Taiwan Semiconductor said to push back on controversial CHIPs Act requirements
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Taiwan Semiconductor (NYSE:TSM), which is in the process of working with the U.S. government to receive funding from the CHIPs Act, is said to be pushing back on some of the more controversial parts of the legislation.
The world's largest foundry is concerned with the aspects that require profit-sharing measures for companies that "significantly exceed the projections" and provide detailed measures of their operations, The Wall Street Journal reported, citing people familiar with the matter.
Taiwan Semiconductor (TSM) Chairman Mark Liu told an industry conference in Taiwan last month that "some of the conditions are unacceptable" and that the company was discussing the terms with the government, The Journal added.
The people added that Taiwan Semiconductor (TSM) is worried the economics of its Arizona plants may not work if its profits are limited by the CHIPs Act and there may be issues determining the profit of one or two plants in a global operation.
South Korean chip manufacturers Samsung (OTCPK:SSNLF) and SK Hynix may also have concerns about the profit-sharing issues as well as they weigh whether to receive funding.
The $52B CHIPs Act, which was signed into law in August 2022, contains a controversial measure that includes profit-sharing measures for companies that "significantly exceed the projections," with the projections used to determine the level of profitability.
Last month, the U.S. Commerce Department asked for financial statements from companies seeking to receive the funds, adding it would be a "critical part" of how the program evaluates programs and assesses their viability, along with economic returns, risks and the size and scope of projects.
The projections include details such as the number of wafers sold from the facility, the expected price for units and the annual price changes.
The CHIPs Act includes subsidies for domestic production and an investment tax credit for chip plants that could be worth an estimated $24B over the next decade. The legislation was designed to reduce the reliance of foreign semiconductor production amid increasing geopolitical tensions, particularly with China.
Taiwan Semiconductor (TSM), which is already building a plant in Arizona and may build another one in the U.S., believes it will receive anywhere between $7B and $8B in tax credits from the CHIPs Act, the people added. It is also looking for grants for its Arizona plants to the tune of $6B to $7B, bringing its potential government support to be between $13B and $15B.
Following the passage of the legislation, Taiwan Semiconductor (TSM) announced in February that it would increase its investment in the Arizona plant by up to $3.5B, having already tripled its original investment in the region to $40B.
Last week, Taiwan Semiconductor (TSM), which produces chips for companies such as Apple (AAPL), Nvidia (NVDA), AMD (AMD) and others, released March revenue figures that showed a 15% year-over-year decline to NT$145.41B. Overall revenue for the first-quarter rose 3.6% year-over-year.
Some have wondered recently whether Taiwan Semiconductor (TSM) may lower its 2023 capital spending plans amid ongoing global economic uncertainty.
Taiwan Semiconductor (TSM), which was recently upgraded by investment firm Susquehanna, is slated to report first-quarter results on April 20 before the market opens.