TSMC Expects $20 Billion US Semiconductor Subsidies...Opposes Toxic Clauses

Taiwan's TSMC, the world's largest foundry (semiconductor contract manufacturer), is expected to apply for semiconductor subsidies worth up to $15 billion (approximately 19.935 trillion KRW) from the U.S. government. However, it has been confirmed that TSMC is unwilling to accept some of the conditions set by the U.S. for the subsidies. Korean semiconductor companies, including Samsung Electronics, have also expressed concerns.

[Image source=Reuters Yonhap News]

The Wall Street Journal (WSJ) reported on the 19th (local time), citing sources, that TSMC expects to receive about $7 billion to $8 billion in tax credits under the provisions of the CHIPS and Science Act (CSA). TSMC, which plans to invest $40 billion in two semiconductor plants in Arizona, also intends to apply for direct subsidies of $6 billion to $7 billion for those plants. Accordingly, the total amount of support is estimated to be up to $15 billion.

The Biden administration is accelerating efforts to build a domestic-centered semiconductor supply chain. It plans to support the U.S. semiconductor industry with a total of $52.7 billion (69.5 trillion KRW) over five years, most of which will be invested in factory construction and related activities. WSJ evaluated TSMC's project to build two semiconductor plants in Arizona as one of the Biden administration's largest efforts.

However, TSMC is highly concerned about detailed CSA provisions that require companies receiving semiconductor subsidies to share excess profits and disclose detailed business information. Mark Liu, chairman of TSMC, pointed out that these detailed provisions could deter semiconductor investment decisions in the U.S. At an industry meeting held in Taiwan last month, he stated, "Some conditions are unacceptable. Our goal is to minimize the negative impact caused by these conditions," and added, "We will continue discussions with the U.S. government."

The CSA provision that TSMC is opposing requires semiconductor companies receiving subsidies exceeding $150 million to share a portion of their investment returns exceeding expectations with the U.S. Department of Commerce. The Commerce Department has stated that such requirements may be waived in exceptional cases, but this varies on a case-by-case basis, creating significant uncertainty. TSMC is concerned that if potential profits are limited by the Biden administration due to this provision, the economic viability of the Arizona semiconductor plants could be undermined. Sources conveyed that TSMC considers it problematic to calculate profits based on only one or two of its global manufacturing facilities.

Additionally, the Biden administration's demand for broad access to TSMC's books and operations has also sparked controversy. TSMC, which counts Apple and other world-leading technology companies as clients, exclusively shares these clients' business plans and product blueprints. A source pointed out, "TSMC does not want this (client) information to be disclosed externally." WSJ analyzed this as "another obstacle in an industry where confidentiality is critical." However, for TSMC, since the construction costs of the Arizona plants are at least 50% higher than in Taiwan, the Biden administration's subsidies are essential.

These concerns are shared by Korean companies such as Samsung Electronics and SK Hynix. WSJ reported that Korean companies are also deliberating whether to apply for U.S. government subsidies. WSJ noted that Korean semiconductor companies are particularly worried about the guardrail provisions that limit investments in high-performance semiconductor manufacturing facilities in China if they receive U.S. subsidies. Both Samsung Electronics and Hynix operate extensive businesses in China. The media added that TSMC, although having factories in China, does not consider the guardrail provisions a major issue because those facilities are not focused on cutting-edge semiconductors.

Accordingly, the semiconductor industry and the Korean government also intend to negotiate with the U.S. to ease these provisions. It is reported that President Yoon Suk-yeol, who will make a state visit to the U.S. later this month, will discuss these matters with President Biden.

Meanwhile, despite the U.S. setting conditions such as excess profit recapture for semiconductor subsidies, more than 200 companies worldwide have shown interest. The Semiconductor Program Office under the U.S. Department of Commerce confirmed that over 200 companies submitted letters of intent to apply for subsidies by the 14th. These documents reportedly included details such as the scale and location of the facilities to be constructed, production capacity, products to be manufactured, timing and amount of investment, and expected customers. However, the names of the companies that submitted letters of intent were not disclosed.

This content was produced with the assistance of AI translation services.