2024-03-10 - tech

Foreign media: TSMC's Arizona plant only received US$5 billion in government sub

US Incentives for New Semiconductor Fabs, Intel Outperforms TSMC.

Yesterday, according to insiders, TSMC is set to receive over $5 billion in federal funding to support its wafer fab in Arizona, USA.

The insiders said that the subsidy has not been finalized yet, and it is currently unclear whether TSMC will utilize the loans and guarantees provided by the **2022 Chips and Science Act**.

TSMC and other leading chip manufacturers are in negotiations with the US Department of Commerce for a subsidy of about $28 billion, which will be used for advanced wafer fabs. The insiders said that TSMC, Intel, Micron, and Samsung Electronics will all receive billions of dollars in subsidies from the federal government, but the exact amount allocated to each company is still uncertain.

In a statement, TSMC indicated that it has been making steady progress in fruitful discussions with the US government regarding incentive funding. The US Department of Commerce and the White House declined to comment.

According to other individuals familiar with the negotiations, to enhance its profile, South Korea's Samsung plans to invest $17 billion in a new factory in Texas and has also proposed additional investments in the United States. Samsung did not immediately respond to requests for comment.

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The US **Chip Act** allocates a total of $39 billion in direct appropriations—plus $75 billion in financing options—to persuade chip manufacturers to produce domestically. US officials plan to announce the subsidy list for major advanced chip manufacturers by the end of this month, and have already announced the subsidy list for three companies producing older-generation semiconductors.The main chip manufacturer for Apple and Nvidia, TSMC, will invest $40 billion to build two semiconductor fabs in Arizona. Arizona is a hot spot for the chip industry and a key political battleground for the 2024 presidential election.

The Phoenix factory has experienced several setbacks. First, TSMC announced in July last year that due to a lack of skilled workers capable of installing the most advanced equipment, the production of the first factory would be delayed until 2025. This triggered a months-long dispute with local unions, culminating in a formal labor agreement in December last year.

Earlier this year, the company announced that the production of its second factory would be delayed by two years, stating that the technological level of the site would depend on the extent of subsidies they receive from the U.S. government.

Sources close to the matter have revealed that TSMC's main competitor in the U.S., Intel, is negotiating for over $10 billion in federal incentives, including grants and loans. Sources had earlier said that at least $3.5 billion would be provided in the form of direct grants.

Meanwhile, Micron has a plan in Idaho and has stated its intention to build four factories in New York State. Due to Commerce Secretary Gina Raimondo's prioritization of projects that will begin production by the end of this decade, the company's bonus may support the first two factories in New York State. Micron stated in recent filings to the federal government that the other two factories in the state would not be operational until 2041.

In response to the aforementioned report, Intel did not respond to requests for comment, and Micron declined to comment.

In one sentence, Lu Xingzhi reveals TSMC's bitterness.

TSMC's first fab in Kumamoto, Japan, has recently been inaugurated, and the Japanese government has also announced subsidies for the second Kumamoto factory. In contrast, the U.S. factory, which started first, is lagging in progress. Renowned analyst Lu Xingzhi believes that it now appears TSMC may not even receive $10 billion in subsidies.

Media reports indicate that a TSMC executive stationed at the Kumamoto factory stated that the Japanese government's subsidies are well-placed, fully compensating for the cost difference between the Taiwan region and Japan. Additionally, Japanese workers can withstand the working pressure of TSMC, which is not as optimistic for the Arizona factory in the U.S., as American colleagues cannot tolerate such an environment.The U.S. House of Representatives passed a rapid spending bill on the 6th, which includes an expenditure of $3.5 billion to be used for investing in Intel's production of military chips.

Lu Xingzhi commented on his Facebook fan page, suggesting from the perspective of a small shareholder a few years ago that TSMC should establish an advanced process factory in Japan instead of the United States to diversify risks. He commented that setting up a factory in the U.S. would encounter many problems, which would also be detrimental to shareholders. Not to mention the issues of delays, labor unions, and impact on profits, it now seems that they might not even get the $10 billion subsidy (previously the market expected $15 billion).

He mentioned that at the time, he was severely criticized by a few strange pro-American tech scholars, and now when he looks back, he is really moved. He wonders whether these tech scholars have TSMC shares and whether they have considered TSMC's interests. His analytical views may not always be correct, but he will try to be as objective as possible based on the situation at the time to provide a reference for his fans.

Lu Xingzhi cited Foxconn's move to establish a factory in the U.S. as an example, emphasizing that Foxconn also gave full face at the time, but in the end, it didn't amount to much. He believes that tech people are honest and cannot compare with those who play politics.

Lu Xingzhi further analyzed that the U.S. seems to also know that semiconductor manufacturing is not going well, so it tacitly allows Japan to take over TSMC's overseas expansion. In terms of the U.S. government's attitude, if it disagrees, TSMC would not dare to significantly increase its investment in Japan.

TSMC's capital expenditure for 2023 is $30.4 billion, and it is expected that this year's capital expenditure will be between $28 billion and $32 billion, with about 80% used for advanced process technology. TSMC mentioned that the capital intensity is related to the company's higher growth opportunities in the coming years. The significant increase in capital expenditure in the past few years is to prepare for the growth opportunities in high-performance computing (HPC), AI, and 5G trends.

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