TSMC’s decision to expand its operations with a third semiconductor Plant in Arizona represents a significant boost to the US’s ambitions to become more self-reliant in advanced Chip manufacturing and to generate employment. The announcement was initially celebrated as a victory for the US CHIPS Act, aiming to reduce American dependence on China for sophisticated chip supplies.

Apple expressed enthusiasm for sourcing chips made in the US for some of its products. However, the initial excitement faced challenges as the first facility, capable of producing only larger process chips suitable for older Apple devices, sought increased subsidies and fewer regulations. Delays and budget overruns have pushed the production start to 2025, deviating from the original 2024 target, amid concerns that US-manufactured chips could be more expensive than those produced in Taiwan, potentially reducing Apple’s procurement volume.

The discourse around the feasibility of the first plant heightened with discussions on the necessity to send output back to Taiwan for the ‘packaging’ process. Nevertheless, Apple later committed to utilizing a US-based facility for this phase, mitigating some of the initial concerns.

Despite these hurdles, the US government’s ambitious request for TSMC to establish up to six facilities in Arizona has seen progress with the agreement to build a third plant dedicated to 2nm chip technology, a significant advancement over the capabilities of the initial plants.

This development is contingent on a financial package comprising $6.6 billion in grants and up to $5 billion in loans from the US, underscoring President Joe Biden’s initiative to enhance domestic production of crucial technologies.

The strategic investment aims to catalyze TSMC’s construction of a third factory in Phoenix, supplementing two other projects set to commence production in 2025 and 2028. Despite the substantial financial commitment, the expectation is that this investment will yield considerable economic benefits, with the loans slated for repayment, reducing the net expenditure to $6.6 billion.

This arrangement is projected to facilitate over $65 billion in investments by TSMC across the three Arizona plants, reinforcing the company’s position as the preferred chipmaker for leading firms like Apple and Nvidia.

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