TSMC voices strong resistance againts some requirements of the CHIPS Act

The CHIPS for America Act, which aims to promote domestic semiconductor fabrication in the United States, has been met with strong resistance from the TSMC, which is eager to negotiate some of the conditions set by the U.S. government.

The first funding round for grant applications was opened by the Commerce Department at the end of February following the passage of the new set of laws last year. According to a report from The Wall Street Journal that quotes a company representative at an event in Taiwan last month, these applications are subject to various restrictions, some of which have not pleased TSMC’s executives.

The funding round, which began in February, set aside $38 billion in direct funding for semiconductor manufacturing and research in America, as well as an additional $75 billion in loan guarantees and other forms of financial assistance. However, at the same time, it also imposed limitations, requiring companies receiving funding from the establishment of new chip manufacturing facilities in China to show private funding for their initiatives, share financial projections, including capital expenditure and cash outflows, and share any profits that exceeded the financial projections with the government.

Only those companies that receive more than $150 million in funding will be subject to the final restriction. All of the companies are also prohibited from using CHIPS funds for dividend payments or share buybacks.

Some of these requirements have alarmed TSMC, and the company’s chairman, Dr. Mark Liu, was quoted by the Wall Street Journal as saying that his company will continue to discuss some of the requirements with the U.S. government during a conference in Taiwan in March.

The Journal continued by stating that the requirements for profit and business plan sharing are some of the conditions that worry TSMC managers. The company thinks it will be challenging to forecast the amount of profit it will make from a particular plant, and its clients might not want to share the business plans with third parties.

Even though TSMC is constructing a chip manufacturing facility in Arizona that will produce semiconductors using the 4-nanometer manufacturing process, all of the company’s cutting-edge facilities are in Taiwan. Due to the unpredictability of the geopolitical situation in the region, this is a significant source of worry for its clients and the investment community.

Additionally, after purchasing the shares in the first quarter of 2022, a potential conflict in Taiwan caused Warren Buffett’s Berkshire Hathaway to significantly reduce its investment in TSMC in the fourth quarter of that year. In an interview earlier this month, Mr. Buffett gave an explanation of his choice, stating that while TSMC is a great company, a number of factors are beyond its control due to Taiwan’s political climate.

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