The company is expanding in Arizona with the U.S. government’s help.
Chipmaker Taiwan Semiconductor Manufacturing (TSM 1.01%) is planning a major Arizona expansion, backed by billions in support from the U.S. government. Investors appear pleased with the terms of the deal, sending Taiwan Semiconductor shares up more than 2% at the open Monday.
Raising Arizona production
Taiwan Semiconductor is the contractor behind some of the biggest names in technology, making chips for Nvidia, Advanced Micro Devices, and others. A significant portion of the company’s manufacturing capacity is in its native Taiwan, but the U.S. government has made it a priority to entice chipmakers to build stateside.
On Monday, Taiwan Semiconductor announced plans to manufacture state-of-the-art 2-nanometer chips at a plant under construction in Arizona. The company is investing $65 billion in the U.S. on three fabrication plants, supported by $6.6 billion in grants from the U.S. government and upwards of $5 billion in additional loans.
The U.S. government made funding available under the 2022 Chips Act. Taiwan Semi chairman Mark Liu said in a statement:
The CHIPS and Science Act provides TSMC the opportunity to make this unprecedented investment and to offer our foundry service of the most advanced manufacturing technologies in the United States. Our U.S. operations allow us to better support our U.S. customers, which include several of the world’s leading technology companies. Our U.S. operations will also expand our capability to trailblaze future advancements in semiconductor technology.
Is Taiwan Semi a buy after its big Arizona announcement?
Taiwan Semiconductor is the backbone of the artificial intelligence (AI) revolution, making the chips that are making AI possible. The company’s know-how and long-term relationships with key customers provide it with something of a competitive moat, but questions remain about the security of its operations.
There are continued worries about a potential Chinese invasion of Taiwan, and a recent earthquake in Taiwan was a fresh reminder of geological threats. Taiwan Semi desperately needs to diversify its operation.
With that in mind, the Arizona expansion is bullish, even without the U.S. government’s willingness to chip in and pick up some of the cost.
Lou Whiteman has positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
