Chipmakers might soon get $52 billion CHIPS Act windfall, but there's a catch

[nanoguy]

In brief: Rebuilding the semiconductor industry in the US will not only take time but also a significant amount of government subsidies for both American and foreign companies. A slimmed-down version of the required legislation is now subject to the first procedural vote, to hopefully get it passed as soon as next week. Even so, the bill comes with some fine print for companies that have a presence in China or wish to operate there in the future.

It wouldn't be the first time silicon giants warned about the lack of government funding for their expansion efforts, but they're once again sounding the alarm. Last month, companies like TSMC, GlobalWafers, and Intel warned that unless Congress unlocks $52 billion in funding for the domestic semiconductor industry, they won't be able to execute on their current ambitions.

Thus far, Intel looks like it will be the biggest beneficiary of the new subsidies, as the CHIPS Act is technically supposed to support domestic companies first and foremost. That said, industry bodies like SEMI last year made the case for helping the greater semiconductor ecosystem, which includes several foreign companies that wish to grow their US footprint.

On Monday, US Senate Majority Leader Chuck Schumer explained the Senate would vote on the matter of government subsidies for the chipmaking industry by treating it as a separate bill. This would see chipmakers get $52 billion while telecom companies would get $1.5 billion for 5G network deployments.

Previously, this was part of a larger, $250 billion bill known as the US Innovation and Competition Act. Driven by fears that too much of the global semiconductor production takes place in Taiwan, governments are racing to build more local manufacturing capacity to reduce the risk of future shocks caused by trade tensions.

It's worth noting the new government stimulus for chipmakers comes with some small print. On one hand, companies like Nvidia, AMD, Qualcomm, Micron, Texas Instruments, NXP Semiconductors, GlobalFoundries, and equipment suppliers like ASML and Lam Research could benefit from the subsidies, if only as a one-time event. On the other, they would be required to refrain from building or expanding operations in countries considered "unfriendly."

Chief among these unfriendly countries would be China, which is planning to reduce its reliance on semiconductor imports as soon as possible. Any company that wants to extract funds from the $52 billion pool won't be allowed to make chips on a 28nm or smaller process node in the country.

Some industry officials believe this threshold doesn't make sense given the fast pace of advancements in process technology. Samsung recently started making chips on a 3nm process, with TSMC expected to follow in the coming months. Intel is still catching up, but it doesn't have any official plans to build advanced fabs in China.

Still, the bigger problem is that China is spending over $155 billion on the research and development of advanced chipmaking technologies. In some areas like NAND manufacturing, Chinese companies such as YMTC are quickly closing the gap compared to other industry giants like Micron and Samsung. There is a risk that the $52 billion the US is willing to invest in domestic capacity developments might not be enough.

Another issue is a dearth of skilled workers — a problem that is felt across the global semiconductor and electronics industries, including places like Taiwan. Facilitating immigration by students and experienced engineers and researchers is one way to solve this issue. Another would be to support microelectronics and semiconductor degree programs such as the one recently launched by Purdue University, or initiatives like the American Semiconductor Academy.

Lastly, it seems that not all chipmakers are happy with the CHIPS Act in its current form. These companies have asked to be unnamed to avoid potential industry and government blowback, but it wouldn't be too hard to guess they're of the fabless variety.

One such company explained off the record that "you have Intel that might get $20 billion with CHIPS Act plus $5 billion or $10 billion under the FABS Act. So $30 billion goes to your direct competitor, and you don't get a penny? That's going to cause problems in the market." In other words, fabless companies wish they could get tax credits for design activities, but they're not holding their collective breath for it to happen anytime soon.

Image credit: Jason Leung, Ian Hutchinson

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https://www.techspot.com/news/95347-chipmakers-might-soon-get-52-billion-chips-act.html

 

[maxxcool7421]

The US cannot compete in terms of labor costs vs China
The US is fully dependent on metallic silicon from China and their US hating buddy Russia
The US is fully dependent on Russia and China for NEON for chip manufacturing

Until this is solved by outright owning a NEON+Metallic silicon source large enough to supply US only electronic needs (BTW those resources do NOT exist) this s stupid cash grab by politicians, chip foundries and a big old 'news bite' to get people reelected.

