The US Department of Commerce has entered into a $6.6 billion subsidy agreement with Taiwan Semiconductor Manufacturing Co. (TSMC) for its chip production in Phoenix, Arizona.
This deal is the first major allocation under the $52.7 billion Chips and Science Act, introduced in 2022 to boost domestic semiconductor production.
The deal, which follows a tentative agreement announced in April, aims to produce the world’s most advanced chips on U.S. soil.
TSMC’s expanded investments now total $65 billion and will ensure its Phoenix facility uses state-of-the-art 2-nanometer technology by 2028.
$65 billion investment brings cutting-edge chips to Arizona
TSMC’s commitment to its Phoenix site represents a significant advance for the U.S. semiconductor industry.
The company, which had originally planned to invest $40 billion, increased its funding by $25 billion to $65 billion earlier this year.
This expansion includes the addition of a third manufacturing facility (fab) in Arizona by 2030.
The Phoenix facility will use TSMC’s 2-nanometer technology – the world’s most advanced chip manufacturing process.
Production is scheduled to begin in 2028, underscoring the United States’ claim to be a leader in semiconductor innovation.
TSMC will leverage its A16 chip manufacturing technology, solidifying Arizona’s role as an advanced manufacturing hub.
Government loans and profit-sharing agreements shape the deal
The TSMC subsidy includes up to $5 billion in low-cost government loans.
The funds will be released in tranches tied to specific project milestones. By the end of the year, $1 billion is expected to have been paid out.
As part of the agreement, TSMC agreed to forego share buybacks for five years, except under certain conditions. Under an “upside sharing agreement,” the company will share any excess profits with the U.S. government.
Commerce Secretary Gina Raimondo emphasized the strategic importance of the deal, saying it represents both offensive and defensive measures in the U.S. quest for dominance in the semiconductor sector.
The subsidy is also in line with efforts to ensure that domestic chip buyers prefer U.S. products, thereby strengthening national security goals.
Chips law
The Chips and Science Act, which will be passed by Congress in 2022, aims to revitalize the U.S. semiconductor industry, which currently lacks domestic production of cutting-edge chips.
The law allocated $36 billion for chip projects and attracted investments from global players.
This includes $6.4 billion for Samsung in Texas, $8.5 billion for Intel and $6.1 billion for Micron Technology. Trade officials are working to finalize these agreements before President Biden’s term ends in January.
The Chips Act underscores the importance of semiconductor technology to national security and economic resilience.
Beyond TSMC, these investments aim to build a robust domestic supply chain and reduce dependence on foreign production.
Export controls and national security concerns about China
The subsidization of TSMC comes against the backdrop of increasing geopolitical tensions, particularly regarding chip exports to China.
Although the Commerce Department has reportedly ordered TSMC to stop supplying advanced chips to Chinese customers, there is no official confirmation of this.
Raimondo emphasized that a central aspect of the administration’s semiconductor strategy is to ensure that no subsidized company violates U.S. export controls.
According to Raimondo, national security concerns remain a priority, stating:
Investing in TSMC to expand here is an insult – a defense is to ensure that neither TSMC nor any other company sells our cutting-edge technology to China.
Transforming the US semiconductor landscape
TSMC’s investment represents a fundamental shift in the U.S. semiconductor landscape.
By 2030, the Phoenix factory will not only produce cutting-edge chips, but also be an important part of a broader strategy to secure domestic supply chains.
The agreement underscores the intersection of technology, economics and geopolitics as the US seeks to maintain its dominance in a sector crucial to future innovation.
The subsidy marks a turning point for the semiconductor industry and signals a shift toward regional self-sufficiency and technological leadership.
With ongoing investments under the Chips Act, the U.S. is positioning itself to compete in an increasingly fragmented global semiconductor market.
