US Senate passes CHIPS Act to boost domestic semiconductor manufacturing as relations...

midian182

Posts: 8,171   +97
Staff member
What just happened? The US Senate has passed the CHIPS Act, giving the domestic semiconductor-production industry a $52 billion boost in the form of subsidies that will go toward the construction of new fabs. The long-term goal is to lessen reliance on Taiwan, especially in light of worsening relations with China, and mitigate against the worst effects of the current chip shortage—and any future ones.

The Senate yesterday voted 64 - 33 in favor of passing the $280 billion Chips and Science Act, $52 billion of which will go toward subsidies for chip makers. There will also be an investment tax credit for chip plants estimated to be worth $24 billion. The incentives do come with some restrictions for companies that have a presence in China or wish to operate there, or in other unfriendly countries, in the future.

The House of Representatives plans to vote on the bill later today. If passed, as expected, President Biden should sign it into law early next week.

The CHIPS Act, as it's known, came about through the chip crisis caused by the pandemic's lockdowns and massive increase in demand. Extreme weather, logistical problems, and Russia's invasion of Ukraine have exacerbated what was already an unprecedented situation.

"We are moving forward on the Senate CHIPS bill," Senate Majority Leader Chuck Schumer said in a statement. "It's going to take aim at the national semiconductor chip shortage, lower costs for American consumers, and boost scientific innovation and jobs."

Not every politician supports the bill. Vermont Senator Bernie Sanders said: "The five biggest semi-conductor companies that will likely receive the lion's share of this taxpayer handout, Intel, Texas Instruments, Micron Technology, Global Foundries, and Samsung, made $70 billion in profits last year. Does it sound like these companies really need corporate welfare?" Intel has been a vocal supporter of the act, and even postponed the groundbreaking ceremony of its Ohio fab because of the delays.

Another major factor behind the act is the US' reliance on Taiwan for its chips. Commerce Secretary Gina Raimondo previously said that if the US is cut off from the country's chip-manufacturing industry, the United States will face a deep and immediate recession.

Such a nightmare scenario could be possible. China has long said it would have no qualms about using military force against Taiwan, which it says is a breakaway province that must be "reunited" with the mainland. Reports that US House Speaker Nancy Pelosi plans to visit Taiwan have led to China threatening "firm and resolute measures" if the trip goes ahead.

As per Reuters, the Chinese Embassy in Washington said China "firmly opposed" the bill, which it said was "entrenched in the Cold-War and zero-sum game mentality and runs counter to the common aspiration of people from all sectors in China and the US to strengthen exchanges and cooperation."

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Irata

Posts: 2,201   +3,800
Let‘s see how much of that goes to Intel who afaik don‘t even make processors for third parties yet vs other players.

Also wondering if the money is tied to non-discriminatory clauses like having to offer minimum capacity and max prices to any third party that want their chips made at the government paid fabs.
 

takaozo

Posts: 238   +348
The real question for non US people is how this will impact global pricing. Also will the US gov force the foundries to use/sell products made there only to US?
 

gamerk2

Posts: 730   +698
Remember everyone: North of 90% of our semiconductor's are imported with either South Korea or Taiwan, neither exactly secure locations. And without access to those chips, we basically have no economy/military to speak of.

So this is a no-brainer. My only real concerns are:

*What we are spending is still just a fraction of what other countries are spending on semiconductors
*The relatively low amount we are spending won't be enough to entice significant fab construction
 

Theinsanegamer

Posts: 3,550   +6,003
Good first steps. If the government is going to spend my tax dollars on corporate interests, may as well be interests creating more jobs and helping secure us from foreign interests. It's what the rest of the world has been doing for years.
 

psycros

Posts: 4,352   +6,381
Good first steps. If the government is going to spend my tax dollars on corporate interests, may as well be interests creating more jobs and helping secure us from foreign interests. It's what the rest of the world has been doing for years.

I agree as long as there are requirements to reduce the volume of Chinese chip manufacturing as domestic capacity increases. This shouldn't only be about making the west less reliant on China but also undoing some of the damage done in the 90's through the reckless empowerment of a hostile regime.
 

gamerk2

Posts: 730   +698
And damn were we stupid for getting ourselves into this damn mess.
American consumers have shown over and over again: They prefer cheaper prices of overseas goods over American produced goods. And you can't exactly slap a tariff on semiconductors without raising prices on basically *everything* as collateral damage.

Korea/Taiwan dominated because they were willing to spend hundreds of billions to invest in a growing industry. The US industry by and large died off because we didn't. And while this is a good start, realistically, we need another 0 added to have any meaningful long-term impact.

