$52B CHIPS Act signed, but many remain skeptical

President Joe Biden signed the $52B CHIPS and Science Act yesterday, authorizing subsidies for chipmaking within the US.

The White House claims the act has spurred $44B worth of new chip fabrication plans, but many doubts have been expressed about the likely effectiveness of the measure…

Background on the $52B CHIPS Act

US chipmaking technology has fallen way behind that of Taiwan’s TSMC and Korea’s Samsung. That reduces the business potential of US chipmakers like Intel, while also leaving US companies like Apple dependent on foreign countries.

The CHIPS Act is designed to address this by providing subsidies designed to help investment in US chip fabrication plants. It allows qualifying companies to claim around 30% of the total cost of building a new facility.

Apple was one of the companies that lobbied for the act, and TSMC said that it was vital to its plans for a chipmaking plant in Arizona.

Biden says act is already working

The White House claims that the promised subsidies have already led to $44B worth of new investment. CNET reports:

“The CHIPS and Science Act supercharges our efforts to make semiconductors here in America,” Biden said in a speech Tuesday at the White House’s Rose Garden. “America invented the semiconductor, and this law brings it back home.”

The legislation has already helped encourage smartphone chip designer Qualcomm to spend $4.2 billion with chipmaker GlobalFoundries to build processors in New York, the White House said in a fact sheet released Tuesday. And Micron will invest $40 billion in memory chip manufacturing capacity, the White House said, a move that could elevate the US share of memory chipmaking from 2% to 10%.

Others have concerns and doubts

The subsidy plans led to the expression of a number of concerns and doubts.

Not just for US companies

While only chipmaking plants built in the US will qualify, they do not need to be owned by US companies. Some have said that this limits the potential to revitalize the technical capabilities of American-owned companies.

Conversely, Intel may waste the money

The opposite concern has also been raised: That Intel may get the biggest chunk of the money, and its track record in chipmaking innovation is very poor. Many doubt that subsidized plants will fundamentally improve the capabilities of the company.

Chip fabrication does not create many jobs

Chipmaking is a highly automated process, which means that even large-scale investment delivers poor value for money when it comes to creating US employment.

Payback times are very long

It takes years to build a new chip fabrication plant, and many more years before it achieves profitability – if it ever does.

May lead to subsidy war with other countries

One of the justifications for the CHIPS Act is that Taiwan, Korea, and China already offer government subsidies to their chipmakers, and the US needs to do the same. However, US subsidies may simply lead to other countries boosting their own subsidies, negating the competitive boost.

The US lacks the necessary ecosystem

Some point out that the chip fabrication lead of companies like Taiwan isn’t just down to technical expertise – they also have all the necessary support industries around them. CNET again:

Making a handful of fabs significantly cheaper can help US manufacturing, but it’s a long way from building the rich network of companies that prevail in Asia, supplying materials like giant polysilicon crystal ingots that are sliced ​​into chip wafers to all the testing, packaging and assembly work that takes place after chips are made.

“Efforts must also support the larger semiconductor ecosystem, which spans everything from wafer substrates to chip probes to items as mundane as shipping materials,” said Jim Witham, CEO of power electronics maker GaN Systems. He believes the CHIPS Act funding is only a beginning. “We’ve lost many of these capabilities in the US, and rebuilding them takes time and money.”

The Boston Consulting Group expects it would cost $350 billion to $420 billion to create a self-sufficient semiconductor supply chain in the US.

Echoes of the Foxconn Wisconsin fiasco

Finally, government subsidies can prove poor value in general, with some pointing to the fiasco of the Foxconn Wisconsin plant, which promised 13,000 jobs in return for $4B in subsidies, and has so far delivered only empty offices and just a handful of jobs.

What’s your view on the $52B CHIPS Act? Please share your thoughts in the comments.

Photo: The White House

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Naveen Kumar

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