMC first announced it would build a new facility in Phoenix in May 2020, a project that company officials said would eventually require government subsidies to help address the higher costs of building and operating chip plants in the United States.

In December 2022, several months after the passage of the CHIPS Act, TSMC announced that it would build a second factory at the site, increasing its total investment from $12 billion to $40 billion.

But since TSMC began construction in 2021, several obstacles have delayed the start of production. Last summer, TSMC postponed initial production at its first factory to 2025, starting this year, saying local workers lacked experience installing some sophisticated equipment. In January, the company said the second plant would not meet its original schedule to start production in 2026.

According to Biden administration officials, production at the second plant is expected to begin in 2028, while production at the third plant is expected to begin by the end of the decade.

TSMC's expansion into the United States could have a huge impact on the global semiconductor supply chain, whose vulnerabilities have been laid bare by crippling chip shortages during the pandemic.

TSMC, which pioneered the idea of ​​making chips to order for others to design them, operates huge factories in Taiwan that produce the vast majority of the small components that provide processing power to computers, phones, networking devices, home appliances and military equipment. America's dependence on the company's factories, on an island that China does not recognize as independent and claims as part of its territory, has long worried U.S. officials.

New generations of manufacturing technologies are often described in terms of nanometers, or billionths of a meter, a measure of the key dimensions of microscopic circuits. In December 2022, TSMC said it would produce three-nanometer chips at its second factory in Arizona. It will now also introduce the next generation of technology, two nanometers, at the second plant, Biden administration officials announced.

Such advances determine how many transistors can fit on each small slice of silicon, allowing chips to perform calculations faster and store more data. Over the past decade, TSMC has supplanted Intel in providing the most sophisticated manufacturing technology, producing components that Apple designs for its latest smartphones and Nvidia develops to power artificial intelligence applications like ChatGPT.

While the planned addition of two-nanometer technology represents a substantial advancement, it does not necessarily mean that TSMC's U.S. plants will offer the latest technology at the same time as its Taiwanese plants. The company researches new technologies on the island, and adapting those processes to large-volume production is typically done in nearby buildings first to speed up the transition and reduce travel times for engineers.

It remains possible that Intel, which is racing to regain leadership in manufacturing technology, will offer the industry's most advanced manufacturing technology by 2028 in U.S. factories. The company conducts manufacturing technology research in Oregon.

Biden administration officials are expected to give additional grants in the coming months to other large chipmakers that have invested in new or expanded domestic facilities in recent years, including Micron Technology and Samsung.

Leave a Reply

Your email address will not be published. Required fields are marked *