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The U.S. Commerce Department said on Monday that it has signed an agreement to award Taiwan Semiconductor Manufacturing (TSMC) $6.6 billion in direct funding under the CHIPS and Science Act to set up semiconductor factories in Phoenix, Arizona, and provide up to $5 billion in loans. 

This grant, pegged for the company’s U.S. subsidiary, TSMC Arizona, is the latest step by the U.S. to strengthen its domestic supply of semiconductors as it seeks to reshore manufacturing of chips amid escalating geopolitical tensions between the U.S. and China. 

The CHIPS Act, signed into law in 2022, earmarks an investment of about $280 billion to boost domestic chip research and production in the U.S, of which about $52 billion has been set aside to subsidize domestic chip manufacturing. Besides national security concerns arising from semiconductors primarily being made in Asia, a big motivator for the U.S. is to diversify the production of semiconductors, and bring more electronics production to the West. The Act is primarily aimed at attracting manufacturing stateside, and also prohibits recipients of the funding from increasing their semiconductor manufacturing footprint in China.

With the new investment, Taiwan-based TSMC, which is the world’s largest producer of semiconductors, is broadening its plans for its fabrication plants in Arizona. The company said it would build a third fabrication unit in addition to the two being built right now, and will manufacture 2-nanometer or more advanced chips. The company had previously said it would invest about $40 billion to set up plants in the U.S.

TSMC said its first fab unit is slated to begin producing chips under the 4nm process in the first half of 2025; the second factory will produce 3nm and 2nm chips from 2028; and the third plant will start manufacturing 2nm and more advanced chips near the end of the decade.

TSMC is investing more than $65 billion via these projects in the U.S., and the company said in a statement that the investment makes this the largest ever direct investment by a foreign entity in a greenfield project in the U.S.

TSMC Arizona will sell its chips to its U.S. customers, which include AMD, Apple, Nvidia and Qualcomm. The company expects the three fab units to create approximately 6,000 direct high-tech, high-wage jobs, and more than 20,000 construction jobs.

The White House last month said it had signed an agreement with the Department of Commerce to grant Intel up to $8.5 billion to shore up U.S.-based production.

Intel could receive approximately $20 billion in grants and loans from the CHIPS and Science Act for its semiconductor manufacturing. Meanwhile, Samsung, which announced a $17 billion additional investment in Taylor, Texas, is expected to receive more than $6 billion in grants for its chip facility in Texas.