TSMC seeking up to $15 billion from federal government for Arizona chip plants

The Wall Street Journal reported that Taiwan Semiconductor Manufacturing Co. was seeking tax credits and grants of up to $15 billion from the federal government in order to support its Arizona semiconductor plant amid concerns over subsidy criteria.

According to the WSJ citing sources familiar with the issue, TSMC is expecting to receive between $7 and $8 billion in tax credit under the CHIPS Act. This will be in addition to grants of $6 to $7 billion for its Arizona facilities.

TSMC invests more than $40 billion to build two fabs north of Phoenix. This is one of the largest foreign direct investment in U.S. and state history. The Phoenix Business Journal reported that it plans to hire more than 4,500 people at its Arizona campus, where it will manufacture 3-and-4-nanometer chips.

TSMC expressed concerns about CHIPS Act subsidies, which include rules that require the company share profits with the U.S. Government if returns exceeded projections. According to the WSJ, the company is worried that the economics of the Arizona project might not work out if government profits are capped.

If returns exceed expectations, semiconductor chipmakers who request more than 150 million dollars in CHIPS Act funds are required to split a portion with their partners. The report states that the U.S. Commerce Department has said the profit sharing requirement can be waived under exceptional circumstances. However, terms will be determined on a case by case basis.

Subsidies would be provided by more than 52 billion dollars in the CHIPS Act, which is earmarked to support semiconductor research, development and manufacturing, as well as workforce development. This amount includes $39 Billion that will be used to provide manufacturing incentives to companies for building new factories and expanding production across the country.

Reuters reported that Taiwan Economy Minister Wang Mei Hua said to reporters in early February that TSMC was in talks with the U.S. about the conditions of subsidies. The company hopes that the'relevant subvention legislation' will not impact industrial cooperation and construction costs between the two countries,' Reuters stated.

The U.S. Commerce Department said to Reuters it would protect confidential information about business and only allow "upside-sharing" in cases where project cash flows significantly exceed those projected.

TSMC shares details on Arizona hiring

TSMC announced that it had hired over 900 new employees in Arizona during its earnings call held on Thursday.

C.C. Wei, TSMC CEO, stated on the earnings conference call.

Phoenix Business Journal reported that the company had hired 2,000 people for its Arizona campus.

Wei stated on the earnings conference that despite challenges in obtaining permits TSMC plans to start production of its N4 technology at its Arizona fabs as early as 2024.

TSMC failed to respond to a question seeking further comment on its production schedule at its Arizona fabs.

TSMC reported a first-quarter profit of US$6,8 billion. According to the first quarter earnings report, the company had revenues of $16.7 billion. This is a decrease of 4.8% from the same period last year.

Wendell Huang said that the weakening macroeconomic condition and softening of end market demand affected TSMC's first quarter business. Customers adjusted their demands accordingly. We expect that customers will continue to adjust their inventory in the second quarter of 2023.

The company expects revenue in the second quarter to range between $15,2 billion and $16 trillion in U.S. dollars. The management also expects an operating profit margin of between 39.5% to 41.5% for the second quarter, down from 45.5% during the first quarter.

TSMC said that despite the global economic situation and the softer outlook for computer sales, it will maintain its current capital expenditure levels of between US$32 billion and US$36 billion this year, including work in Arizona.