“Biggest investment in US industry in 50 years”

While we knew that around $50B was being made available to promote US chip fabrication, it’s only today that we’re learning the actual CHIPS Act details. The bill itself did not specify how the money would be split.

Specifically, we now know that a little over half the total will be made available to help produce advanced chips in the US, while the rest of the money is being divided between two further initiatives…

The NY Times reports:

The Department of Commerce on Tuesday unveiled its plan for dispensing $50 billion aimed at building up the domestic semiconductor industry and countering China, in what is expected to be the biggest US government effort in decades to shape a strategic industry.

About $28 billion of the so-called CHIPS for America Fund is expected to go towards grants and loans to help build facilities for making, assembling and packaging some of the world’s more advanced chips.

Another $10 billion will be devoted to expanding manufacturing for older generations of technology used in cars and communications technology, as well as specialty technologies and other industry suppliers, while $11 billion will go toward research and development initiatives related to the industry.

Of course, government programs aren’t exactly noted for their urgency, and the CHIPS Act is no exception. The government is not yet accepting applications for a slice of the pie, and has only promised to do so “no later than February” of next year. It does, however, claim that decisions could be quickly reached, with the first disbursements by the spring.

Secretary of Commerce Gina Raimondo described the investment as a once-in-a-generation one.

“This is a once-in-a-lifetime opportunity, a once-in-a-generation opportunity, to secure our national security and revitalize American manufacturing and revitalize American innovation and research and development,” Ms. Raimondo said. “So, although we’re working with urgency, we have to get it right, and that’s why we are laying out the strategy now.”

Trade experts tend to agree with this assessment, calling it the most significant investment in industrial policy that the US has made in the last 50 years or more.

While some may be disappointed that a relatively small proportion of the total is devoted to advanced chipmaking, the decision does make sense. The biggest roadblock right now is in the form of older and more basic chips, like display drivers and power management circuits. This is true of everything from smartphones to cars.

Applicants will be required to demonstrate that they have funding sources for the balance of the costs, whether from their own resources or private investment, and will also need to show that the plants they are building will remain viable in the long-term.

So-called “spillover benefits” – positive impacts on the local population, including direct and indirect jobs – will also be factored into the equation.

Finally, as part of the government’s aim of reducing dependence on China, there is a sting in the tail for any companies hoping to receive similar incentives from that country.

The chips bill specifies that companies that accept funding cannot make new, high-tech investments in China or other “countries of concern” for at least a decade, unless they are producing lower-tech “legacy chips” destined to serve only the local market .

Apple chipmaker TSMC will be applying for funding for its Arizona plant, which is expected to make some A-series and M-series chips, although the company itself has been tight-lipped about its exact plans.

Although construction of the main chip facility is complete, there is still plenty of work needed in terms of building the remaining facilities, carrying out test production, and taking care of all the steps leading up to volume production. Apple lobbied for the CHIPS Act, with TSMC saying that the funding was vital to the Arizona plant.

Photo: Caleb Fisher/Unsplash

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Naveen Kumar

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