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Tuesday, May 28, 2024

TSMC Will Receive $6.6 Billion to Bolster U.S. Chip Manufacturing

BusinessTSMC Will Receive $6.6 Billion to Bolster U.S. Chip Manufacturing


The Biden administration will award up to $6.6 billion in grants to Taiwan Semiconductor Manufacturing Company, the leading maker of the most advanced microchips, in a bid to bring some of the most cutting-edge 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. The company has already committed to building two plants at the site and will use some of the grant money to build a third factory in Phoenix, U.S. officials said on Sunday. TSMC will also increase its total investments in the United States to more than $65 billion, up from $40 billion.

Bringing the world’s most sophisticated chip manufacturing to the United States has been a major goal for the Biden administration. TSMC announced that it would now produce two-nanometer chips at the hub, a significant step forward given that the United States currently produces none of the most advanced semiconductors.

Federal officials view the investment as vital for building up a reliable domestic supply of semiconductors, the small chips that power everything from phones and supercomputers to cars and fighter jets. 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 made in the United States.

The award is the second largest by the federal government under a program intended to re-establish the United States as a leader in semiconductor manufacturing. It was unveiled a few weeks after President Biden announced that Intel, another major chipmaker, would receive $8.5 billion in grants and up to $11 billion in loans during a tour of battleground states meant to sell his economic agenda.

The CHIPS Act, which lawmakers passed in 2022, gave the Commerce Department $39 billion to distribute as subsidies to encourage companies to build and expand chip plants across the United States. The program is a major pillar of Mr. Biden’s economic policy agenda, which is centered on strengthening American manufacturing.

TSMC’s award will bring the total announced grants to more than $16 billion. Three smaller companies, GlobalFoundries, Microchip Technology and BAE Systems, received the first awards.

In addition to the grants, the federal government will provide up to $5 billion in loans to TSMC. The company is also expected to claim federal tax credits that could cover 25 percent of the cost of building and outfitting factories with production equipment. About $50 million of the grants will be set aside to train and develop the company’s work force, federal officials said.

Gina Raimondo, the commerce secretary, said the investment would help the United States start manufacturing the most advanced semiconductors, which are used in artificial intelligence, smartphones and the most sensitive military hardware.

“It’s a national security problem that we don’t manufacture any of the world’s most sophisticated chips in the United States,” Ms. Raimondo said on Sunday. “Now, because of this announcement, these chips will be made in the United States.”

Earlier this year, Ms. Raimondo said new investments in semiconductor companies would put the United States on track to produce roughly 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 certain construction and production milestones before payments are made.

The company has been counting on federal aid for years. Talks about a partly subsidized expansion in the United States began in 2019, during the Trump administration, according to company officials. TSMC first announced that it would build a new facility in Phoenix in May 2020, a project that company officials said would eventually require government subsidies to help address the higher cost of building and operating chip plants in the United States.

In December 2022, several months after the passage of the CHIPS Act, TSMC announced that it would build a second factory at the site, increasing its total investment to $40 billion from $12 billion.

But since TSMC started construction in 2021, various stumbling blocks have delayed the start of production. Last summer, TSMC pushed back initial production at its first factory to 2025 from this year, saying local workers lacked expertise in installing some sophisticated equipment. In January, the company said the second plant would not meet its original schedule of beginning manufacturing in 2026.

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

TSMC’s expansion in the United States could have an outsize impact on the global supply chain for semiconductors, the vulnerabilities of which were laid bare by crippling chip shortages during the pandemic.

TSMC, which pioneered the idea of manufacturing chips to order for others that design them, operates massive factories in Taiwan that churn out the vast majority of the small components that supply processing power to computers, phones, networking gear, appliances and military gear. America’s reliance on the company’s factories, on an island that China does not recognize as independent and claims is part of its territory, has long worried U.S. officials.

New generations of production technology are often described in terms of nanometers, or billionths of a meter, a measure of key dimensions of microscopic circuitry. In December 2022, TSMC said it would produce three-nanometer chips at its second Arizona factory. It will now also introduce the next generation of technology, at two nanometers, in the second plant, Biden administration officials announced.

Such advances determine how many transistors can be packed on each small slice of silicon, which allow chips to perform calculations more quickly and store more data. In the past decade, TSMC supplanted Intel in delivering the most sophisticated production technology, producing components that Apple designs for its latest smartphones and Nvidia develops to power artificial intelligence applications like ChatGPT.

Though the planned addition of two-nanometer technology represents a substantial advance, that does not necessarily mean that TSMC’s U.S. factories will offer the latest technology at the same time as its factories in Taiwan. The company carries out research on new technologies on the island, and adapting those processes to high-volume manufacturing is typically done first in nearby buildings to speed the transition and reduce travel time for engineers.

It remains possible that Intel, which is racing to regain its lead in manufacturing technology, will offer the most advanced production technology in the industry by 2028 at U.S. factories. The company carries out its manufacturing technology research in Oregon.

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



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