In December 2022, the world’s leading chip maker, Taiwan Semiconductor Manufacturing Company, announced plans to invest $40 billion to establish its first major U.S. manufacturing plant in Arizona. These plans, including the construction of two new factories, had been hailed as a significant step toward achieving President Biden’s goal of promoting domestic chip production. Due to a lack of technical knowledge among local workers and uncertainty about technology choices and federal funding, the manufacturing schedule has been delayed. TSMC suggested that progress at the Arizona site hinges on the incentives that the U.S. government provides. The delays are not unique to TSMC, and the reevaluated production schedules of companies such as Intel and Microchip Technology are due to a decrease in chip sales, causing them to monitor spending on new infrastructure. Challenges associated with these U.S. expansions could raise concerns about the feasibility of President Biden’s industrial policy initiative, which has become a centerpiece for his re-election campaign. The Commerce Department is preparing to issue significant grants under the 2022 CHIPS Act and has received over 600 statements of interest, and it is estimated that private investments total $235 billion. However, it is expected that the distribution of benefits to companies will result in a competition to attract investments from major overseas chip manufacturers. Therefore, there is pressure to finalize these deals before other countries do. The chips made at these new facilities would be in high demand, but the Treasury Department still needs to provide guidance on tax credits that are important for advanced manufacturing. Despite the challenges, these manufacturing investments are crucial for the U.S. as the government attempts to reduce its dependence on chip factories in Asia. If everything goes as planned, these new facilities will significantly bolster America’s chip production and reduce offshore dependence.
