Writer: Joshua Andino
2 min read April 2023 — Taiwan Semiconductor Manufacturing Co. (TSMC) is pushing back on certain CHIPS Act requirements as it continues to build out its Arizona manufacturing sites.
Taiwan Semiconductor Manufacturing Co. expects to receive between $7-8 billion in CHIPS Act-provided tax credits, in addition to another $6-7 billion in state grants for its Arizona sites, reports the WSJ citing sources familiar with the matter. Altogether, the two plants represent a $40 billion investment in Arizona and the U.S., one of the largest foreign direct investments in the country’s history and the largest in the state.
The company is concerned over certain regulations within the CHIPS Act that would require sharing profits with the U.S. government and potentially detailed information regarding its operations. There are worries that the economics of its Arizona projects will not pencil out should the company see capped profits. While the U.S. Commerce Department has stated that certain requirements can be waived, the profit-sharing requirements complicate a venture that has already seen issues regarding operating in the U.S. economic environment with labor and management styles being key points of contention alongside an unfamiliar regulatory environment and inflationary pressures.
The two sites in North Phoenix are expected to create over 4,500 jobs, with employees producing 3-and 4-nanometer chips. On a Thursday earnings call, the company confirmed it had hired over 900 workers so far, with CEO C.C. Wei emphasizing that the company was focused on hiring, “Talent whose core values and principles are aligned with TSMC’s, so that we can establish TSMC culture in all our employees, no matter where we operate.”
In a short statement, TSMC confirmed with Reuters that it would be looking for further guidance from the U.S. government on CHIPS Act regulations, and they are not alone. South Korean President Yoon Suk Yeol had earlier last month expressed similar concerns on behalf of Samsung Electronics Co Ltd and SK Hynix Inc.
“TSMC’s investment in the U.S. from a business perspective makes no sense at all,” said Kirk Yang, former tech analyst and private equity firm Kirkland Capital chairman, suggesting there may be a political angle as well. He added, “so far, the Phoenix project has yielded very little benefit for TSMC or Taiwan.”
Wang Mei-hua, Taiwan’s Minister of the Economy, told reporters last week that, “The Taiwan government and industry have a very close understanding (of what is going on) and hope that the details of the relevant subsidy legislation will not affect industrial cooperation between the two sides and costs for industry-related construction.”
As it stands, chip makers are looking to make the most of around $52 billion in subsidy money made available to them by the passage of the CHIPS and Science Act earlier last year. Companies requesting over $150 million in subsidies are required to share a portion of their profits if returns exceed projections.
For TSMC, its first plant is expected to begin production sometime in 2024. Its second plant will be online in 2026.
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