US Finalizes $6.6B CHIPS Award to Taiwan

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Facts

  • The US Commerce Department announced Friday that it will award a $6.6B government subsidy to Taiwan Semiconductor Manufacturing Co. (TSMC) so it can continue producing semiconductors in Phoenix, Arizona.[1][2]
  • This binding contract, which follows a preliminary agreement in April, also includes up to $5B in low-cost government loans for TSMC Arizona, which has agreed not to do stock buybacks — with some exceptions — for five years and to share excess profits with the US government.[1]
  • The US has already announced more than $36B in grants through the 2022 CHIPS Act, with Pres. Joe Biden saying that the TSMC deal alone 'will spur $65B dollars of private investment to build three state-of-the-art facilities in Arizona.'[3]
  • This is the first major deal completed since the CHIPS Act was passed. More deals are expected to be finalized in the weeks before the inauguration of Pres.-elect Donald Trump, who has promised to revoke, or at least reconsider, the law.[4][5]
  • While announcing the deal, US Commerce Secretary Gina Raimondo praised it, saying it has allowed the US to 'outcompete and out-innovate the rest of the world,' particularly when it comes to the artificial intelligence (AI) that will be powered by these chips.[5]
  • Taiwan, which makes around 90% of the world's chips, will build three plants in the US.[6]

Sources: [1]CNBC, [2]Breitbart, [3]Barrons, [4]Bloomberg, [5]FT and [6]CNN.

Narratives

  • Democratic narrative, as provided by Axios. Republicans should remember that the CHIPS Act passed with bipartisan support and the benefits have been a boon to the US, especially Arizona — a state Trump just won in the presidential election. Droves of semiconductor companies are moving to Arizona because of CHIPS, and the US' relationship with Taiwan continues to blossom. Undoing CHIPS would reverse a lot of economic prosperity.
  • Republican narrative, as provided by Nationalreview. Politicians, particularly Democrats, shouldn't be overestimating CHIPS' impact. The corporate welfare program the law created has yet to make a difference on the economy, considering much of what's happening with TSMC was agreed upon prior to the bill's passing. What's more, the success of TSMC is all but canceled out by the failure of the US-based company Intel. The US could get these deals done without handouts by loosening regulations and embracing free markets.

Predictions