 

[psycros]

Remember when the government was actually incentivizing companies to move overseas in the early 90's? A lot of people told them what a gigantic mistake it was and were completely ignored. And now here we are, the country that invents most of the advanced technology but builds nothing..and our ruling class acts surprised when China simply steals that tech that our companies sent them the plans for or allowed Chinese nationals access to in our plants, labs and universities. So now we have these ultra-profitable chipmakers demanding that we print even more fiat currency to bribe them into rebuilding that production capacity. I have another idea: all NATO countries should make it illegal for their big tech firms to produce products of strategic importance (military or economic) in nations that are effectively hostile. We do this in wartime and we're effectively at war with China. Intel and the other top chipmakers are ridiculously profitable - they shouldn't need Monopoly money handouts to make them invest in their own futures. If anyone should get that kind of funding it should be smaller US firms trying to provide some meaningful competition. At this point any western nation that isn't planning their China exit strategy needs to be. The geopolitical reality right now demands it. The free world needs to isolate the bullies like China and Russia and let them starve into submission. Stop giving North Korea a single cent until they give ground on human rights and political repression. China is only rich because of western corporate greed: we need to change course as quickly as possible while there is still time. Curtail H1B visas and stop pretending that American schools aren't turning out capable engineers. At least half of all Asian tech workers cheated to get their degrees. If we must recruit Chinese tech specialists then require them give up their Chinese citizenship. Offer to bring their immediate families over if necessary - leave no hostages behind.

 

[mgwerner]

Remember when the government was actually incentivizing companies to move overseas in the early 90's? A lot of people told them what a gigantic mistake it was and were completely ignored. And now here we are, the country that invents most of the advanced technology but builds nothing..and our ruling class acts surprised when China simply steals that tech that our companies sent them the plans for or allowed Chinese nationals access to in our plants, labs and universities.

Ross Perot immediately comes to mind.

 

[psycros]

Ross Perot immediately comes to mind.

It still blows my mind that he actually tried to organize a rescue mission for the Iranian hostages. I still feel kind of bad for Carter that they bungled the operation he green-lit, but then again, he was the fool who turned his back on the Shah and basically allowed radical Islam to be born. Thankfully, all it took was putting a Republican in charge of the military, and the captives were immediately released.

 

[mgwerner]

It still blows my mind that he actually tried to organize a rescue mission for the Iranian hostages. I still feel kind of bad for Carter that they bungled the operation he green-lit, but then again, he was the fool who turned his back on the Shah and basically allowed radical Islam to be born. Thankfully, all it took was putting a Republican in charge of the military, and the captives were immediately released.

Tried and succeeded with his two employees. But Perot was not involved with the hostages at the embassy, his company employees were arrested and imprisoned while installing a computer system for the Iranian healthcare system.

 

[Kam7r]

"unfriendly" I find it funny the hate of russia or even china lately ( it's deserved don't get me wrong , and I hope the ukrainians will kick their 4sses), but I'm wondering where were displayed on almost every websites the flags of all the countries where the u.s bring "democracy" to show support ? where where the flags when they lied to the world about irak and I could go on and on ... you condemn everything or you condemn nothing, or it's just hypocrisy and double standard... "see the straw in the neighbor's eye and not see the beam in his"

 

[Hexic]

"unfriendly" I find it funny the hate of russia or even china lately ( it's deserved don't get me wrong , and I hope the ukrainians will kick their 4sses), but I'm wondering where were displayed on almost every websites the flags of all the countries where the u.s bring "democracy" to show support ? where where the flags when they lied to the world about irak and I could go on and on ... you condemn everything or you condemn nothing, or it's just hypocrisy and double standard... "see the straw in the neighbor's eye and not see the beam in his"

Because politicians, much like corporations, only care about perception. It's why every month these days is now a "X Pride" month, or "Celebrating X" Month. What about the other 11 months, why not make your company banner rainbow every month?

Because it's all image to make more money, and pander votes out of any group dumb enough to believe them.

 

[kiwigraeme]

You often wonder why USA subsidizes Corps yet imposes no or toothless conditions.
When big pharma gets lots of USA govt research cheap - yet is allowed to rip off the American public mostly ( compared to prices given overseas buyers ) unhindered or fettered .
If they get Intel 30 Billion - then you would think it would require Intel to sell x% to other USA based companies for cost +y (yes we know companies offload profit where law allows to least tax - Apple makes hardly any profit in most countries selling phones at 300% mark up ( includes cost of selling - as at $1000 phone probably costs them less than $200 to make ).
Or at least a prescribed discount
Or that they must make Z% of production available to other USA companies .
Corporate Subsidies are a trillion dollar business the world over - so always a laugh when someone screams blue murder about millions going to poor - evil- will bring the wrath .

How's those subsidies to get fast cheap internet to the rural areas in the USA with monopoly given at same time as subsidies - Lots of those subsidies were just stolen and soviet reporting took over .

The other interesting thing is NZ say subidises a foreign movie made here eg Avator 1 to number whatever . But if we subsidise our farmers we will get huge duties/tariffs imposed on us.
Remember USA screaming in 70s and 80s about Japanese price cutting to get market share .

I know there are international trade laws - but they affect the weaker countries more - The USA can and does ignore them - and happy to drag out legal challenges for years .
Samsung got it right "copying" Apple
Uber got it right abusing every countries laws etc

 

[WhoCaresAnymore]

Subsidies are helpful to start-ups and companies with a proven track record of actually showing results based on the criteria for the subsidies. But this is 2022, and everything seems like a scam or con.

