US Commerce Department Closes $6.6 Billion Chips Act Funding Award for TSMC
The US Department of Commerce has finalized the $6.6 billion award to Taiwan Semiconductor Manufacturing Company (TSMC) under the Chips Act. According to Yahoo Finance, the TSMC Chips Act funding marks a major milestone in the Biden administration’s efforts to bring production of semiconductors back to the US.
Legally Binding
Earlier this year, the Department of Commerce disclosed the TSMC funding amount as part of the preliminary agreement announced in April 2024. The company has now entered into a binding contract with the government. TSMC becomes the first chip manufacturer to reach this stage of the Chips Act award program developed in 2022.
The deal comes a few weeks before President-elect Donald Trump takes office. Trump has previously criticized the Chips Act. Under the new deal, TSMC will receive about $1 billion this year since it has already met some of the benchmarks required.
The chip manufacturer will also be taking $5 billion in loans. By finalizing the funding agreement with TSMC, the Department of Commerce guarantees the country the return of semiconductor production to the US.
“This is some of the most sought-after technology on the planet. It’s impossible to overestimate how significant this is for America’s national and economic security,” Commerce Secretary Gina Raimondo said.
Growing US Investment
In April 2024, the chipmaker agreed to expand the planned TSMC investment in the US to $65 billion and build a third Arizona fab in 2030. The Taiwanese chip maker plans to manufacture the world’s most advanced 2 nanometer technology at its Arizona factory.
Production of this technology is likely to commence in 2028. TSMC agreed to use A16 to manufacture chips in Arizona. A16 is the most advanced chip making technology.
“When we started this, there were a lot of naysayers who said maybe TSMC will do 5 or 6 nanometers in the United States. Actually they are doing their most sophisticated chips in the United States,” Commerce Secretary Gina Raimondo.
TSMC will forego stock buyback for at least five years. The company will share excess profits with the US government based on the provisions of the upside sharing agreement.
Moving Forward
The Department of Commerce expects to sign more deals in the coming weeks. These deals will solidify the Chips Act as one of the largest industrial policies in decades. The Chips and Science Act allocates 25% tax credits, $75 billion in loans and loan guarantees, and $39 billion in grants to promote US chip industry growth.
The US government seeks to lure semiconductor production in the US through CHIPS Act funding following years of shifting production to Asia. The Department of Commerce has already allocated most of the funds. However, only a small portion of these awards have been finalized.
Last month, US chip manufacturer, Wolfspeed announced that it would be receiving $750 million in form of government grant under the 2022 Chips and Science Act. The US government has also given Intel a big grant. The giant chip maker signed a preliminary non-binding agreement with the U.S. Department of Commerce in March 2024.
Under this agreement, Intel expects to receive direct funding amounting up to $8.5 billion under the Chips and Science Act. The funding will enable Intel to advance its commercial semiconductor projects across four states. Intel will also be making Intel AI chips for Amazon Web Services through its Foundry business after it signed a deal in September 2024.
