Taiwanese chip giant will build third facility in Arizona as part of $65bn investment in the US.

The United States has pledged to give Taiwan’s chip giant TSMC up to $6.6bn to expand production at facilities it is building in the state of Arizona.

The funding announced on Monday will support TSMC building a third semiconductor factory in Arizona, in addition to two facilities already in the pipeline, US officials said.

TSMC’s total investments in the US will rise to $65bn under the agreement, according to US officials.

The deal is the latest effort by US President Joe Biden’s administration to encourage domestic production of advanced chips that will power cutting-edge industries such as artificial intelligence.

The funding is tied to the CHIPS and Science Act, signed by Biden in 2022, which aims to reinvigorate the US semiconductor industry by offering large subsidies to lure private investment.

The US has been highly dependent on Asian firms for its supply of high-end chips, raising fears of disruption in the event of a geopolitical crisis in the region, such as a Chinese invasion of self-governing Taiwan.

Biden said the investment would put the US on track to produce 20 percent of the world’s leading-edge semiconductors by 2030.

“Semiconductors – those tiny chips smaller than the tip of your finger – power everything from smartphones to cars to satellites and weapons systems. America invented these chips, but over time, we went from producing nearly 40 percent of the world’s capacity to just over 10%, and none of the most advanced chips, exposing us to significant economic and national security vulnerabilities,” Biden said in a statement released by the White House.

“I was determined to turn that around, and thanks to my CHIPS and Science Act – a key part of my Investing in America agenda – semiconductor manufacturing and jobs are making a comeback.”

TSMC, which produces nearly all of the world’s leading-edge microchips, has sought to diversify its chip production away from Taiwan amid pressure from customers and governments concerned about the security of the island.

The company started construction of its first factory in Phoenix in 2021 and began work on its second facility last year.

Apart from the US, the company has laid out plans to produce chips in Japan and Germany.

The Biden administration will announce next week that it will provide more than $6bn in funding to South Korea’s Samsung to expand its chip output in Texas, the Reuters news agency reported on Monday, citing two people familiar with the matter.