Biden Ups Ante to $50 Billion for CHIPS Act

TAIPEI — US President Joe Biden’s $2 trillion infrastructure plan announced this week increases the amount of funding that would be allocated to revive the American semiconductor industry to $50 billion.

Biden’s proposal for the chip industry ups the ante from the $37 billion suggested in two measures introduced last year, the American Foundries Act of 2020 (AFA) and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act.

“President Biden believes we must produce, here at home, the technologies and goods that meet today’s challenges and seize tomorrow’s opportunities,” the US White House said in a press statement. “President Biden is calling on Congress to invest $50 billion to create a new office at the Department of Commerce dedicated to monitoring domestic industrial capacity and funding investments to support production of critical goods. The President also is calling on Congress to invest $50 billion in semiconductor manufacturing and research, as called for in the bipartisan CHIPS Act.”

The Biden infrastructure proposal is unlikely to have strong bipartisan support. US Senate Minority Leader Mitch McConnell criticized the infrastructure plan as a “Trojan horse” that hides huge tax hikes that could hurt companies and the upper middle class.

Biden’s proposal comes as two Asian chipmakers, Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung are expected to widen their lead in the semiconductor industry this year. The combined capital expenditures of Samsung and TSMC in 2021 will reach at least $55.5 billion, IC Insights said in a March research bulletin. That amount for just one year exceeds the proposed $50 billion in the Biden plan, which would be spread out over a period of several years.

Joe Biden (center) visiting Cree in 2010, when he was Vice President. He was accompanied by then-Secretary of Energy Steven Chu (left), and Charles Swoboda (right), at the time Cree’s CEO. (Official White House file photo, by David Lienemann)

More than 70 years ago, the US made all of the world’s semiconductors yet now accounts for only 12 percent of global production, according to the Semiconductor Industry Association.

Last month, top US chipmaker Intel announced it would dive headlong into the foundry business in competition with TSMC and Samsung, starting with a $20 billion investment in Arizona. New CEO Pat Gelsinger said the company is establishing the contract manufacturing endeavor as a standalone business called Intel Foundry Services.

Intel’s plan “does not depend on a penny of government support. It is the right strategy for us going forward,” Gelsinger was cited by Reuters as saying.

While the US still makes most of the key semiconductor design software and production equipment, companies in Taiwan, South Korea and China produce most of the world’s chips.

The increased dominance of the chip industry by Samsung and TSMC has wide-ranging geopolitical and business implications. South Korea’s Samsung is within range of a nuclear attack by North Korea. Taiwan is under threat of an armed takeover by China.

In the past twelve months, governments in North America and Europe have started efforts to reduce their exposure to fragile supply chains by rebuilding their declining domestic chip industries. The government of India is also offering a $1 billion cash incentive to any investor that commits to building a domestic semiconductor facility, according to Reuters.

The amount proposed by President Biden would probably still fall short of the amount necessary to get the US back in the game. Governments would need to spend at least $30 billion per year for a minimum of five years to have any reasonable chance of success, according to IC Insights President Bill McClean.

The efforts by governments around the world to build domestic semiconductor supply chains may also result in a glut of manufacturing capacity, undermining profitability, according to TSMC Chairman Mark Liu.

Global efforts to develop national self-sufficiency in chip production are “economically unrealistic”, Liu said this week at an event in Taiwan as chairman of the Taiwan Semiconductor Industry Association.

“It makes sense that all the major economies hope to bring the chips for infrastructure or defense uses onshore, but to bring a full supply chain back and try to be fully self-reliant is totally not efficient,” Nikkei Asia cited Liu as saying. “That additional capacity could become unprofitable capacity.”

Governments will need to work with private-sector companies to kickstart chip production, but at this point, it’s not clear whether the support will be in the form of incentives to TSMC and Samsung to invest in the US and Europe, funding for domestic manufacturers or a combination of both approaches. Samsung and TSMC have announced plans to invest more in the U.S. while they lobby for government incentives.

The post Biden Ups Ante to $50 Billion for CHIPS Act appeared first on EETimes.

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