Taiwan Semiconductor Manufacturing Company (NYSE: TSM) saw its stock climb over 2% on Monday following the announcement of a $6.6 billion federal grant to support its expansion in Arizona. The funding marks a major step in strengthening America's domestic semiconductor production capabilities.
The grant, revealed on April 8, will help fund three advanced chip fabrication facilities in Phoenix, Arizona. Combined with approximately $5 billion in government loans, the federal support aims to accelerate TSMC's $65 billion investment plan - the largest foreign direct investment in Arizona's history.
"America invented these chips, but over time, we went from producing nearly 40% of the world's capacity to close to 10%, and none of the most advanced chips," President Biden noted during the announcement, highlighting the urgent need to rebuild domestic semiconductor manufacturing.
The three new facilities are expected to create 6,000 high-wage technology jobs and generate an additional 20,000 positions in construction and supporting industries. Production at the first plant is scheduled to begin in early 2025.
Industry experts view TSMC as a cornerstone of the global semiconductor ecosystem, particularly for artificial intelligence development. According to Dryden Pence of Pence Capital Management, TSMC produces "90% of the really high-value chips" and serves as a critical supplier to leading technology companies like AMD and NVIDIA.
The investment comes as the U.S. aims to address vulnerabilities exposed during the COVID-19 pandemic, when semiconductor shortages disrupted multiple industries. The recent earthquake in Taiwan, which temporarily affected TSMC's operations, further emphasized the need for geographical diversification in chip production.
TSMC maintains an optimistic outlook for 2024, projecting revenue growth in the low-to-mid 20% range. The company anticipates strong demand for its advanced 3nm and upcoming 2nm chip technologies, particularly from the expanding AI sector.
The federal funding package represents a strategic move to strengthen America's position in advanced semiconductor manufacturing while reducing dependence on overseas production. As global demand for AI and data processing continues to surge, securing domestic access to cutting-edge chips has become increasingly central to U.S. economic and national security interests.