The CHIPS Act, which was signed into law in August 2022, has a clear objective – to boost US based semiconductor manufacturing. However, this initiative is not just driven by commercial interests, but also by broader strategic considerations. One of the key motivations behind the Act is to reduce the country’s reliance on semiconductor manufacturing in Asia.
A significant portion of the funds allocated under the CHIPS Act is about to be disbursed, with major players in the semiconductor industry like Samsung, Intel, and TSMC set to receive billions in grants and subsidies. According to Bloomberg, Samsung is expected to receive $6 billion, TSMC over $5 billion, and Intel up to $10 billion. These companies have planned or ongoing semiconductor manufacturing facilities in the US.
Samsung is constructing a 4nm EUV manufacturing plant in Texas, with an estimated cost initially set at $17 billion. However, recent reports suggest that due to inflation and higher labor costs, the new projected cost is around $25 billion. It is anticipated that Samsung may utilize the incoming funds to offset this cost increase and potentially expand its Texas operations.
Intel is also expanding its manufacturing facilities in Ohio and Arizona. The Ohio plant has experienced delays, and the CHIPS Act funding is expected to provide a much-needed boost to this project. On the other hand, TSMC has earmarked $5 billion of its planned $40 billion US investment for its Arizona facility, which has faced construction delays. TSMC’s Chairman has hinted at the need for incentives from the US government.
As the funds under the CHIPS Act start to flow, the response from major chipmakers will be closely watched. While billions of dollars in grants and loans are significant, the overall cost of establishing state-of-the-art semiconductor facilities raises questions about whether these incentives will be sufficient to sustain long-term investments in the industry.
The CHIPS Act represents a crucial step towards bolstering US semiconductor manufacturing and reducing dependence on Asian production. The allocated funds to key industry players signal a renewed focus on domestic semiconductor capabilities. However, the effectiveness of these investments in maintaining a competitive edge in the global semiconductor market remains to be seen.
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