TSMC receives NT$62.5 billion in aid from Japan, China

Taipei, Aug. 24 (CNA) Taiwan Semiconductor Manufacturing Co. (TSMC) said on Saturday that it has received a total of NT$62.5 billion (US$1.95 billion) in subsidies from China's and Japan's government for its investments in the two markets in recent years.

Financial data compiled by the world's largest contract chipmaker showed in the first half of this year, TSMC was granted NT$7.96 billion in aid from China and Japan after about NT$47.55 billion received in 2023 and NT$7.05 billion obtained in 2022 from the two governments.

The aggregate subsidies from the Japanese and Chinese governments to TSMC totaled about NT$62.5 billion since 2022.

The chipmaker said the aid was used to finance its investments in Kumamoto, Japan and Nanjing, China.

Many countries in the world view semiconductors as one of the most important strategic materials to have and some have allocated large amounts of funds as subsidies to chipmakers to build their own semiconductor industry.

TSMC, which rolls out about 90 percent of the world's high-end chips, has been coveted by these countries and enticed to build wafer fabs overseas, with generous financial aid.

In Nanjing, TSMC owns a 12-inch wafer fab. A board meeting of the company in 2021 approved a plan to invest US$2.887 billion to build a new 28 nanometer process production line with a monthly capacity of 40,000 units in the Nanjing fab, to expand its mature technology capacity.

Through a joint venture -- Japan Advanced Semiconductor Manufacturing, Inc. (JASM), TSMC officially opened a 12-inch fab on Feb. 24 with mass production slated to start at the end of 2024.

The chipmaker also announced on Feb. 6 plans to build another advanced facility in Kumamoto under the joint venture, with operation scheduled to start in 2027.

In Kumamoto, TSMC will produce more than 100,000 wafers a month, using its 40nm, 22nm, 28nm, 12nm, 16nm, 7nm and 6nm processes to cater to clients in the automotive, industrial and consumer electronics and high-performance computing (HPC) devices.

Investments in Japan are expected to surpass US$20 billion through JSMC, which is owned by TSMC, Sony Semiconductor Solutions Corp. (SSS), Denso Corp. and Toyota Motor Corp., with the Taiwanese chipmaker holding an 86.5 percent stake, according to the chipmaker.

In addition to Japan and China, TSMC has extended its reach to Germany and the United States.

On Tuesday, TSMC broke ground on a 12-inch wafer fab in Dresden through a joint venture called European Semiconductor Manufacturing Co. (ESMC), which includes Robert Bosch GmbH, Infineon Technologies AG and NXP Semiconductors N.V.

Total investment is estimated to top 10 billion euros (US$11.1 billion), with TSMC taking a 70 percent stake in the joint venture and each of its three partners taking 10 percent to produce 40,000 wafers a month, using TSMC's 28/22 nanometer planar CMOS and 16/12nm FinFET manufacturing processes.

In the groundbreaking ceremony, European Union (EU) Commission President Ursula von der Leyen announced the EU Commission approved 5 billion euros worth of state aid for the TSMC project under the European Chips Act.

In the United States, TSMC is building two advanced fabs in Arizona and the first one is scheduled to start mass production in the first half of 2025, using the 4nm process, while the second one is slated to mass produce wafers using the 2nm process in 2028.

TSMC has announced plans to build a third fab in Arizona using the 2nm process or more advanced technology with its total investments in Arizona expected to top US$65 billion.

In April, the U.S. Department of Commerce announced it has signed a non-binding preliminary memorandum of terms (PMT) with TSMC for up to US$6.6 billion in direct funding under the CHIPS and Science Act.

TSMC has not received any aid from the U.S. government yet. The chipmaker said it will not predict when the financial aid will come.

As investments overseas will boost the chipmaker's operating costs, TSMC said it will adopt flexible pricing strategies based on higher costs abroad to achieve a long-term goal of a no less than 53 percent gross margin, which refers to the difference between gross profit and total expenses, including interest payments and taxes.