TSMC Deal Before Trump’s Return – The U.S. Commerce Department said on Friday it has finalized a 54.6 billion rupee ($6.6 billion) government subsidy for Taiwan Semiconductor Manufacturing Co’s (TSMC) U.S. unit for semiconductor production in Phoenix, Arizona.
First major award under Rs 4.35 lakh crore program
The binding contract, following a preliminary agreement reached in April, marks the first major award to be completed under the Rs 4.35 lakh crore ($52.7 billion) program set up in 2022. The deal comes just weeks before President-elect Donald Trump, who has previously criticized the program, takes office.
TSMC expands investment, technology development
In April, TSMC agreed to increase its planned investment by Rs 2.05 lakh crore ($25 billion) to Rs 4.95 lakh crore ($65 billion) and add a third factory in Arizona by 2030. The Taiwanese company is set to produce the world’s most advanced 2-nanometer technology at its second factory in Arizona, which is expected to start production in 2028. TSMC will also use its most advanced chipmaking technology, called “A16,” in Arizona.
Commerce Secretary’s remarks on the deal
“When we started this, there were many who doubted that TSMC would use 5- or 6-nanometer technology in the United States,” Commerce Secretary Gina Raimondo said in an interview. “But in reality, they are producing their most sophisticated chips in the United States.”
Additional support and terms of the deal
Along with the subsidy, TSMC will also receive up to ₹41,800 crore ($5 billion) in low-cost government loans. Under the deal, TSMC will receive payments as it meets project milestones, and the Commerce Department expects to release at least ₹8,200 crore ($1 billion) to TSMC by the end of this year, a senior official told reporters. TSMC has agreed to forgo share buybacks for five years, subject to some exceptions, and share any excess profits with the U.S. government under a “benefit-sharing agreement.”
TSMC CEO statement on deal
TSMC CEO C.C. Wei commented that the deal “helps us accelerate the development of the most advanced semiconductor manufacturing technology available in the U.S.”
The Chips and Science Act and National Security Concerns
In 2022, Congress passed the Chips and Science Act to boost domestic semiconductor production, which Secretary Raimondo described as critical to attracting TSMC and other chip investments. Currently, no cutting-edge chips are produced in the United States.
“It didn’t just happen… We had to convince TSMC to expand,” Raimondo said. “We also had to convince American companies to buy chips made in the United States. The market doesn’t take national security into account.”
Other chip investments and deal finalisations before Biden’s exit
The Commerce Department has allocated Rs 29.6 lakh crore ($36 billion) for chip projects, including Rs 51,900 crore ($6.4 billion) for Samsung in Texas, Rs 69,500 crore ($8.5 billion) for Intel and Rs 49,000 crore ($6.1 billion) for Micron Technology. The Commerce Department is working to finalize these deals before President Biden leaves office on January 20.
TSMC’s advanced chips and export control regulations
Reuters reported on Saturday that the US Commerce Department has ordered TSMC to stop shipments of advanced chips to Chinese customers. Raimondo did not confirm this order, but stressed the importance of both offensive and defensive strategies vis-à-vis China.
“Investing in TSMC to expand here is an offensive strategy, while defense means ensuring that neither TSMC nor any other company sells our most advanced technology to China or violates our export controls,” Raimondo said, adding that TSMC had not been found guilty of any violations.
Commitment to national security
“We take national security seriously and examine every potential issue, whether it affects companies we subsidize or not,” she added.
