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TSMC will receive US$5 billion in US subsidies

Sunday,Mar 10,2024

 Taiwan Semiconductor Manufacturing Co.’s plant in Arizona is expected to receive more than $5 billion in federal incentives, Bloomberg reported, citing people familiar with the matter. The U.S. government is not yet ready to announce the incentive because it must be finalized with contract chip manufacturers around the world, but the amount looks very substantial.

It's unclear whether TSMC, which makes chips for AMD, Apple, Intel, Nvidia and Qualcomm, will receive the $5 billion grant, or if the amount includes grants, loans and/or loan guarantees. Additionally, it's unclear whether the company will use the loans and loan guarantees to build and expand its plant near Phoenix, Arizona, or whether it would rather invest its own capital.
If the information about TSMC's $5 billion incentive package is accurate, then reports of Intel's roughly $10 billion incentive program are likely accurate as well. Also consider the fact that Intel's projects in the U.S. are more ambitious and more expensive than TSMC's. Intel, for example, is building a brand new factory in Ohio that is expected to cost more than $100 billion.
TSMC's project in Arizona involves investing $40 billion to build two semiconductor manufacturing plants. For large foundries, it's a way to diversify their geographic footprint and stay relevant to local semiconductor manufacturing trends. However, TSMC’s Arizona project has encountered multiple setbacks.
TSMC began construction of a new U.S. wafer fab in early 2021, aiming to start production in 2024. However, due to a reported shortage of skilled workers in the state, TSMC had to delay the installation of some fab equipment and, therefore, delayed the start of the fab until 2025. The production facility, known as Fab 21 Phase 1, will use TSMC's 5-nanometer process technologies, including N5, N5P, N4, N4P and N4X.
In addition to the Fab 21 phase, TSMC also announced Fab 21 Phase 2 in late 2022. The factory is designed to produce chips on its 3nm-scale production processes, including N3, N3E, N3P and N3X. While the fab enclosure is still under construction, equipment installation for Fab 21 Phase 2 was delayed earlier this year due to a lack of U.S. subsidies and demand uncertainty. As a result, the second phase of Fab 21, originally scheduled to start production in 2025, is now expected to begin operations sometime in 2027 or 2028, a considerable deviation from the original plan.
It remains to be seen whether the incentive program will impact TSMC’s Fab 21 Phase 2 plans.