Basically, the question boils to this: Are you willing to have the government directly involved in the markets in order to ensure we have a robust semi-conductor industry? Because the free markets have long since decided: It's too expensive to produce here.
 

captaincranky

Posts: 18,855   +7,766
*-
Basically, the question boils to this: Are you willing to have the government directly involved in the markets in order to ensure we have a robust semi-conductor industry? Because the free markets have long since decided: It's too expensive to produce here.
Given the extreme amount of automation involved with semiconductor fabrication, while the labor costs involved will be much higher with American labor, I would venture a guess that the cost difference won't be as bad as expected. (And yes, that was an uneducated guess).

Now, paying union labor to build these fabs to begin with, will be an entirely different story.
 

gamerk2

Posts: 730   +698
*-

Given the extreme amount of automation involved with semiconductor fabrication, while the labor costs involved will be much higher with American labor, I would venture a guess that the cost difference won't be as bad as expected. (And yes, that was an uneducated guess).

Now, paying union labor to build these fabs to begin with, will be an entirely different story.
Fabs are *very* high tech and specialized facilities, which involve a lot of high-end R&D. And it goes without saying, the fabs that have the R&D in-house are the ones that will be upgraded to bleeding-edge.

You also need to factor the cost of moving materials, getting access to the necessary rare-earths (which China *also* has a monopoly on, and why you see Russia in particular getting friendly throughout Africa), and so on. It's *much* more then labor costs that need to be considered.
 

wiyosaya

Posts: 7,983   +7,035
As I see it, this is a great first step, but this will need to be extended well beyond chips. For example, pretty much all motherboards are manufactured in Taiwan and other non-US countries, too. Chips, themselves, are of little use unless they are soldered to a motherboard or other PC board - the vast majority of which are, currently, also made outside of the US.

Good first steps. If the government is going to spend my tax dollars on corporate interests, may as well be interests creating more jobs and helping secure us from foreign interests. It's what the rest of the world has been doing for years.
Not only with respect to fabs, but WRT to the boards that use those chips, IMO, this represents a huge possibility for the US to move back to manufacturing all kinds of electronics - which used to be made in the US prior to US Capitalistic Corporate Greed grabbing US citizens by the balls and siphoning every $0.01 from their pockets and bank accounts. Let's hope the JAs resist figuring a way out of shifting all these jobs somewhere else besides the US in the name of the great God Profit. IMO, that would truly make America Great Again.

Though I am sure some are not going to want to hear this, but, IMO, this move is an epic improvement over clueless "tariffs" that were being paid by US citizens, anyway, and thus, hurting US citizens.
I agree as long as there are requirements to reduce the volume of Chinese chip manufacturing as domestic capacity increases. This shouldn't only be about making the west less reliant on China but also undoing some of the damage done in the 90's through the reckless empowerment of a hostile regime.
90s? It all started after Tricky D!ck Nixon normalized relations with China in 1972. If you are interested - https://www.history.com/this-day-in-history/nixon-arrives-in-china-for-talks
 

Uncle Al

Posts: 9,118   +8,161
Again, if this is a loan that will be paid back I'm all for it but if this is a gift, the producers better be downright cheap on the cost of these chips. As badly as big business, especially the tech industry, are ripping people off with inflated costs, they should be paying their own way.
 

Hotlynx16

Posts: 52   +11
Maybe some voted against it because they thought it was a sham cover to line Demonrats pockets along with all the other lies they have been telling us! While it may sound good on the surface there is usually a lot of PORK underneath! The chips bill has loopholes which could favor China and unpacks the reality of the liberal climate change agenda.
 

VEGGIM

Posts: 42   +7
I wonder how this would afect amd. If Intel gets most of the money then amd could probably start getting defunct.
 

JohnnyStone

Posts: 70   +39
This government is such rubbish. This is supreme anti-competitive. Intel could not propperly manufacture and compete with TSMC and just giving them more money will not necessarily change that. They have incompetent engineers, money don't change that.

This also gives Intel an unfair advantage over AMD. This world is just so corrupt. This has nothing to do with helping the USA, it is just about buddies helping buddies. One day all this evil will come back to bite the US. You vote for this rubbish, you will reap the reward!
 

Endymio

Posts: 1,827   +1,895
This is supreme anti-competitive.
It is anti-competitive. It is, however far less anti-competitive than the lavish subsidies and other government aid that nations like Taiwan and especially China grant semiconductor firms.

Intel could not propperly manufacture and compete with TSMC
When TSMC builds a new semi fab, the Taiwanese government pays half the cost of the land, and 25% of the cost of the equipment. TSMC also pays a lower tax rate, a lower labor rate, and doesn't have to deal with the bewildering melange of EPA, OSHA, and other regulations that Intel does.

This has nothing to do with helping the USA
So you're perfectly fine with a genocidal communistic dictatorship like China controlling the world semiconductor industry, just as they already control steel, rare earths, shipping, and many others?