TSMC wants to cash its US CHIPS but seems unhappy with the red tape

Could it be the profit sharing, China ban, or demands for trade secrets?

TSMC is the latest foundry operator to express at least some concerns over the US CHIPS Act subsidies opportunity.

Signed into law in August, the act ring-fenced $52.7 billion of taxpayer cash to bankroll a step up in semiconductor manufacturing and R&D on American soil, so as to lessen the United States' reliance on overseas chip factories and supply chains. Foreign-run fab giants, notably TSMC and Samsung, made it plain they intended to pitch for a slice of the cash – the allocation of which will be decided by Uncle Sam – so they could expand their operations in the US.

However, as more information about the application process has trickled out of the US government's Commerce Department, chipmakers and foundry operators have voiced frustration over the requirements to get a portion of this public funding.

TSMC's specific gripes aren't clear, and The Register reached out for clarification. The silicon giant at least told Reuters it is in talks with the US government over CHIPS Act guidance. Taiwan's Economy Minister has also reportedly confirmed TSMC is negotiating with Uncle Sam, and expressed optimism that the wrangling over subsidies wouldn't negatively impact relations.

The CHIPS funding is of particular interest for TSMC, which is in the middle of a massive expansion in capacity, including a pair of US fabs located outside Phoenix, worth roughly $43.5 billion. By our estimate, TSMC could bag between $2 billion and $6 billion on top of substantial tax breaks.

However, that's only if the biz manages to jump through the hoops necessary to claim its portion of the funds, and there are many such hoops. At a high level, companies receiving more than $150 million in the subsidies will be required to share a portion of any profit that exceeds certain "agreed-upon thresholds." Additionally, these manufacturers will be subject to detailed reporting requirements, a prohibition on Chinese investments and stock buybacks, and employee childcare provisioning requirements.

And chipmakers caught flouting these rules could be forced to return funding, among other corporate penalties.

The 10-year prohibition on Chinese investments has been a particular sticking point for South Korean memory slingers Samsung Electronics and SK hynix. Both factory titans have significant investments in mainland China. SK hynix is in the process of acquiring Intel's NAND manufacturing plant in China's Dalian province, while Samsung operates two memory fabs in Xi'an and Suzhou, China.

Last month South Korea's Ministry of Trade, Industry, and Energy said the agency was working with US authorities to ensure the nation's interests are reflected in the agreement. South Korea's government has also expressed concerns that the details demanded by the CHIPS funding are too invasive and involve the sharing of trade secrets.

US trade policy appears to be playing a major factor in this case. The US has, over the past two administrations, worked to stifle China's semiconductor industry. Given this context it's not surprising to see the US taking steps to ensure CHIPs funding can't be funneled back into China. ®

PS: Beijing's military has just finished rehearsing cutting off the island of Taiwan in response to the Taiwanese president's visit to the US.