By Bill Alpert and Brian Swint
Shares of Taiwan Semiconductor Manufacturing were slipping Friday after the Commerce Department announced the company could get up to $6.6 billion of government funding to build chip factories in Arizona.
The company's American depositary receipts (ADRs) fell 1.1% to $186.37 in Friday trading, still less than the 2.2% slide in the Nasdaq Composite.
There may be some worry that TSMC won't get the money. In his campaign, President-elect Donald Trump criticized the Chips and Science Act that provided the funds for factories. President Joe Biden signed it into law in 2022 to encourage the return of semiconductor manufacturing to the U.S. But Trump said trade tariffs would do the same thing without government spending.
The Commerce Dept. has allocated most of the $39 billion that Congress has budgeted under the Chips Act. The department is racing to award the last few billion in grants before Biden leaves office.
TSMC was designated in April for up to $6.6 billion in grants. Two dozen companies have been selected for awards under the Chips Act. There is a lot of taxpayer money involved, so those announcements have to be sealed with legally binding agreements. Friday's final deal with TSMC is only the second under the program. In August, Minnesota-based Polar Semiconductor sealed their deal for $123 million.
Disbursement of government cash will then be tied to construction milestones for each company. Commerce officials said that TSMC may get at least $1 billion before the year ends.
Companies building factories with Chips Act grants must put in far more of their own money than the government contributes. The $6.6 billion grant to TSMC will support the company's planned investment of $65 billion to create a production cluster near Phoenix. The government said that the project will create 6,000 manufacturing jobs, 20,000 construction jobs, and more than 10,000 indirectly related jobs in this decade.
It is the largest foreign direct investment in a greenfield project in U.S. history, the government said. The first of three facilities is scheduled to open next year.
The world's top five chip makers will all have factories in the U.S. when they complete their projects funded by the Chips Act. Along with TSMC, they include Intel, Samsung Electronics, SK Hynix, and Micron Technology. In addition to the economic benefit from the factories, the chips program aims to increase U.S. security by reducing reliance on supplies from strategically vulnerable spots like Taiwan.
Trump's criticism of the program has made those companies and their host communities anxious to complete the awards before his inauguration. Tuesday, the chambers of commerce in Ohio, Oregon, New Mexico, and New York pleaded with the Biden administration to complete factory awards within 30 days. Those are locations where Intel awaits $8.5 billion in grants and $11 billion in loans under the Chips Act, to build $36 billion worth of facilities that would provide 10,000 permanent jobs.
Arizona was notably absent from Tuesday's letter. That's probably because the TSMC agreement was in the works.
Despite Friday's weakness, TSMC shares have been doing well. Coming into the session, they have gained more than 80% since the start of the year.
Write to Bill Alpert at william.alpert@barrons.com and Brian Swint at brian.swint@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 15, 2024 12:58 ET (17:58 GMT)
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