US-China tech war: TSMC strikes US$11.6 billion deal to make ‘most advanced semiconductor chips’ in Arizona

Taiwanese firm set to get US$6.6 billion in grants and as much as US$5 billion in loans to help build factories as Washington vies for chip prominence
With new investments like those from TSMC Arizona, US says it is on track to make roughly 20 per cent of world’s leading-edge semiconductors by 2030

United States

Ji Siqiin Washington

Published: 9:31pm, 8 Apr 2024

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Amid its continuing tech war with China, the United States on Monday announced a US$6.6 billion grant to Taiwan Semiconductor Manufacturing Company for the chip-making giant to build a third plant in the country for “the world’s most advanced semiconductors”.

In addition, a US$5 billion loan from Washington will be made available to the Taiwanese firm, which will invest more than US$65 billion to construct three semiconductor fabrication plants, or fabs, in the state of Arizona, according to the US Department of Commerce.

The third plant will be built before the end of the decade and produce 2-nanometer or more advanced chips, it added.

“TSMC’s renewed commitment to the United States, and its investment in Arizona represent a broader story for semiconductor manufacturing that’s made in America and with the strong support of America’s leading technology firms to build the products we rely on every day,” said US President Joe Biden in a statement.

The development underscored the Biden administration’s push for the Chips and Science Act, signed into law in 2022 and setting aside US$39 billion in direct grants – plus loans and guarantees worth US$75 billion – to lure semiconductor companies to build manufacturing facilities in America.

The US currently produces less than 10 per cent of the world’s chips and none of the most advanced ones.

Owing to new investments like those from TSMC Arizona, the US is now on track to produce roughly 20 per cent of the world’s leading-edge chips by 2030, the Commerce Department said.

At full capacity, the Taiwanese company’s three fabs would manufacture tens of millions of leading-edge chips powering products like 5G/6G smartphones, autonomous vehicles and AI data centre servers, it added. TSMC’s major clients include AMD, Apple, Nvidia, and Qualcomm.

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“This would help strengthen America’s competitive edge in science and technology innovation,” the department said.

TSMC previously announced US$40 billion would be spent on its first two plants in Arizona. But the world’s largest chip maker has struggled with operational delays, citing shortages of specialist workers and US government incentives.

The first fab will make 4nm chips and now is scheduled to begin production by the first half of 2025. The second fab, whose operational debut was delayed from 2026 to 2028, will produce 2nm chips on top of its original plan to make only chips measuring 3nm, thanks to the fresh funding from the US government, according to the company.

Generally, the smaller a semiconductor is the more advanced it will be, as more computing power can be packed into a tiny piece of silicon.

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“The proposed funding from the Chips and Science Act would provide TSMC the opportunity to make this unprecedented investment and to offer our foundry service of the most advanced manufacturing technologies in the United States,” said TSMC Chairman Mark Liu.

“Our US operations allow us to better support our US customers, which include several of the world’s leading technology companies. Our US operations will also expand our capability to trailblaze future advancements in semiconductor technology.”

Last month, the Commerce Department announced that tech giant Intel would receive US$19.5 billion – consisting of US$8.5 billion in direct funding and up to US$11 billion in loans – to build and modernise its semiconductor factories in four US states.