The U.S. Dept. of Commerce has offered semiconductor manufacturer TSMC Co. $6.6 billion from 2022’s CHIPS and Science Act to support its efforts to build chip plants in Arizona.

Under the nonbinding preliminary terms, the Commerce Dept. would provide the money to TSMC subsidiary TSMC Arizona Corp. in direct funding to supplement the estimated $65 billion it is spending on projects in Phoenix. The program also plans to offer TSMC Arizona up to $5 billion in loans, and the company said it plans to seek a tax credit for 25% of certain capital costs.

Construction is underway on two TSMC fabrication plants, or fabs, led by a team that includes CTCI Americas Inc. and Austin Industries. Along with the funding announcement, TSMC also said it would build a third fab in Phoenix. The first fab is scheduled to begin operating in the first half of next year, followed by the second fab in 2028. 

TSMC estimates the projects will together involve about 20,000 construction jobs. 

The chip maker also is in the design phase for an industrial water reclamation plant with a goal of “near zero liquid discharge” for the Arizona fabs.

The company’s “U.S. operations allow us to better support our U.S. customers,” Mark Liu, chair of Taiwan-based TSMC said in a statement.

The funding comes from a CHIPS Act program aimed at boosting domestic semiconductor production. The law set aside $39 billion for construction, expansion and modernization of fabs. 

The Commerce Dept.’s funding offer to TSMC is the second-largest it has made so far in the CHIPS program. Last month, officials announced they had reached preliminary terms with Intel to provide it with $8.5 billion in direct funding, along with up to $11 billion in loans. Commerce Secretary Gina Raimondo said that would be the largest amount of money provided under the program. Officials have also offered GlobalFoundries, BAE Systems Inc. and Microchip Technology Inc. funding through the program. 

Chip shortages during the height of the coronavirus pandemic caused supply chain problems for manufacturers in various sectors. TSMC supplies tech companies including AMD, Apple, Nvidia, Qualcomm and others, and Commerce Dept. officials said TSMC’s fabs would help strengthen domestic supply chains.

“The leading-edge semiconductors that will be made here in Arizona are foundational to the technology that will define global economic and national security in the 21st century, including AI and high-performance computing,” Raimondo said in a statement.