Semiconductor shortage

US grants US$6.6bn subsidy to TSMC under CHIPS Act

  • On April 8th the US Department of Commerce announced its decision to offer US$6.6bn in funding to Taiwan Semiconductor Manufacturing Company (TSMC). The world’s largest chip manufacturer said it would add a third facility in the US, introduce its latest 2nm chips and increase total funding for its semiconductor factories in the country to US$65bn from US$40bn. The third factory is expected to be operational by 2030.
  • TSMC’s move to make 2nm and more advanced semiconductors in the US is a significant victory for the Biden administration as this is the first time the Taiwanese company will make cutting-edge chips overseas. Demand from two of TSMC’s biggest consumers–Apple and NVIDIA–may have influenced this decision. However, it is important to note that TSMC will end up producing a small portion of its most advanced chips in its US factories while the majority will be produced back home.
  • The US$50bn CHIPS Act set out to bring advanced chip production to the US at a time of increasing geopolitical risks. The announcement comes a month after the Department of Commerce approved funds up to US$8.5bn for Intel’s (US) plants in the country as part of a series of subsidies announced so far (see table).
  • Even as TSMC invests heavily in the US, it has been able to move faster with its investments in Japan. Plans for both countries were announced in 2021, with the Japanese factory coming online in early 2024, while the US plants have been delayed.
  • Originally planned to begin production in 2024, TSMC’s first plant (in Arizona) will be operational only next year. The deadline for the second facility, for which construction is yet to begin, has been pushed to 2028 from 2026. The third facility will start production only by 2030. The delayed timelines highlight the difficulties faced by the US in its effort to manufacture the most advanced semiconductors at home and secure its technological supply chain.

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