TSMC Considers Returning Chip Act Subsidies if U.S. Seeks Equity Stake

TradingKey - TSMC is contemplating returning some of the financial support it received from the U.S. under the CHIPS Act if the U.S. government insists on exchanging subsidies for equity stakes. This comes in response to recent U.S. proposals to convert subsidies into government ownership in supported firms, according to insiders cited by The Wall Street Journal.

The U.S. government is planning to invest in Intel due to its operational struggles. Unlike the Biden administration's providing direct financial subsidies, the Trump administration plans to acquire a 10% equity stake in the company and has indicated that similar measures may be considered for other companies in the future.

Reuters reported on August 20 that U.S. Commerce Secretary Howard Lutnick is exploring expanding this model to other tech firms, potentially acquiring shares in major chipmakers like TSMC and Samsung.

However, sources suggest the U.S. aims to acquire stakes only in companies receiving CHIPS Act funding, rather than those increasing U.S. investments independently. For firms not committing to U.S. investment growth, a "stock-for-subsidies" approach may be enforced.

TSMC previously secured $6.6 billion under the CHIPS Act to construct the FAB 21 wafer plant in Arizona. Signed by former President Biden, the Act offers billions to cut domestic manufacturing costs and lure companies like TSMC to boost U.S. chip production.

Despite receiving these subsidies, TSMC insiders assert the company has never been heavily dependent on U.S. financial assistance.

Meanwhile, industry executives are increasingly concerned about the government taking stakes in major chipmakers like Micron and Samsung, partly due to the Trump administration's ability to execute such maneuvers. Recently, the U.S. Department of Defense acquired a 15% stake in MP Materials, the largest U.S. rare earth miner, with a commitment to invest substantially in the company.

Additionally, the Trump administration's move to acquire chip company equity represents broader private sector intervention, which has been evident in previous actions. Recently, the U.S. required Nvidia and AMD to remit 15% of their China sales for export licenses, potentially expanding this requirement. Before negotiating with Intel on subsidy-to-equity conversion, Trump asked Intel CEO Lip-Bu Tan to resign over China ties.

The New York Times highlighted these interventions' potential to unsettle the chip industry, where predictability is crucial. Trump's approach has shifted corporate planning from engineering to political strategy, creating uncertainty about forced business strategy changes.

Experts warn these actions might stifle innovation and disrupt the U.S. tech industry's market model. On August 21, Pegatron's chairman urged the U.S. to avoid excessive market interference, advocating for a free competitive environment, and cautioned that too much policy interference could hinder industrial competitiveness and innovation.

Legally, converting subsidies to equity could face challenges, as existing contracts don't authorize government shareholding but only profit-sharing from excess earnings.