2 min read

From Taiwan with Love

Becoming the biggest player in the world's most competitive market.

With expansive new authorities established under the CHIPS Act, the US government under President Biden has become the leading global investor in semiconductors. Two recent headlines speak to the scale of US involvement.

In late March, the US government announced a nearly $20 billion investment in Intel, the leading American firm, focused on next-generation chips and technologies. And yesterday, less than a month after inking the Intel agreement, the Biden administration announced a massive, long-term deal with TSMC, the Taiwanese firm that is by far the world's largest chipmaker.

Chips and ambitions

The CHIPS and Science Act, a transformative law passed in 2022, firmly establishes the US government as the central player in the world's most competitive market. The scale of ambition is enormous. Under the CHIPS and Science Act, the US government will invest approximately $280 billion in several critical areas over the next ten years.

Semiconductor production and research: $52.7 billion

  • $39 billion for manufacturing incentives
  • $11 billion for research and development
  • $2 billion for legacy chip production
  • $0.7 billion for international information communications technology security and semiconductor supply chain activities

Scientific research and innovation: $102.9 billion

  • $81 billion for the National Science Foundation (NSF)
  • $16.9 billion for the Department of Energy's Office of Science
  • $5 billion for the Department of Commerce's National Institute of Standards and Technology (NIST)

Regional technology hubs and innovation: $10 billion

  • Establishment of regional technology hubs across the country to promote innovation, job creation, and economic growth
  • Funding for research, workforce development, and entrepreneurship programs at these hubs

NASA funding: $10 billion

  • Support for space exploration, scientific research, and technology development at NASA

Investment tax credit: ~$24 billion

  • 25% investment tax credit for capital expenses related to semiconductor manufacturing
  • Estimated to be worth $24 billion in tax incentives to encourage private sector investment in domestic semiconductor production

Huge money and long horizons

As part of the deal just announced, TSMC will receive grants worth $6.6 billion and loans of approximately $5 billion from the US government. In exchange, the Taiwanese firm has pledged to expand its investments in the US from $40 billion to $65 billion by 2030.

If there is a signal to monitor, it is this: serious money – racing to $100 billion – will enter the circular flow for semiconductor development. If production reaches its projected scale, Arizona, not Taiwan, will become the global center of advanced chipmaking by 2028.

Gina Raimondo, the US commerce secretary and one of the key architects of the CHIPS Act, emphasized the importance of this partnership for US competitiveness.

TSMC is expanding its manufacturing capabilities in Arizona such that for the first time ever we will be making, at scale, the most advanced semiconductor chips on the planet here in the United States of America.

The chips that TSMC makes . . . underpin all AI. Tens of thousands of leading-edge chips are required to train a single frontier AI model [such as OpenAI’s GPT4].

And now, because of this announcement, these chips will be made in the United States of America.

FT pod on the deal