The US allocated $6.6 billion to TSMC under the “Chip Act”

The US Department of Commerce said it has completed the allocation of a government subsidy in the amount of $6.6 billion to the American division of Taiwan Semiconductor Manufacturing Co (TSMC) in Phoenix, Arizona, which will engage in semiconductor production, Reuters reports.

Image source: tsmc.com

The binding contract — following a preliminary agreement dating back to April — governs the first major payout under the $52.7 billion program, which begins in 2022. In April, TSMC agreed to increase its planned investment by $25 billion to a total of $65 billion and build a third plant in Arizona by 2030. At the second plant, the Taiwanese contractor will produce semiconductors using advanced 2 nm technology, with mass production expected to begin in 2028. The company has also agreed to launch its cutting-edge A16 solution at the Arizona site.

The subsidy for TSMC also includes a low-cost government loan of $5 billion – under the terms of the agreement, the company will receive funds as it meets project milestones. By the end of the year, TSMC will receive at least $1 billion, the Ministry of Commerce expects. The company agreed to waive share repurchases for five years and share excess profits with the US government. The deal “will help us accelerate the development of the most advanced semiconductor manufacturing technology available in the United States,” said TSMC CEO C.C. Wei.

In 2022, the US Congress approved the “CHIP Act” – a measure required because advanced semiconductors are not yet produced in the country. “It didn’t happen naturally. We had to convince TSMC that they would want to expand,” said the head of the Ministry of Commerce, Gina Raimondo. She added that the authorities had to convince American companies to buy chips made in the USA. “The market does not take into account national security,” the official noted. Her department has earmarked $36 billion for chip production projects, including $6.4 billion for Samsung’s Texas facility, $8.5 billion for Intel and $6.1 billion for Micron. The Ministry of Commerce intends to conclude as many contracts as possible before January 20, when current US President Joe Biden leaves office.