US rules ‘unacceptable’; more cash needed
Act surprised! There is a potential snag in the plan for Apple chips to be made in the US by TSMC. The company’s A-series and M-series chipmaker says that the US government is imposing “unacceptable” conditions on the two TSMC Arizona plants it is building.
TSMC is said to have been offered tax credits worth $7-8 billion, but a new report says it is looking for the government to double its incentives to around $15B, and to waive the profit-sharing terms attached to the CHIPS Act…
The story so far
TSMC first announced its plans to build one or more chip plants in Arizona back in 2020, with an initial investment of $12B. It was claimed that 1,600 US jobs would be created, including those in a local supply chain.
Within a month of the announcement, it was revealed that the company was seeking huge subsidies from the US government in order to proceed.
Specifically, TSMC wants the US government to completely cover the difference in operating costs between Taiwan and the USA.
Apple supported this bid for subsidies, lobbying on TSMC’s behalf. The Cupertino company later said that the plant would make chips for Apple’s devices, though only for older ones.
Those subsidies looked set to get paid through the CHIPS Act, a $50B program to promote chip fabrication within the US.
With questions raised about whether this would deliver value for money, the government said it was including clauses that would require companies to share profits if those exceeded expectations.
‘Unacceptable’ conditions for TSMC Arizona plants
The WSJ today reports that it is this clause which TSMC is now describing as “unacceptable.”
Taiwan Semiconductor Manufacturing Co, which plans to invest $40 billion in two chip factories in Arizona, is concerned about rules that could require it to share profits from the factories and provide detailed information about operations, said people familiar with the situation.
Chairman Mark Liu [said] “Some of the conditions are unacceptable and we aim to mitigate any negative impact from these and will continue discussions with the US government.”
The company also wants twice as much cash as it was initially offered.
TSMC expects to get tax credits of some $7 billion to $8 billion under provisions of the Chips Act, according to people familiar with the company’s plans. In addition, it is looking to receive grants, an area where the Commerce Department has wide discretion to judge who is deserving and under what terms.
The people said TSMC was thinking of asking for some $6 billion to $7 billion in grants for the two Arizona plants, bringing total US government support as high as $15 billion.
Potential replay of the Foxconn Wisconsin fiasco
If all this sounds somehow familiar, that’s because – right from the start – there were those of us suggesting that the plans for one or more TSMC Arizona plants might turn into a replay of the Foxconn Wisconsin fiasco.
Back in 2017, iPhone assembler Foxconn announced plans for a $10B factory in Wisconsin, with the then Trump administration claiming that it would create as many as 13,000 new jobs – and be followed by additional plants in Illinois, Indiana, and Michigan.
Wisconsin pledged $3B in subsidies, with Foxconn later coming back for an extra billion. Even if the promised jobs had materialized, that would have meant the state paying the Taiwanese company at least $231K per job.
The company got as far as clearing land for the factories, but not building any. It did build some offices, which remained empty a year later, and created just 178 jobs.
Foxconn later said that it was substantially scaling back its plans – then said that it wasn’t building a Wisconsin factory after all. The state’s governor later confirmed that the plans weren’t going ahead. By this time, the state had already spent almost a billion dollars in infrastructure for the nonexistent factories.
This latest development seems guaranteed to once again raise questions about the wisdom of such corporate subsidy programs.
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