Chipmakers battle for a slice of US government support
Chipmakers battle for a slice of US government support
Enlarge / Employees wearing cleanroom suits monitor chemical vapor deposition operations indoors of the GlobalFoundries semiconductor manufacturing plant in Malta, New York. Semiconductor production plants have become a focal point as the post-pandemic economic recovery is held back in some regions by a shortage of some of the critical electronic components needed.
The long wait for legislation to strengthen the United States' position in global semiconductor manufacturing is nearly over. The corporate rush to get their hands on the billions of dollars it is freeing up has only just begun.
Last week, the House of Representatives followed the Senate in passing sweeping legislation to counter China's rise as a tech powerhouse, including $52 billion in subsidies to support advanced chip manufacturing and research and development in the United States. The law, which has yet to be signed into law, unlocks an estimated $24 billion more in investment tax credits for chipmakers by allowing them to deduct 25% of the cost of new fabs, or fabs, from their profits in the first year.
Pat Gelsinger, CEO of Intel, said the law could be "the single most important piece of industrial policy" in the United States since World War II. It is designed to reverse the decline of the United States' share of global chip manufacturing to 10%, from 38% in 1990.
However, the financial support from Washington is unlikely to extend to all the giant projects already under construction or on the drawing board in the United States.
"It's not as big as everyone thinks," said Pat Moorhead, an American chip analyst. With advanced chip factories costing more than $10 billion, the Department of Commerce, which will be responsible for deciding who gets the money, will face some tough choices, he said.
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The legislation provides $39 billion over five years to support the construction of new factories, with grants of up to $3 billion for each project. An additional $11 billion is earmarked for R&D, including $2 billion for projects deemed important by the Pentagon.
Intel alone hopes to secure $12 billion in construction subsidies, or nearly a third of the total, for two factories under construction in Arizona and two others for which it is about to start up in Ohio. Others looking for cash include the two chipmakers that have overtaken Intel in recent years to master the most advanced or "cutting edge" chip manufacturing techniques - TSMC, which is building a $12 billion factory. dollars in Arizona, and Samsung, which is working on a $17 billion installation in Texas. Both factories are expected to start producing chips in 2024.
Although Congress has agreed to make the subsidies available to foreign companies, domestic chipmakers are pushing to ensure that the lion's share of the money goes to US companies. A US chipmaker executive said the Commerce Department should favor companies that do their R&D in the US and employ the most workers there, which would clearly favor US companies.
The Commerce Department has not yet revealed the application process or how it will choose priorities for taxpayer support.
U.S. officials also need to decide how much money to allocate to the more expensive, "state-of-the-art" factories, which supply chips for demanding, high-volume uses like smartphones and PCs. This would mean giving full support to Intel, which has lost its technological lead in global chipmaking to TSMC and Samsung and has invested heavily to claw its way back.
The same day the House passed the Chips Act, Intel shocked Wall Street with a slump in its latest quarterly results and said it would cut its capital spending plans for this year by $4 billion. However, he hasn't changed the longer term plans for his new advanced fabs. The factories are central to the company's goal of trying to compete head-on with TSMC by becoming a "foundry" that manufactures chips on behalf of other companies rather than to its own designs.
Last week's financial setback has revived some analysts' suggestions that Intel should abandon its foundry ambitions and focus instead on bolstering its existing business. However, the company argued that it had to b...
Enlarge / Employees wearing cleanroom suits monitor chemical vapor deposition operations indoors of the GlobalFoundries semiconductor manufacturing plant in Malta, New York. Semiconductor production plants have become a focal point as the post-pandemic economic recovery is held back in some regions by a shortage of some of the critical electronic components needed.
The long wait for legislation to strengthen the United States' position in global semiconductor manufacturing is nearly over. The corporate rush to get their hands on the billions of dollars it is freeing up has only just begun.
Last week, the House of Representatives followed the Senate in passing sweeping legislation to counter China's rise as a tech powerhouse, including $52 billion in subsidies to support advanced chip manufacturing and research and development in the United States. The law, which has yet to be signed into law, unlocks an estimated $24 billion more in investment tax credits for chipmakers by allowing them to deduct 25% of the cost of new fabs, or fabs, from their profits in the first year.
Pat Gelsinger, CEO of Intel, said the law could be "the single most important piece of industrial policy" in the United States since World War II. It is designed to reverse the decline of the United States' share of global chip manufacturing to 10%, from 38% in 1990.
However, the financial support from Washington is unlikely to extend to all the giant projects already under construction or on the drawing board in the United States.
"It's not as big as everyone thinks," said Pat Moorhead, an American chip analyst. With advanced chip factories costing more than $10 billion, the Department of Commerce, which will be responsible for deciding who gets the money, will face some tough choices, he said.
>
The legislation provides $39 billion over five years to support the construction of new factories, with grants of up to $3 billion for each project. An additional $11 billion is earmarked for R&D, including $2 billion for projects deemed important by the Pentagon.
Intel alone hopes to secure $12 billion in construction subsidies, or nearly a third of the total, for two factories under construction in Arizona and two others for which it is about to start up in Ohio. Others looking for cash include the two chipmakers that have overtaken Intel in recent years to master the most advanced or "cutting edge" chip manufacturing techniques - TSMC, which is building a $12 billion factory. dollars in Arizona, and Samsung, which is working on a $17 billion installation in Texas. Both factories are expected to start producing chips in 2024.
Although Congress has agreed to make the subsidies available to foreign companies, domestic chipmakers are pushing to ensure that the lion's share of the money goes to US companies. A US chipmaker executive said the Commerce Department should favor companies that do their R&D in the US and employ the most workers there, which would clearly favor US companies.
The Commerce Department has not yet revealed the application process or how it will choose priorities for taxpayer support.
U.S. officials also need to decide how much money to allocate to the more expensive, "state-of-the-art" factories, which supply chips for demanding, high-volume uses like smartphones and PCs. This would mean giving full support to Intel, which has lost its technological lead in global chipmaking to TSMC and Samsung and has invested heavily to claw its way back.
The same day the House passed the Chips Act, Intel shocked Wall Street with a slump in its latest quarterly results and said it would cut its capital spending plans for this year by $4 billion. However, he hasn't changed the longer term plans for his new advanced fabs. The factories are central to the company's goal of trying to compete head-on with TSMC by becoming a "foundry" that manufactures chips on behalf of other companies rather than to its own designs.
Last week's financial setback has revived some analysts' suggestions that Intel should abandon its foundry ambitions and focus instead on bolstering its existing business. However, the company argued that it had to b...
Enlarge / Employees wearing cleanroom suits monitor chemical vapor deposition operations indoors of the GlobalFoundries semiconductor manufacturing plant in Malta, New York. Semiconductor production plants have become a focal point as the post-pandemic economic recovery is held back in some regions by a shortage of some of the critical electronic components needed.
