TSMC's US$6.6 billion of U.S. subsidies linked to advanced A16 process

Taipei, Nov. 18 (CNA) The U.S. Department of Commerce (DOC) said its granting of up to US$6.6 billion in subsidies to Taiwan Semiconductor Manufacturing Co. (TSMC) last week came after the Taiwanese company pledged to produce chips made using its advanced A16 process.

TSMC Arizona Corp., a subsidiary of the Taiwanese chip giant that handles operations in the state, secured the U.S. government subsidies under the CHIPS Incentives Program's Funding Opportunity for Commercial Fabrication Facilities after agreeing to bring this state-of-the-art chip-making technology to the United States.

"The advanced chips that TSMC manufactures for its customers -- including its A16 technology, which is the most advanced semiconductor technology in the world -- are the backbone of central processing units for servers in large-scale datacenters and of specialized graphics processing units used for machine learning," the DOC said in a statement.

TSMC Chairman C.C. Wei (魏哲家) was also quoted in the statement as saying that the final agreement signed with the DOC was expected to help the company "accelerate the development of the most advanced semiconductor manufacturing technology available in the U.S."

In addition to direct funding of up to US$6.6 billion, the CHIPS Program Office will provide up to US$5 billion of proposed loans -- which is part of US$75 billion of loans authorized by the CHIPS and Science Act -- to TSMC Arizona under the award, the DOC said.

TSMC is currently building two advanced fabs in Arizona. The first is scheduled to start mass production using its 4 nanometer (nm) process in early 2025, while the second is slated to mass produce wafers using the 3 nm and 2 nm processes in 2028.

On April 8, when TSMC signed a preliminary non-binding agreement for the subsidies, the company announced a plan to build a third fab in Arizona using the 2 nm process or more advanced technology with production slated to start by the end of 2030, boosting its total investment in Arizona to over US$65 billion.

According to TSMC, the A16 semiconductor process is an improvement on its 2 nm process that is currently on track to begin production next year.

TSMC said its A16 technology is a next-generation nanosheet-based technology featuring Super Power Rail, which it describes on its website as "an innovative, best-in-class backside power delivery solution" that "improves logic density and performance by dedicating front-side routing resource to signals."

Market analysts expect demand for the A16 process to come from high performance computing suppliers as the boom in artificial intelligence development continues.

Speaking with CNA, Liu Pei-chen (劉佩真), a researcher at the Taiwan Institute of Economic Research's Taiwan Industry Economics Database, said on Monday that it is possible that TSMC will roll out chips made using its A16 process in its third plant in Arizona.

This will satisfy the U.S. government's "Made in America" initiatives, which aim to increase reliance on domestic supply chains and ultimately reduce the need to spend taxpayer dollars on foreign-made goods, Liu said.

After President-elect Donald Trump returns to the White House in January, he could demand more from TSMC in a bid to narrow the gap between the U.S. and Taiwan in advanced chip development.

Through its investments in the U.S., however, TSMC is expected to operate in more flexible manner at a time of escalating geopolitical unease, Liu explained.

She said she has faith that TSMC will continue to lead its peers in advanced technology development as the company remains highly competitive in terms of chip development used in the AI era.