Taiwan Semiconductor-US government finalize Chips Act award to boost local manufacturing

The Biden administration has finalized its Chips Act incentive agreement with Taiwan Semiconductor Manufacturing (NYSE:TSM).

The White House said on Friday that the agreement with TSM will spur $65B of private investment to build three facilities in Arizona and create tens of thousands of jobs by the end of the decade.

This would be the largest foreign direct investment in a greenfield project in the history of the U.S., according to the White House.

“The first of TSMC’s three facilities is on track to fully open early next year, which means that for the first time in decades an America manufacturing plant will be producing the leading-edge chips used in our most advanced technologies,” said the statement from President Joe Biden.

In April, the U.S. signed a tentative deal with TSM to provide the chipmaker up to $6.6B in grants and as much as $5B in loans to boost domestic manufacturing of advanced semiconductors.

The chip giant will get at least $1B of the total this year because it has already attained some of the criteria required, Bloomberg News reported, citing administration officials.

The agreement is the first major Chips Act deal to be completed, while Intel (INTC) and Samsung (OTCPK:SSNLF) and others are still discussing details of agreements, the report added.

The U.S., China, Japan, South Korea and the EU are among the regions which have stepped up efforts to boost domestic chip production to stay ahead in the AI race. Under the U.S. CHIPS Act, several companies have inked preliminary deals with the U.S. Department of Commerce to get funds.

According to Needham, the CHIPS and Science Act could undergo a rebranding, but likely remain safe when President-elect Donald Trump returns to the White House in January. The analysts had noted that the legislation was initially drafted during Trump’s first term, and was one of the most bipartisan bills passed during the Biden administration.

The CHIPS Act provides for $39B in grants, billions more in loans and 25% tax credits to boost domestic chip manufacturing and reduce reliance on Asia. More than 20 companies are in line for the government funding.