Taiwan Semi and GlobalFoundries Finalize Major US Funding Deals, Eye Growth in Chip Manufacturing

Prominent chipmakers, including Taiwan Semiconductor Manufacturing Co TSM and GlobalFoundries Inc GFS, have finalized agreements for substantial U.S. government grants and loans to support their manufacturing efforts, Bloomberg cites familiar sources.

This milestone, confirmed by a recent notification from the U.S. Commerce Department to Congress, marks significant progress in implementing the 2022 bipartisan initiative to boost domestic semiconductor production.

Taiwan Semiconductor, which received an initial $6.6 billion in April for its Phoenix, Arizona semiconductor project, and GlobalFoundries, awarded $1.5 billion for its facilities in Malta, New York, and Burlington, Vermont, are among 21 recipients collectively receiving $37 billion in preliminary CHIPS Act funds, Reuters reports.

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Some grant recipients fear potential setbacks after former President Donald Trump returns to office as Trump recently criticized the CHIPS Act on the Joe Rogan podcast, calling it a "bad deal" that subsidizes wealthy corporations. He suggested high tariffs, rather than federal funding, as an alternative to encourage domestic chip production.

Republican House Speaker Mike Johnson also hinted that the GOP might consider repealing the CHIPS Act if they gain majority control. Although he later clarified his remarks, uncertainty lingers among companies awaiting final agreements.

Experts suggest that despite campaign remarks, President-elect Donald Trump is unlikely to repeal the Biden administration's CHIPS and Science Act.

Paul Triolo of Albright Stonebridge told CNBC that, despite Trump's reservations, there is bipartisan support for advanced manufacturing in the U.S. Economist Adam Posen of the Peterson Institute for International Economics expects Trump may adjust the funding focus but will largely leave the act intact, akin to Biden's retention of Trump-era tariffs on China.

Posen predicts Trump will likely emphasize tariffs over industrial policy expansion if he chooses to adjust the act.

Taiwan Semiconductor reported a fiscal third-quarter revenue of 759.69 billion New Taiwan dollars ($23.50 billion), up 39%, topping the $22.4 billion-$23.2 billion guidance and consensus estimate.

The contract chipmaker attributed the quarterly performance to robust smartphone and AI-related demand for its 3nm (which Needham's Charles Shi primarily attributed to Apple Inc AAPL) and 5nm technologies. The gross margin expanded to 57.8%, up 350 bps. It expects fourth-quarter revenue of $26.1 billion-$26.9 billion, above the Street consensus of $24.86 billion.

GlobalFoundries reported a fiscal third-quarter 2024 revenue decline of 6% year-on-year to $1.74 billion, beating the consensus estimate of $1.73 billion. The adjusted gross margin declined by 450 bps to 24.7%. It expects fourth-quarter revenue of $1.80 billion—$1.85 billion, versus the $1.73 billion estimate.

Taiwan Semiconductor stock gained over 90% year-to-date, and Globalfoundries lost over 19%.

Price Actions: TSM stock traded higher by 3.97% at $200.90 at the last check on Thursday. GFS traded lower by 2.30%.

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