TSMC Uneasy About Sharing Business Plans, Profit With US Government

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The Taiwan Semiconductor Manufacturing Company (TSMC) is eager to negotiate some of the conditions set by the US government as part of the landmark CHIPS for America Act which aims to stimulate domestic semiconductor fabrication in the United States. The new set of laws was passed last year, and the Commerce Department opened the first round of funding for applications for the grant at the close of February. These applications are subject to various restrictions, some of which have not sat well with TSMC’s executives, according to a report from The Wall Street Journal that quotes a company representative at an event in Taiwan last month.

TSMC Uneasy About Sharing Business Plans With US Government As Part Of CHIPS Act Funding

The funding round, which opened in February, reserved $38 billion in direct funding for semiconductor fabrication and research in America and added another $75 billion in loan guarantees and other financial assistance. However, at the same time, it introduced restrictions as well, which would limit firms that received the money from setting up new chip manufacturing facilities in China, demonstrating private funding for their projects, share financial projections such as capital expenditure and cash outflows and share any profits above the financial projections with the government.

The final restriction will apply only to those companies that receive more than $150 million in funds. An additional condition levied on all the companies refrains from using the CHIPS funds to buy back shares or pay dividends.

Some of these conditions have created concern at TSMC, with the Wall Street Journal quoting the firm’s chairman Dr. Mark Liu stated during a conference in Taiwan in March that his firm will continue discussing some of the conditions with the US government.

Dr. Liu’s remarks were:

Some of these conditions are unacceptable and we aim to mitigate any negative impacts from these and will continue discussions with the US government.

The Journal added that some conditions causing concern among TSMC managers are the stipulations for profit and business plan sharing. The company believes that it will be hard to predict what profit it generates from a specific plant, and its customers might not be willing to see the business plans shared with an outside party.

TSMC’s chairman Dr. Mark Liu in Tainan, Taiwan in November 2022 as part of a beam lifting ceremony for a 3-nanometer manufacturing extension. Image: Liu Xuesheng/UDN

While TSMC is building a chipmaking facility in Arizona that is expected to churn out semiconductors manufactured with the 4-nanometer manufacturing process, all of the firm’s leading-edge facilities are in Taiwan. This is a cause of significant concern for its customers and the investment world due to the unpredictable geopolitical situation in the region.

A potential conflict in Taiwan also made Warren Buffett’s Berkshire Hathaway significantly reduce its TSMC investment in the fourth quarter of 2022 after buying the shares in the earlier quarter. Mr. Buffett explained his decision in an interview earlier this month, as he outlined that while TSMC is an excellent firm, the political situation in Taiwan leaves several factors out of its control.

The Taiwanese firm is also battling a slowdown in the global semiconductor industry which many analysts expect will last a good part of this year. Its revenue for the first quarter was relatively low, and a growing chorus of investment banks and financial firms believes the downward revenue trajectory will continue during the current quarter. At the same time, TSMC has started producing advanced 3-nanometer products in its Taiwanese facilities, and rumors have suggested that it is expanding its design plans for the next generation 2-nanometer technology.

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