TSMC's CHIPS Act Money

At the end of my video on TSMC’s experiences in Japan, I wrote:

As for TSMC Arizona, that fab will eventually make chips. Local news just reported that they added their last steel beam in February 2024. But as Mark Liu said, the future depends on the size of the subsidy.

If TSMC wants 40% support like with Japan on a $40 billion project, that's $16 billion in subsidies. Will the administration want the PR optics of giving $16 billion of taxpayer money to a foreign company in an election year?

Maybe. Maybe not. I should add that that $16 billion doesn't have to come in the form of cash subsidy. The investment tax credits will do some heavy lifting too.

I should not have been so skeptical. Uncle Sam came through with the chips and salsa, baby 🎉! From Bloomberg:

The US plans to award Taiwan Semiconductor Manufacturing Co. $6.6 billion in grants and as much as $5 billion in loans to help the world’s top chipmaker build factories in Arizona, expanding President Joe Biden’s effort to boost domestic production of critical technology.

Under the preliminary agreement announced by the US on Monday, TSMC will construct a third factory in Phoenix, adding to two facilities in the state that are expected to begin production in 2025 and 2028. In total, the package will support more than $65 billion in investments at the three plants by TSMC, the go-to chipmaker for companies such as Apple Inc. and Nvidia Corp.

TSMC’s third fabrication site, or fab, will rely on next-generation 2-nanometer process technology, and is slated to be operational before the end of the decade.

I am frankly tired of doing videos about TSMC for now. So this newsletter is all that we are going to get. Here are some raw thoughts about the TSMC CHIPS deal, based on what I have seen. Add disclaimers - things are subject to change. Memorandum of Intent etc.

$11.5 billion is a lot of money. And then if we add the investment tax credit, which I think is underrated. It credits you 25% of capital investments in semiconductor equipment and facilities. So TSMC upped their total investment to $65 billion. Assuming that is all capital, that can be up to $16 billion in tax credits - which are deducted directly from tax liabilities. TSMC did about $30 billion USD of pre-tax profit ...