The U.S. Department of Commerce has finalized a $6.6 billion subsidy agreement with Taiwan Semiconductor Manufacturing Co. (TSMC) to strengthen semiconductor production in Phoenix, Arizona. The deal, announced on Friday, is a key component of the $52.7 billion CHIPS and Science Act, which aims to revitalize domestic semiconductor manufacturing and reduce reliance on foreign sources.
Commerce Secretary Gina Raimondo highlighted the strategic importance of the investment during a press call, saying, "This will be one of the most important investments we make as a country to advance our economic and national security." The project, with an overall investment of $65 billion in north Phoenix, represents a critical step for the U.S. in maintaining a competitive edge in semiconductor technology.
The finalized agreement with TSMC ensures that its commitment will proceed even as President-elect Donald Trump prepares to take office. Trump and some congressional Republicans have expressed skepticism about the CHIPS Act, but the Biden administration has effectively secured the deal by completing it now. Funds will be allocated to TSMC as it meets specific project milestones, with at least $1 billion expected to be distributed by the end of the year.
In a statement, TSMC CEO C.C. Wei said, "This agreement helps us to accelerate the development of the most advanced semiconductor manufacturing technology available in the U.S." The second phase of TSMC's Arizona facility is expected to produce state-of-the-art 2-nanometer chips by 2028, a notable milestone for the U.S. semiconductor industry.
The CHIPS Act, established in 2022, was designed to bolster domestic chip production amid ongoing global supply chain challenges and heightened competition with China. TSMC's expanded investment, including plans for a third fabrication plant in Arizona by 2030, underscores its commitment to establishing a significant U.S. presence.
In April, TSMC agreed to increase its investment from $40 billion to $65 billion, adding a new facility equipped with its advanced "A16" technology. Raimondo addressed initial skepticism, stating, "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."
Under the terms of the agreement, TSMC will receive up to $5 billion in low-cost government loans and has committed to forgoing stock buybacks for five years, while also agreeing to share excess profits with the U.S. government through an "upside sharing agreement." This measure aims to protect taxpayer investment and ensure a return on the public funds provided.
The broader CHIPS initiative has allocated substantial funds to other major projects, including $8.5 billion for Intel, $6.4 billion for Samsung's operations in Texas, and $6.1 billion for Micron Technology. Commerce officials are working to finalize these agreements before the end of the current administration's term.
While TSMC's investment is a significant step forward, challenges persist. The U.S. government's efforts to limit advanced chip sales to China have introduced a complex geopolitical dimension to the semiconductor industry. Raimondo stated, "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."
Arizona Governor Katie Hobbs expressed hope that the incoming Trump administration would appreciate the economic value of the CHIPS Act investments, noting, "This is American manufacturing." Hobbs plans to engage directly with Trump to advocate for the continuation of these initiatives.