Look at the PPP program in the USA that was supposed to be used to subsidize payrolls during COVID. I know SOO many people and companies who took the money, just because and used it to pay down debt or blow it. There is no accountability, the money is just going down a pit and no return.

What goes out the treasury door has done nothing but create this economic storm of inflation (flooding the market with cash), and debt. I love my country and love most people who live here, regardless of color, religion, sexual orientation. But things have gotten so weird here. I'm in my 50's and now we have to watch everything we say, there is no humor in anything anymore. Everything is racist. Hell, I've heard keeping a nice lawn is racist, because that's what white people do.

You get the drift. This progressive/socialistic lean is killing us from within. I miss the days where the core of both parties in the US did what they did because they love our country.

So I'm against these subsidies now. It's just lining pockets.

 

[Uncle Al]

Simply put, anything like this should be strictly a low cost LOAN, not a gift. Just like was done when the automakers were bailed out during the Obama administration and before you argue, please look it up. As a matter of record, every penny was paid back and in some cases a very tidy profit for the American people was realized.

 

[kiwigraeme]

Simply put, anything like this should be strictly a low cost LOAN, not a gift. Just like was done when the automakers were bailed out during the Obama administration and before you argue, please look it up. As a matter of record, every penny was paid back and in some cases a very tidy profit for the American people was realized.

That's good - I remember the bank scandal - dressing up crap mortgages etc as prime A class beef .
Least they got the junk Bond king ( Milken ) and Martha Steward behind bars .

When those banks bailed out - I think it was free money -with no govt equity taken . could be wrong .
I heard that straight after they were already redecorating their offices and junkets to Hawaii as per normal .
No Goldmans Sachs partner should ever suffer prison time - I think they paid a few billion to other big guys as they tried to defraud them with junk , sold a A1 prime beef .
that oxytocin/fentanyl family sound real nice people .

As for those mortgages - must of been a laugh for people with no ability to pay to live in a million dollar home for a year or more before bank kicks them and leaves them with a bad credit rating . In NZ and most countries banks can screw you over if you fall behind - $600 000 house - $400 000 mortgage - if bank sells- they use their friendly seller - they sell it for $450 000 ( well probably $550000 - just high enough to stop too many questions )- everyone is happy - even worse if they sell your house at $350 000 - now homeless you have to pay back $50000 - so best to declare bankrupt .
Saying that many of these people didn't use all tools to save house - failed to work with banks , or at least sell it themselves

 

[BadThad]

NO MORE GOVERNMENT HANDOUTS! These should be LOANS at good interest rates - take it or leave it. The government has NO BUSINESS fiddling with private industry and picking winners.

 

[Vanderkaum037]

Remember when the government was actually incentivizing companies to move overseas in the early 90's? A lot of people told them what a gigantic mistake it was and were completely ignored. And now here we are, the country that invents most of the advanced technology but builds nothing..and our ruling class acts surprised when China simply steals that tech that our companies sent them the plans for or allowed Chinese nationals access to in our plants, labs and universities. So now we have these ultra-profitable chipmakers demanding that we print even more fiat currency to bribe them into rebuilding that production capacity. I have another idea: all NATO countries should make it illegal for their big tech firms to produce products of strategic importance (military or economic) in nations that are effectively hostile. We do this in wartime and we're effectively at war with China. Intel and the other top chipmakers are ridiculously profitable - they shouldn't need Monopoly money handouts to make them invest in their own futures. If anyone should get that kind of funding it should be smaller US firms trying to provide some meaningful competition. At this point any western nation that isn't planning their China exit strategy needs to be. The geopolitical reality right now demands it. The free world needs to isolate the bullies like China and Russia and let them starve into submission. Stop giving North Korea a single cent until they give ground on human rights and political repression. China is only rich because of western corporate greed: we need to change course as quickly as possible while there is still time. Curtail H1B visas and stop pretending that American schools aren't turning out capable engineers. At least half of all Asian tech workers cheated to get their degrees. If we must recruit Chinese tech specialists then require them give up their Chinese citizenship. Offer to bring their immediate families over if necessary - leave no hostages behind.

You hit the nail on the head. Our ruling class doesn't care about our country. Why should they? They can just relocate their fortunes and their families offshore to any number of countries that are happy to take them. They have no loyalty, complete freedom, and complete power.

 

[yannus]

The free world needs to isolate the bullies like China and Russia and let them starve into submission.

Mostly correct except for the feasibility of the statement above. Right now, the "free world" (which is not free anymore) has not much that Russia and China want. So how could we starve them when they have what we need ? The only way out that I see is to free ourselves from our governments first and that could show them the path to freedom.