TSMC ramps up advanced chip production in US, gets $11.6 billion in grants

The investment made by TSMC is the largest foreign direct investment made in a new project in US history, the Commerce Department revealed. 

Published - April 09, 2024 02:52 pm IST

FILE PHOTO: TSMC has signed an agreement with the US to make most of its advanced semiconductors in Arizona from 2028. 

FILE PHOTO: TSMC has signed an agreement with the US to make most of its advanced semiconductors in Arizona from 2028.  | Photo Credit: Reuters

Taiwan Semiconductor Manufacturing Co. (TSMC) has signed an agreement with the US to make most of its advanced semiconductors in Arizona from 2028. The US government also plans to award the world’s biggest chipmaker $6.6 billion in grants and $5 billion in loans to help build advance production units, which will expand the supply chain of semiconductors in the US, the FT reported.

The subsidies have been given under the Chips Act, passed in 2022 to push US chipmaking. Last month, Intel promised $100 billion in new investment projects while receiving a deal for $8.5 billion in grants and up to $11 billion in loans.

This will mark TSMC’s third factory in Phoenix, Arizona, in addition to two facilities in the state that are expected to start production in 2025 and 2028. The grant, in total will support more than $65 billion in investments at the three plants by TSMC, the primary chipmaker for companies like Apple and Nvidia. The company’s earlier investment in the US totalled to $40 billion. 

TSMC Arizona has also committed to support making advanced packaging capabilities with partners in the US, the department said. It also shared that 70% of TSMC customers were US companies. 

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“TSMC is expanding its manufacturing capabilities in Arizona such that for the first time ever we will be making, at scale, the most advanced semiconductor chips on the planet here in the United States of America,” FT quoted US commerce secretary Gina Raimondo as saying. “[We are] massively strengthening our national security position.”

TSMC CEO C.C. Wei said that TSMC will help US tech organisations “unleash their innovations by increasing capacity for leading-edge technology through TSMC Arizona. 

The investment made by TSMC is the largest foreign direct investment made in a new project in US history, the Commerce Department revealed. The new factory will manufacture the latest 2nm chips in a fabrication plant or fab, making it a step-up from its previous plans to run its US fabs on older technology than most of what is in its fabs in Taiwan. 

An engineer familiar with the matter spoke to FT saying that since most AI chips will run on 3nm by 2026, production capabilities in the first TSMC Arizona plant would lag behind. When the second Arizona fab opens in 2028, Nvidia and other AI chip buyers will have most likely moved to the 2nm, which is why the TSMC decided to upgrade the tech. 

“The chips that TSMC makes . . . underpin all AI. Tens of thousands of leading-edge chips are required to train a single frontier AI model [such as OpenAI’s GPT4],” Raimondo said. “And now, because of this announcement, these chips will be made in the United States of America.”

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