Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest chipmaker, has struck an $11.6 billion deal with the Biden administration to expand its production capabilities in Arizona, marking a significant move in the semiconductor industry.

The Deal Details

Under the agreement announced in a press release on Monday, TSMC will receive government grants and loans totaling nearly $12 billion. This includes $6.6 billion in grants and $5 billion in direct funding, part of the CHIPS and Science Act passed in 2022. With a revenue of about $67 billion and $26 billion in net income last year, TSMC is a major player in the semiconductor market.

Expansion Plans

TSMC plans to build a third factory at its Phoenix site, slated to start production in the coming decade. Its first facility is expected to go live next year, with the second facility currently under construction and set to be operational by 2028. The total commitment to Arizona now stands at $65 billion for TSMC.

Impact on Technology

The new facility will focus on producing advanced two-nanometer chips, crucial for driving the artificial-intelligence revolution. TSMC’s clients include tech giants like Apple and Nvidia, and this expansion aligns with the growing demand for cutting-edge semiconductor technology.

Strategic Importance

The deal also has political implications, especially in Arizona, a key battleground state. It could bolster Biden’s reelection prospects, as the grant includes provisions for local workforce training and the creation of thousands of manufacturing and construction jobs.

Shift in Supply Chains

Both the US government and American companies are working to reduce dependency on China’s high-tech manufacturing sector. This shift is driven by various factors, including geopolitical tensions, national security concerns, and disruptions caused by the pandemic.

Market Response

TSMC’s American Depositary Receipts (ADRs) have seen a 36% surge this year, reflecting investor confidence in the company’s strategic moves. Warren Buffett’s Berkshire Hathaway previously held a stake in TSMC but divested it due to geopolitical considerations and investment opportunities elsewhere.

Conclusion

With this deal, TSMC solidifies its position as a key player in the US semiconductor industry, contributing to the nation’s efforts to strengthen domestic chip manufacturing and technological innovation.