TSMC secures $11.6bn in funding as Chips Act faces uncertain future

Unlock the White House Watch newsletter for free

Your guide to what the 2024 US election means for Washington and the world

Taiwan Semiconductor Manufacturing Company and Joe Biden’s administration have finalised more than $11bn in grants and loans to support the company’s US chipmaking plans, as the White House pushes to distribute subsidies before Donald Trump takes office.

The deal with the world’s biggest chipmaker, which includes up to $6.6bn in grants and up to $5bn in loans, is the first major award under the Chips Act to be finalised. It is also the largest foreign investment in a new manufacturing project in US history, according to the Department of Commerce.

TSMC supplies most of the world’s leading-edge chips, including Nvidia’s artificial intelligence GPUs. But the location of its fabs in Taiwan has led to anxieties about potential US-China tensions affecting supply.

“All AI runs on these chips,” said US commerce secretary Gina Raimondo, emphasising the TSMC investment would help the US to “outcompete and out-innovate the rest of the world”.

The Chips Act, passed in 2022 with bipartisan support, is aimed at boosting chip manufacturing in the US and offers financial support to national and foreign companies. But its future is uncertain after the election victory for Trump, who has vowed to undo or re-examine many of his predecessor’s signature policies.

Trump criticised US chip subsidies during his appearance on Joe Rogan’s podcast in October. “That chip deal is so bad,” Trump said. “We’ve put up billions of dollars for rich companies to come and then borrow the money and build chip companies here, and they are not going to give us the good companies anyway.”

Raimondo will be replaced when Trump takes office and potential nominees for the role reportedly include former pro wrestling executive and co-chair of his transition team Linda McMahon.

Industry insiders who spoke to the Financial Times on condition of anonymity acknowledged the uncertainty created by Trump’s election, but emphasised the high degree of bipartisan support for building up US chip manufacturing — which could fit with Trump’s “America First” agenda.

The funds for TSMC will support the company’s planned investment of more than $65bn in three chip factories, or “fabs”, in Phoenix, Arizona, which are under construction, and will be awarded based on the completion of “project milestones”, the commerce department said. The fabs will be used to make the most advanced 3 nanometre chips, which are used to power AI.

“It’s impossible to overestimate how significant this announcement is for American national security and economic security,” Raimondo said, adding that the “yield” rate — a key indicator of efficiency — for one of the TSMC plants in Arizona has proven equal to its counterparts in Taiwan. The plant is expected to start full production next year.

After announcing preliminary agreements with about two dozen companies across the chip supply chain under the Chips Act, the commerce department has been locked in complex negotiations over the terms under which the federal grants will ultimately be allocated.

The largest of these include an $8.5bn grant for Intel, a $6.4bn grant for Samsung, and a $6.1bn grant for memory chipmaker Micron Technology. A final $1.5bn subsidy award to New York’s GlobalFoundries is expected to follow soon, said people familiar with the discussions.