TSMC-US Discuss CHIPS Act 'Guidance' Amid Subsidy Concerns

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Facts

  • On Monday, the world's leading contract chipmaker, Taiwan Semiconductor Manufacturing Company (TSMC), stated that it has been talking with Washington about its guidance for the CHIPS Act, which is designed to boost US chipmaking capacity.1
  • This comes less than two weeks after TSMC Chairman Mark Liu argued that certain restrictions and regulations in the CHIPS Act are inadmissible and could dissuade potential partners from applying for the grant.2
  • Concerns over the conditions for subsidies under this legislation have mounted, as reports have suggested the application process could expose confidential corporate strategy while requiring profit-sharing with the US government.1
  • Previously, with the prospects of grants from the $52B CHIPS Act, TSMC was among 14 companies that either announced or broke ground for the building of 22 new chip factories in the US — the Taiwanese company was to build two plants in Arizona.3
  • Taiwan's economy minister Wang Mei-hua on Monday expressed her hopes that subsidy conditions will not damage the US-Taiwan industrial cooperation, as they are currently negotiating on their 21st Century Trade Initiative.4
  • Amid these uncertainties regarding the TSMC's pledged $40B investment in advanced fabs in Arizona, the chipmaker reported that revenue in March contracted 15.4% year-on-year and 10.9% month-on-month.5

Sources: 1Reuters, 2Focus taiwan, 3CBS, 4Rti radio taiwan international and 5Taipei times.

Narratives

  • Narrative A, as provided by Washington Post. Despite being a consequence of bipartisan efforts to revive the US chipmaking industry, the CHIPS Act has been threatened as several unrelated objectives and unreasonable restrictions have been attached to the grant-giving process while regulatory requirements increase costs of building and operating a plant in the US. It is time for the US to scale back these conditions and facilitate victory in this worldwide race.
  • Narrative B, as provided by Reason.com. The US chip industry is extremely profitable, with firms investing massively in research and development without receiving any subsidies. Yet, the government has claimed that expanding its budget deficit and diverting billions in taxpayer money to influential companies will promote national security, a notion unsupported by the facts as only one-eighth of such interventions are successful in onshoring production.

Predictions