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Phoenix okays development deal with TSMC for $12 billion chip factory

City officials in Phoenix, Arizona on Wednesday unanimously voted to authorize a development agreement with chipmaker Taiwan Semiconductor Manufacturing Co that would provide $205 million in city funds for infrastructure such as roads and water improvements for a planned $12 billion semiconductor factory in the city.

TSMC is the world’s biggest contract chipmaker and manufactures semiconductors for Apple Inc, Qualcomm Inc and a range of other technology companies. The company in May disclosed its intentions to build a 5-nanometer chip factory in Arizona, which would be its first advanced manufacturing facility in the United States. Earlier this month it approved an investment to set up a wholly owned subsidiary in the U.S. state with paid-in capital of $3.5 billion.

The Phoenix City Council voted to allow the city to enter the agreement by a vote of 9-0. Ahead of the vote, Phoenix Mayor Kate Gallego called the agreement “a great success across so many levels of government in helping Arizona become a leader in advanced manufacturing.”

Under the agreement, TSMC will build a new factory and create 1,900 new full-time jobs to be phased in over a five-year period. Construction would start in early 2021, with factory production expected in 2024.

In return, the city will build three miles of streets for $61 million, spend $37 million on water infrastructure improvements and $107 million in wastewater improvements. The company will enter a formal deal with the city after selecting a site, which is expected before the end of the year.

Based in Hsinchu, Taiwan, TSMC has said it also hopes for U.S. federal subsidies to help cover the extra cost of building chips in the United States. Most of the world’s advanced semiconductors are manufactured in Taiwan, including those used in U.S. military equipment, which has become a cause for concern as tensions increase between the United States and China.

American lawmakers in June proposed billions of dollars in subsides to help bolster advanced semiconductor manufacturing in the United States. Those funds could benefit both TSMC as well as U.S. firms such as Intel Corp and Micron Technology Inc. Reuters

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