WASHINGTON, April 8 (Reuters) - The U.S. Commerce

Department said Monday it would award Taiwan Semiconductor

Manufacturing Co's ( TSM ) U.S. unit a $6.6 billion

subsidy for advanced semiconductor production in Phoenix,

Arizona and up to $5 billion in low-cost government loans.

TSMC agreed to expand its planned investment by $25 billion

to $65 billion and to add a third Arizona fab by 2030, Commerce

said in announcing the preliminary award. The Taiwanese company

will produce the world's most advanced 2 nanometer technology at

its second Arizona fab expected to begin production in 2028, the

department said.

"These are the chips that underpin all artificial

intelligence, and they are the chips that are necessary

components for the technologies that we need to underpin our

economy, but frankly, a 21st century military and national

security apparatus," Commerce Secretary Gina Raimondo said in a

statement.

TSMC, the world's largest contract chipmaker and a major

supplier to Apple ( AAPL ) and Nvidia ( NVDA ), had previously

announced plans to invest $40 billion in Arizona. TSMC expects

to begin high-volume production in its first U.S. fab there by

the first half of 2025, Commerce said.

The $65 billion-plus investment by TSMC is the largest

foreign direct investment in a completely new project in U.S.

history, the department said.

Congress in 2022 approved the Chips and Science Act to boost

domestic semiconductor output with $52.7 billion in research and

manufacturing subsidies. Lawmakers also approved $75 billion in

government loan authority.

TSMC Arizona has also committed to support the development

of advanced packaging capabilities through partners in the U.S.

to allow customers to purchase advanced chips that are made

entirely on U.S. soil, the department said, adding 70% of TSMC

customers were U.S. companies.

TSMC CEO C.C. Wei said the company would help U.S. tech

firms "unleash their innovations by increasing capacity for

leading-edge technology through TSMC Arizona."

Commerce expects the projects will create 6,000 direct

manufacturing jobs and 20,000 construction jobs. The department

said 14 direct TSMC suppliers plan to construct or expand U.S.

plants.

At full capacity, TSMC's three fabs in Arizona will

manufacture tens of millions of leading-edge chips in 5G/6G

smartphones, autonomous vehicles, and AI data center servers,

the department said.

Through its Arizona fabs, TSMC will support key customers

like Apple ( AAPL ), Nvidia ( NVDA ), Advanced Micro Devices ( AMD ) and Qualcomm ( QCOM )

"by addressing their leading-edge capacity demand,

mitigating supply chain concerns, and enabling them to compete

effectively in the ongoing digital transformation era," the

department added.

Commerce last month announced $8.5 billion in grants and up

to $11 billion in loans for Intel ( INTC ) to subsidize

leading-edge chip production from the same program.

The department is expected to unveil an award for South

Korea's Samsung Electronics ( SSNLF ) as soon as next week,

sources said. Commerce declined to comment. Samsung did not

respond immediately to a request for comment.