White House Unveils $6.6 Billion Grant For TSMC; Chip Giant Announces Third Semiconductor Fab In Arizona

Amid a growing push by Joe Biden Administration to beef up semiconductor supply chains, Taiwan Semiconductor Manufacturing Company (TSMC) is set to secure a federal grant of $6.6 billion under the CHIPS and Science Act.

The Arizona subsidiary of the chip giant signed a non-binding preliminary memorandum of terms (PMT) with the US Department of Commerce on Monday (8 April) for the onshoring of chip production.

In addition to the proposed $6.6 billion in direct funding, TSMC will also be eligible to receive up to $5 billion in loans and be able to claim an investment tax credit of up to 25 per cent of capital expenditures. 

Buttressed by the grant of $6.6 billion, TSMC, headquartered in Hsinchu, Taiwan, has also announced plans to build a third fab in Phoenix, Arizona, that will be operational by the end of the decade.

TSMC's initial investment commitment to Arizona stood at $40 billion. With the addition of the third fab, TSMC's total capital expenditure for the Phoenix site surpasses $65 billion.

This landmark investment not only marks the largest foreign direct investment in Arizona's history but also stands as the largest foreign direct investment in a greenfield project in US history.

The increase to $65 billion would put the US on track to produce roughly 20 per cent of the world's leading-edge chips by 2030, the Commerce Department said in a press release.

"For the first time ever, we will be making, at scale, the most advanced semiconductor chips on the planet here in the United States of America," US Commerce Secretary Gina Raimondo  told reporters the day before the official announcement on Monday, adding that these chips would "underpin all artificial intelligence demand".

The first TSMC plant in Arizona will make 4-nanometer chips and is scheduled to begin production in first half of 2025.

The second fab will produce the world’s most advanced 2-nm chips in addition to the previously announced 3-nm technology, with production beginning in 2028.

The third fab will also produce chips using 2nm or more advanced processes, with production beginning by the end of the decade.

In the realm of semiconductor technology, a fundamental rule applies: the smaller the nanometer size, the more cutting-edge and potent the chips become. Standing at the forefront of this technological race are industry giants like TSMC, Intel, and Samsung, relentlessly pushing the boundaries of semiconductor innovation. All three juggernauts are engaged in a fierce competition, striving to put 2-nm chips into production by the close of 2025.

At present, TSMC exclusively manufactures its most advanced chips in Taiwan: 4-nm chips for AI training, designed by Nvidia and used for applications such as ChatGPT, and 3-nm processors for Apple iPhones.