U.S. Gov Subsidizes Domestic Chip Production With $6.6B Incentives for TSMC and Samsung Under CHIPS Act
The United States government is dispensing billions of dollars in incentives and loans as part of the CHIPS and Science Act passed by Congress in August 2022. TSMC and Samsung have emerged as the third and fourth beneficiaries of billions of dollars available under the U.S. CHIPS and Science Act after GlobalFoundries and Intel.
- The United States government is dispensing billions of dollars in incentives and loans as part of the CHIPS and Science Act passed by Congress in August 2022.
- The U.S. Congress has apportioned $52.7 billion as direct incentives for semiconductor manufacturing and R&D, in addition to $75 billion as government loans.
- So far, GlobalFoundries, Intel, TSMC, and Samsung have received their share of the CHIPS Act incentives.
Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung have emerged as the third and fourth beneficiaries of billions of dollars available under the U.S. CHIPS and Science Act after GlobalFoundries and Intel.
TSMC Arizona, the U.S. subsidiary of the Taiwan-based chipmaker, will receive $6.6 billion under the $52.7 billion legislation passed in 2022 with bipartisan support to reduce and ultimately eliminate the overwhelming reliance on foreign-made chips. Per Reuters, South Korea’s tech behemoth Samsung is also expected to encash $6.6 billion from the federal government.
Beyond the $6.6 billion, TSMC Arizona is also eligible for $5 billion in funding for low-interest loans from the U.S. government. TSMC Arizona is expected to leverage these incentives towards its under-development chip fabrication complex that houses three factories.
The first fabrication unit, which will produce chips based on the 4 nm node, is being developed since 2021 and will begin production of chips to be used in 5G/6G smartphones, autonomous vehicles, and AI datacenter servers in the first half of 2025.
The second fabrication unit will commence operations in 2028 to produce highly advanced chips based on the 2 nm node. The third factory is expected to produce chips by the end of this decade.
With the check from the U.S. government, Samsung plans to construct four facilities near Austin, Texas, including a $17 billion unit it announced in 2021.
The U.S. government’s push for domestic production of something as ubiquitous as chips became a national priority as semiconductor supply chains, of which Taiwan is at the center and right and left, were strained during the COVID-19 pandemic.
Moreover, China’s looming threats over the sovereignty of the Taiwanese island nation, which commands a 68% market share in the manufacturing of advanced chips as of 2023, became apparent. Taiwan is also prone to earthquakes, with the country registering its worst in 25 years last week. In 2022, U.S. commerce secretary Gina Raimondo warned that any disruption to the supply of Taiwanese chips from a Chinese invasion could trigger a recession.
See More: Global Investment on 84 New Chip Fabs to Touch $500B by 2024
The CHIPS Act serves as a vehicle for change and to ensure fabricators, whether Taiwanese or otherwise, make chips in the U.S. Europe and the U.S. accounted for 44% and 37% of the global semiconductor supply, respectively, compared to ~10% currently. It also aims to make the country more competitive in chip production than Taiwan, South Korea, and China.
“America invented these chips, but over time, we went from producing nearly 40% of the world’s capacity to close to 10%, and none of the most advanced chips, exposing us to significant economic and national security vulnerabilities,” president Joe Biden said.
With TSMC’s commitment in Arizona, now totaling $65 billion (up from the $25 billion it previously announced) for the three factories, the U.S. is expected to support as much as 20% of the global semiconductor supply by 2030. TSMC’s investment is also the largest foreign direct investment in U.S. history that a company has made for a greenfield project. According to a Reuters source, Samsung plans to double its initial investment to $44 billion.
The only problem is whether chips made on the 4 nm and 3 nm nodes will become obsolete by the time TSMC begins fabricating 2 nm chips in its third fabrication unit in Arizona in 2030. More importantly, the question of where manufactured wafers would be packaged is an important one. It is unclear if the TSMC Arizona units would have packaging capabilities.
Before TSMC, the U.S. government released incentives under the CHIPS Act for GlobalFoundries and Intel.
- Global Foundries is expected to use the $1.5 billion for a new fabrication unit in New York, the expansion of its New York facility, and the modernization of its Vermont facility. The CHIPS Program Office would also lend Global Foundries $1.6 billion.
- Intel will leverage $8.5 billion for chip manufacturing and R&D activities across its Arizona, New Mexico, Ohio and Oregon facilities. The American company is also entitled to $11 billion in loans.
Finally, Micron can expect to receive its share of the funds under the CHIPS Act. The company has already announced it would pump $100 billion in New York over 20 years.
How soon can the CHIPS Act shore up the United State’s semiconductor industry? Share with us on LinkedIn, X, or Facebook. We’d love to hear from you!
Image source: Shutterstock
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