TSMC Shares Surge as U.S. Secures $1.5 Billion Subsidy and AI Demand Soars

Taiwan Semiconductor Manufacturing Co. (TSMC) has made notable progress in its operations and strategic partnerships in the United States. As recently confirmed by TSMC's Chief Financial Officer Huang Jen-chau, the company secured a $1.5 billion subsidy from the U.S. government in the fourth quarter of 2024. This funding aligns with the broader $66 billion subsidy commitment agreed upon with the U.S. government, under a strategic pact supporting TSMC's ambitious $65 billion investment to establish three wafer fabs in Arizona. The partnership also features a $5 billion low-interest loan, emphasizing the U.S. intent to bolster domestic semiconductor production.

TSMC Arizona's first fab, known as Fab 21, has already commenced production of its N4P node chips, contributing significantly to the technological landscape with initial outputs including older iterations of Apple's A-series application processors. The ongoing developments are part of a plan to erect two more sophisticated fabrication plants in the state, with a 3nm facility expected by 2028 and more advanced production lines poised for operation towards the end of the decade.

This agreement with TSMC is pivotal for the U.S. under the CHIPS Act, which encourages domestic semiconductor manufacturing and research to reduce dependency on foreign supply chains. For TSMC, receiving the inaugural funds marks a significant milestone, reinforcing its commitment to expanding its manufacturing footprint in the U.S. and underscoring a symbiotic interest in enhancing the U.S.'s competitive edge in the semiconductor industry.

Furthermore, riding the crest of the generative AI wave, TSMC is witnessing an upsurge in demand for its advanced processing capabilities. This trend is largely fuelled by companies like NVIDIA, which rely on TSMC for production and packaging of AI-specific chips. In response to surging demands, TSMC plans to invest over NT$200 billion (approximately $61 billion) in expanding its CoWoS advanced packaging facilities, aimed at addressing the burgeoning needs of AI applications.

The expansion includes new facilities across a sprawling 25-hectare area, anticipated to break ground soon, with construction to begin as early as March. The planned facilities reflect TSMC’s strategic pivot to accommodate long-term client demand that exceeds current production capabilities, marking a proactive approach in its operational scaling to meet tomorrow’s AI-driven tech industry demands.