The U.S. Commerce Department has finalized a significant subsidy deal worth $6.6 billion with Taiwan Semiconductor Manufacturing Company (TSMC) to support the establishment of advanced semiconductor factories in Phoenix, Arizona. This agreement is part of the broader CHIPS and Science Act, which aims to bolster domestic semiconductor production amid rising global competition [113bb9a9].
Commerce Secretary Gina Raimondo highlighted the national security implications of this investment, stating that it is crucial for the U.S. to regain its foothold in semiconductor manufacturing [113bb9a9]. TSMC's CEO, C.C. Wei, expressed optimism about the agreement, asserting that it will accelerate the production of advanced chips, including the anticipated 2-nanometer chips utilizing A16 technology, expected to commence by 2027 [113bb9a9].
In addition to the $6.6 billion subsidy, the U.S. government will provide $5 billion in low-cost loans contingent upon the achievement of project milestones. TSMC has also committed to forgoing stock buybacks for five years and sharing excess profits with the U.S. government, aligning its financial interests with national priorities [113bb9a9].
On November 20, 2024, the Semiconductor Industry Association (SIA) President John Neuffer praised the finalization of semiconductor manufacturing investments by the U.S. Department of Commerce and GlobalFoundries, which are also part of the CHIPS and Science Act. These investments are set to enhance semiconductor production in New York and Vermont, supporting critical sectors such as automotive, communications, and defense [262c8172].
The CHIPS Act has already facilitated 90 new projects across 28 states, resulting in hundreds of billions in private investments and the creation of over 58,000 jobs [262c8172]. A report from May projected a 203% increase in U.S. semiconductor manufacturing capacity from 2022 to 2032, capturing 28% of global capital expenditures from 2024 to 2032 [262c8172].
In a recent analysis, J.H. Cullum Clark, Director of the Bush Institute-SMU Economic Growth Initiative, emphasized the need for the incoming Trump Administration to release over $1 trillion in subsidies and tax credits for semiconductor and green-tech manufacturing authorized under the CHIPS Act, Inflation Reduction Act, and Bipartisan Infrastructure Act. Clark noted that the Biden Administration has not released most of these funds, although the current Commerce Secretary plans to do so [eec81642].
Clark raised concerns about the U.S. producing only 12% of the world's advanced semiconductors while Taiwan produces 68%, which poses national security risks. He advocates for the Trump Administration to promote semiconductor diversification, scale back green-tech tax credits, and increase federal R&D investment to at least 1% of GDP, as federal investment in R&D has decreased to 0.7% from 1.0% in 2010 [eec81642].
The deal with TSMC comes amid heightened scrutiny of its operations, particularly regarding its shipments to Chinese customers. The U.S. has ordered TSMC to halt advanced chip shipments to China to protect sensitive technology, reflecting ongoing tensions between the two nations [113bb9a9].
This investment is expected to create approximately 20,000 construction jobs and 6,000 manufacturing jobs in Arizona, significantly contributing to the local economy. The overall investment from TSMC in Arizona is projected to exceed $65 billion, with plans for a third plant to be built by 2033 [113bb9a9]. As the political landscape evolves, the implications of these subsidy deals will resonate beyond Arizona, influencing GOP strategies in regions where semiconductor manufacturing is a vital economic driver [113bb9a9].