$6.6 billion US aid confirmed for TSMC’s expansion, 2nm chips promised for 2028

The US Commerce Department announced that it has finalized a $6.6 billion subsidy deal to support Taiwan Semiconductor Manufacturing Co. – or TSMC, as you probably know it – in building a major semiconductor facility in Phoenix, Arizona.

This agreement marks a significant milestone under the US Chips and Science Act, a $52.7 billion program launched in 2022 aimed at boosting domestic chip production, Reuters reports.

Being the leading chip manufacturer from Taiwan, TSMC has significantly increased its planned investment in the US, raising it by $25 billion to a total of $65 billion. The expansion plan now includes a third factory (referred to as a "fab") in Arizona, expected to be completed by 2030.

By 2028, TSMC's second Arizona facility is set to start producing cutting-edge 2-nanometer chips, among the most advanced in the world. The company has also committed to using its state-of-the-art "A16" chip production technology at this site.

TSMC plays a crucial role in the smartphone industry because it produces tiny, high-performance chips that power our devices. These chips are like the "brains" of smartphones, allowing them to run apps, connect to the internet, and process complex data efficiently. The lower the "nm" number, the more advanced, powerful, and efficient a chip is, generally speaking.

US Commerce Secretary Gina Raimondo highlighted the significance of this deal, noting that many initially doubted TSMC would bring its most advanced technologies to the US, expecting instead older-type chip production (like 5nm and 6nm chips). However, Raimondo pointed out that TSMC’s commitment to using its latest, most sophisticated chip-making processes in Arizona is a major win for US tech capabilities. Let's see.

The subsidy package also includes up to $5 billion in low-interest government loans. TSMC will receive payments as it reaches key project milestones, with at least $1 billion expected to be disbursed by the end of the year. As part of the agreement, TSMC has agreed not to engage in stock buybacks for the next five years, except in special circumstances. Additionally, the company has pledged to share any extra profits from the project with the US government through a profit-sharing mechanism.

TSMC CEO C.C. Wei expressed optimism about the deal, emphasizing that the funding will help accelerate the development of advanced semiconductor manufacturing in the US. This move is part of a broader strategy by the US government to encourage domestic production of semiconductors, a critical component in electronics, and reduce dependence on overseas suppliers.

Raimondo noted that the US currently lacks facilities capable of producing leading-edge chips, making the expansion of domestic production a matter of national security. She stated that the government had to actively persuade TSMC and American companies to invest in US-made chips, as the market alone would not prioritize national security concerns.

The Commerce Department has allocated additional funding for other semiconductor projects, including $6.4 billion for Samsung’s plant in Texas, $8.5 billion for Intel, and $6.1 billion for Micron Technology. The goal is to finalize these agreements before President Biden leaves office in January 2025.

Recent reports suggest that TSMC has been instructed by the US government to stop exporting advanced chips to China. Although Raimondo did not confirm such a directive, she emphasized the need for a dual approach in dealing with China: investing domestically to strengthen US capabilities (offense) while ensuring that companies like TSMC comply with export controls to protect national security (defense), as she put it.