U.S. Government Subsidy for TSMC

By David Shepardson

WASHINGTON (Reuters) – The U.S. Commerce Department finalized a $6.6 billion government subsidy for Taiwan Semiconductor Manufacturing Co's U.S. unit to support semiconductor production in Phoenix, Arizona.

This binding contract follows a preliminary agreement announced in April and is the first major award under the $52.7 billion program created in 2022.

This announcement comes just weeks before President-elect Donald Trump, who has criticized the program, takes office. In April, TSMC agreed to expand its planned investment by $25 billion to $65 billion and to add a third Arizona fab by 2030.

The Taiwanese company will produce the world’s most advanced 2 nanometer technology at its second Arizona fab, expected to begin production in 2028. TSMC has also agreed to utilize its most advanced chip manufacturing technology called “A16” in Arizona.

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

The TSMC award also includes up to $5 billion in low-cost government loans. Under the agreement, TSMC will receive cash as it meets project milestones, with Commerce expecting to release at least $1 billion to TSMC by year-end.

TSMC agreed to forgo stock buybacks for five years – with some exceptions – and share any excess profits with the U.S. government under an “upside sharing agreement.”

TSMC CEO C.C. Wei stated that the deal “helps us to accelerate the development of the most advanced semiconductor manufacturing technology available in the U.S.”

In 2022, Congress approved the Chips and Science Act to boost domestic semiconductor output, which Raimondo called essential for attracting TSMC and other chip investments. Currently, no leading-edge chips are produced in the United States.

> “It didn't happen on its own… We had to convince TSMC that they would want to expand,” Raimondo said, emphasizing the need to also persuade American companies to buy U.S.-made chips. “The market does not price in national security.”

Commerce has allocated $36 billion for chip projects, including $6.4 billion for Samsung in Texas, $8.5 billion for Intel, and $6.1 billion for Micron Technology. Commerce is working to finalize these agreements before Biden leaves office on Jan. 20.

Additionally, Reuters reported that Commerce ordered TSMC to halt shipments of advanced chips to Chinese customers. Raimondo did not confirm whether a directive had been issued but stressed the need for the United States to play both offense and defense with China.

> “Investing in TSMC to expand here is offense – defense is making sure that neither TSMC nor any other company sells our most sophisticated technology to China and violates our export controls,” she added, clarifying that she was not suggesting that TSMC had committed any violations. “We take national security seriously and we look into every potential problem, whether it’s with companies we subsidize or not.”