Lawmakers propose $22 billion in tax breaks for chip production in U.S.

TSMC is about to get a lot of breaks for its factory in Arizona.

What you need to know

• U.S. lawmakers have proposed $22.8 billion in aid to semiconductor production.
• The aid will come in the form of tax breaks and other programs to chip manufacturers.
• TSMC, for example, will receive incentives for its planned factory in Arizona.

Last month, Apple chipmaker TSMC announced that it would be building a production factory in Arizona for $15 billion dollars. Now, U.S. lawmakers have announced a proposal to offer $22.8 billion in financial aid to chip manufacturers.

"Chip factories can cost up to $15 billion to build, with much of the expense in the form of pricey tools. The proposal would create a 40% refundable income tax credit for semiconductor equipment, $10 billion in federal funds to match state incentives to build factories, and $12 billion in research and development funding."

According to the report from Reuters, the proposal would allow the Defense Department to expand the country's semiconductor production capacity in response to a push for more U.S. based manufacturing.

"It would authorize the Defense Department to use funding under the Defense Production Act to "establish and enhance a domestic semiconductor production capability." While a network of "trusted foundries" exists in the United States to help supply chips to the U.S. government, many chips must still be sourced from Asia."

TSMC is currently responsible for over half of the global market when it comes to contract manufacturing for chips, and is currently rumored to already be building the manufacturing line and equipment for a 3nm chip that will potentially find its way into the iPhone 14.

"While some U.S. firms such as Intel Corp and Micron Technology Inc still make chips in the United States, the industry's center of gravity has shifted to Asia, where Taiwan Semiconductor Manufacturing Co (TSMC) has more than half of the overall market for contract manufacturing chips and an even stronger hold on the most advanced chips."

TSMC's factory in Arizona is expected to be completed by 2024.

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