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

The Biden administration will award up to $6.6 billion in grants to Taiwan Semiconductor Manufacturing Company, a leading maker of the most advanced microchips, in an effort to bring some of the latest semiconductor technology 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. US officials said on Sunday that the company has already committed to building two factories at the site and will use some of the grant money to build a third factory in Phoenix. TSMC will also increase its total investment in the United States to more than $65 billion, up from $40 billion.

Bringing the world's most advanced chip manufacturing to the United States has been a major goal of the Biden administration. TSMC announced that it will now produce 2-nanometer chips at the core, a significant step forward given that the United States does not currently produce any of the most advanced semiconductors.

Federal officials see this investment as vital to building a reliable domestic supply of semiconductors, the tiny chips that power everything from phones and supercomputers to cars and fighter planes. Although semiconductors were invented in the United States, production has largely shifted overseas in recent decades. Only about 10 percent of the world's chips are manufactured in the United States.

This award is the second largest award awarded by the federal government as part of a program aimed at re-establishing the United States as a leading country in semiconductor manufacturing. They were revealed just weeks after President Biden announced that Intel, another major chip maker, would receive $8.5 billion in grants and up to $11 billion in loans during a tour of battleground states aimed at promoting his economic agenda.

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

The TSMC award will bring the total announced grants to more than $16 billion. Three smaller companies, GlobalFoundries, Microchip Technology and BAE Systems, took 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 receive federal tax credits that could cover 25 percent of the cost of building and equipping the factories with production equipment. About $50 million in grants will be allocated to training and developing the company's workforce, federal officials said.

Commerce Secretary Gina Raimondo said the investment will help the United States begin manufacturing more advanced semiconductors, which are used in artificial intelligence, smartphones and more sensitive military devices.

“It's a national security issue because we don't manufacture any of the most advanced chips in the world in the United States,” Ms. Raimondo said Sunday. “And now, because of this announcement, these chips will be manufactured in the United States.”

Earlier this year, Ms. Raimondo said new investments in semiconductor companies would put the United States on track to produce nearly 20 percent 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 meet some construction and production milestones before payments can be made.

The company has been relying on federal aid for years. Talks about a partially subsidized expansion into the U.S. began in 2019, during the Trump administration, according to company officials. TSMC announced for the first time that it would build… New facility in Phoenix in May 2020It's a project that company officials said will eventually require government support to help address the high cost of building and operating chip factories in the United States.

In December 2022, several months after the CHIPS Act passed, TSMC announced it would build a second factory at the site, increasing its total investment to $40 billion from $12 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 plant to 2025 instead of this year, saying local workers lacked experience installing some advanced equipment. In January, the company said the second factory would not meet the original timeline to begin manufacturing in 2026.

Production at the second facility is expected to begin in 2028, and production at the third plant is expected to begin by the end of the decade, according to Biden administration officials.

TSMC's expansion into the United States could have a major impact on the global semiconductor supply chain, whose vulnerabilities have been exposed by severe chip shortages during the pandemic.

TSMC, which pioneered the idea of ​​making chips to order for others to design them, runs huge factories in Taiwan that produce the vast majority of the small components that supply processing power for computers, phones, networking equipment, appliances and military equipment. America's reliance on the company's factories, which are located on an island that China does not recognize as an independent country and claims is part of its territory, has long worried American officials.

New generations of production technology 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. Biden administration officials announced that it will now also introduce the next generation of technology, at 2 nanometers, at the second factory.

Such advances limit the number of transistors that can be packed onto each small silicon chip, allowing the chips to perform calculations more quickly and store more data. In the past decade, TSMC has replaced Intel as the most advanced production technology provider, producing components that Apple designs for its latest smartphones and that Nvidia develops to power AI applications like ChatGPT.

Although the planned addition of 2nm technology represents a major advance, this does not necessarily mean that TSMC's US factories will offer the latest technology at the same time as its factories in Taiwan. The company researches new technologies on the island, and these processes are usually adapted to high-volume manufacturing first in nearby buildings to speed up the transition and reduce travel time for engineers.

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

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