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Microchip giant TSMC strikes $11.6 billion deal with Biden to boost production in Arizona

Theron Mohamed   

Microchip giant TSMC strikes $11.6 billion deal with Biden to boost production in Arizona
  • Taiwan Semiconductor is set to receive almost $12 billion in grants and loans from the US government.
  • The microchip maker plans to build a third factory in Phoenix, Arizona this decade.

The White House is giving the world's largest chipmaker government grants and loans worth almost $12 billion to expand production in Arizona.

The agreement with Taiwan Semiconductor Manufacturing Co. (TSMC) announced an initial deal in a press release on Monday.

The company is poised to garner as much as $6.6 billion in grants and $5 billion in direct funding from the Biden administration, under the CHIPS and Science Act passed in 2022. TSMC generated about $67 billion in revenue last year and and $26 billion of net income.

The semiconductor giant said it would construct a third factory on its Phoenix site that would begin production this decade. Its first facility is on track to go live next year, while the second is under construction and set to be operational in 2028.

TSMC, which supplies chips to companies including Apple and Nvidia, now pegs its total commitment to Arizona at $65 billion.

The company expects to make new, two-nanometer chips at its third facility that could help power the artificial-intelligence boom. Rivals like Intel, Samsung, and Microchip Technology have either agreed their own funding deals with the government, or are expected to soon.

Arizona is set to be a key battleground state in the presidential election. The deal struck between TSMC and the White House could aid Biden's reelection bid, especially as the grant includes funding to train local workers and promises to help create 6,000 manufacturing jobs and 20,000 construction jobs.

Both the government and companies in the US are working to lessen their reliance on China's high-tech manufacturing industry after decades of outsourcing.

The key reasons include rising US-China tensions, national-security concerns about Chinese access to Western tech, and extended pandemic lockdowns in China that caused painful shortages of key components in the US.

TSMC's American Depositary Receipts, which represent shares in the foreign company, have surged 36% this year. They've rallied significantly since Warren Buffett's Berkshire Hathaway amassed a $4 billion stake in the summer of 2022 then promptly dumped the entire position within the next six months.

Buffett has explained that China-Taiwan tensions were "a consideration" when his conglomerate sold, and his team also found better places to park money.

For now, it looks as though TSMC is deepening its foothold in the US as it seeks to become a key domestic supplier of microchips.

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