Biden will give Taiwan’s TSMC $6.6 billion to boost US chip production

Biden will give Taiwan’s TSMC $6.6 billion to boost US chip production

The US government plans to give $6.6 billion to the world’s largest semiconductor chip maker to help it build three factories in Arizona as part of President Joe Biden’s push to secure supplies of advanced chips.

The White House announced on Monday that it has signed a non-binding agreement with Taiwan Semiconductor Manufacturing Company (TSMC) to provide it with funds for a Phoenix-based fabrication plant, or “fab,” in addition to about $5 billion in government loans.

“America invented these chips, but over time, we went from producing almost 40% of the world’s capacity to almost 10%, and none of the chips are the most advanced,” Biden said in a statement. “(That exposes) us to significant economic and national security vulnerabilities.” In addition to the two previously announced US plants, the Taiwanese chipmaker, which manufactures an estimated 90% of the world’s most advanced chips, said Monday that it will build a third, bringing its total investment in Arizona to more than $65 billion.

TSMC ( TSM ) Chairman Mark Liu called the investment “unprecedented” in a statement, noting that its US customers include some of the world’s leading technology companies. The three fabs — the first of which will start production in the first half of 2025 — will give these customers access to a domestic supply of chips that power many products, from smartphones to satellites, as well as artificial intelligence systems.

The company’s total investment of $65 billion represents the largest foreign direct investment in Arizona’s history, the White House said. The three fabs are expected to create about 6,000 high-paying tech jobs, and more than 20,000 indirect jobs — for example, in construction, he added.

Securing the supply chain
The US government has emphasized the need to bring more chip production onshore to limit possible supply disruptions. In a clear demonstration of that risk, the coronavirus outbreak caused major bottlenecks in chip shipments around the world, and contributed to higher prices of consumer goods.

Taiwan is also in a vulnerable position: Supply chain experts and US officials worry that US-China trade tensions and a potential military invasion of the island by Beijing could disrupt its vital chip-making industry. Last week’s powerful earthquake in Taiwan also highlighted the industry’s exposure to such natural disasters.

In a call with reporters ahead of Monday’s announcement, US Commerce Secretary Gina Raimondo said President Biden is “tired of being at the end of the supply chain” and that the new government funds go “a long way to further strengthen the resilience of our domestic supply chain.”

“For the first time, we will be making, at scale, the most advanced semiconductor chip on the planet in the United States,” he added.