US finalizes $6.6 billion chip award to TSMC before Trump returns

Article 1 of 2 A person visits the TSMC Innovation Museum in Hsinchu, Taiwan, May 29, 2024. REUTERS/Ann Wang/File Photo

[1/2]A person visits the TSMC Innovation Museum in Hsinchu, Taiwan May 29, 2024. REUTERS/Ann Wang/File photo Purchase Licensing Rights, opens in a new tab

WASHINGTON, Nov 15 (Reuters) – The U.S. Commerce Department said on Friday it has finalized a $6.6 billion government subsidy for Taiwan Semiconductor Manufacturing Co's U.S. semiconductor manufacturing unit in Phoenix, Arizona.

This binding contract – following a preliminary agreement announced in April – is the first major award to be finalized under the $52.7 billion program created in 2022. It comes just weeks before the president-elect takes office Donald Trump, who criticized the program. , TSMC (2330.TW), opens a new tab and has agreed to expand its planned investment of $25 billion to $65 billion and add a third manufacturing plant in Arizona by 2030.

The Taiwanese company will produce the world's most advanced 2-nanometer technology at its second manufacturing plant in Arizona, which is expected to begin production in 2028. TSMC has also agreed to use its most advanced chip manufacturing technology called “A16 » in Arizona.

“When we started, a lot of naysayers were saying TSMC would do maybe 5 or 6 nanometers in the United States,” Commerce Secretary Gina Raimondo said in an interview. “In fact, they make their most sophisticated chips in the United States.”

The TSMC prize also includes up to $5 billion in low-cost government loans. Under the terms of the agreement, TSMC will receive money as it completes project milestones. The trade expects to release at least $1 billion to TSMC by the end of the year, a senior official told reporters.

TSMC agreed to forgo share buybacks for five years – subject to some exceptions – and to share any excess profits with the US government under an “upside sharing agreement, opens in a new tab”.

TSMC CEO CC Wei said in a statement that the deal “helps us accelerate the development of the most advanced semiconductor manufacturing technology available in the United States.”

In 2022, Congress approved the Chip and Science Act aimed at boosting domestic semiconductor production, which Raimondo called key to securing investment in TSMC and other chips. No cutting-edge chips are currently produced in the United States.

“This didn't just happen… We had to convince TSMC that they wanted to expand,” Raimondo said, adding that officials also had to convince U.S. companies to buy U.S.-made chips . “The market does not take national security into account.”

Commerce allocated $36 billion to chip projects, including $6.4 billion for Samsung (005930.KS), opens a new tab in Texas, $8.5 billion for Intel (INTC.O), opens a new tab and $6.1 billion for Micron Technology (MU.O), opens a new tab. Commerce is working to finalize these agreements before Biden leaves office on January 20. Reuters reported on Saturday that Commerce had ordered TSMC to stop shipments of advanced chips to Chinese customers.

Raimondo did not confirm that the department had issued a directive to TSMC, but said the United States needs to play offense and defense with China.

“Investing in TSMC to expand here is an offense – defense ensures that neither TSMC nor any other company sells our most sophisticated technology to China and violates our export controls,” Raimondo said, adding that it was not saying that TSMC had committed violations.

“We take national security seriously and we investigate all potential issues, whether they concern companies we subsidize or not,” she added.

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Reporting by David Shepardson; Published by Lincoln Feast.

Our Standards: The Thomson Reuters Trust Principles., opens a new tab

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