Taiwan Semiconductor's US Subsidy Boosts 'A16' Tech Production in Arizona

Taiwan Semiconductor Manufacturing Co TSM has secured up to $6.6 billion in subsidies from the U.S. Department of Commerce under the CHIPS Incentives Program.

The funding is contingent upon the contract chipmaker’s commitment to producing semiconductors using its cutting-edge A16 process technology at its Arizona facilities, the Taipei Times cites the department.

Taiwan Semiconductor’s Chair, C.C. Wei, told the Taipei Times that the agreement with the U.S. would accelerate the development of the company’s most advanced semiconductor manufacturing capabilities within the country.

Also Read: Warner Bros. Secures 11-Year NBA Deal Extension

Taiwan Semiconductor is constructing two advanced semiconductor fabs in Arizona. The first will likely start mass production of 4nm chips in early 2024, while the second will produce 3nm and 2nm chips by 2028.

The company also announced plans to establish a third fab in the state by 2030, using its A16 technology or a more advanced process, increasing its total investment in Arizona to over $65 billion.

Previously, Taiwan Semiconductor announced that its “A16” chip manufacturing technology will likely begin production in the latter half of 2026.

The advanced 1.6-nm chipmaking technology will likely bolster Taiwan Semiconductor’s competitive position against Intel Corp INTC.

The A16 process builds on Taiwan Semiconductor’s 2nm technology and utilizes an innovative “super power rail” for enhanced logic density and performance.

According to the report, this next-generation nanosheet-based technology is tailored for high-performance computing and artificial intelligence applications. Analysts predict growing demand for A16 chips as the AI boom continues.

In addition to direct funding, the U.S. government has proposed up to $5 billion in loans to support Taiwan Semiconductor’s Arizona expansion. These funds are part of the $75 billion authorized under the CHIPS and Science Act.

Prior reports indicated Taiwan Semiconductor is producing Apple Inc’s AAPL A16 system-on-chip (SoC) at Phase 1 of its Fab 21 facility in Arizona.

The A16 chip, built using Taiwan Semiconductor’s 5nm N4 process, was first introduced with the iPhone 14 Pro in 2022.

In 2024, Taiwan Semiconductor’s board approved a new investment of up to $7.5 billion to expand operations at its Arizona facility. According to Tim Culpan, Taiwan Semiconductor plans to scale up production volumes after completing the second stage of the Phase 1 fab.

Taiwan Semiconductor stock surged 85% year-to-date.

Taiwan Semiconductor’s third-quarter results highlighted robust 3nm performance, fueled primarily by Apple, while 5nm showed steady leveling, Needham analyst Charles Shi said.

It reported third-quarter revenue of $23.50 billion, up 39%, beating the $22.4 billion-$23.2 billion guidance and the consensus estimate.

The analyst praised Taiwan Semiconductor’s gross margin improvement to 57.8%, overcoming earlier cost concerns linked to 3nm and electricity increases.

The contract chipmaker expects AI revenue to triple in 2024, hitting $13 billion, and projects AI to comprise 20% of total revenue by 2028. It anticipates a 2024 CapEx of $30 billion, with fourth-quarter spending likely surging to $12 billion, partly for the initial 2nm buildout.

Price Action: TSM stock closed higher by 1.24% at $189.80 premarket at the last check on Tuesday.

Also Read:

• Alibaba’s Monetization Strategy Gains Momentum, But GMV Growth Lags: Analyst

Image via Shutterstock