On February 4, 2022, the U.S. House of Representatives passed the U.S. Competition Act. The most interesting part of the bill is the authorization of $52 billion to support chip companies to carry out production activities in the United States.
In connection with the news that Intel has built a factory in Ohio, has the era of the end of semiconductor globalization begun? Can the US $52 billion chip industry support be achieved? What is the impact of this?
First, the landing of the roadblock: the two bills of the Senate and the House of Representatives may be passed only after the completion of the big PK
There is no doubt that this bill will have no impact in the near future (1 year), because it is still far from being passed and entered into force. And even if it is passed, it is a long-term impact of more than 5 years, and the money allocated to each year is not much.
According to the administrative process of the United States, the two bills of the Senate and the House of Representatives may be passed only after the completion of the big PK. The full name of this "American Competition Act" is called: "The United States Creates Opportunities, Technological Excellence and Economic Power Act", and the English initials are exactly "COMPETES", so it is simply called "American Competition Act". The bill was introduced by the top Democratic leadership of the House and was just passed in the House of Representatives (220-210).
Correspondingly, there is a competing version proposed by the Senate, the version passed by the senators in May 2021, called the American Innovation and Competition Act of 2021 (USICA). Its previous name is probably familiar to everyone, called the Endless Frontier Act.
That is to say, these two bills must be decided after PK to decide a final version, in order to be considered to be passed. Although the ultimate purpose of both bills is to invest in the technology industry and change the U.S. trade strategy, the two chambers currently have a lot of differences on THE STANDARDS and USICA, and the probability of unification in the short term is not high, and the probability of passing is lower.
In terms of the current degree of tearing in the two houses, I think it is very good to get it done this year: the Senate version itself has been widely questioned in the House, so let the House of Representatives propose its own version; the House version must get more than 60 votes in the Senate, which is also very difficult, otherwise Biden's BBB bill will not be difficult to produce.
The current democracy in the United States is so inefficient that even if it is a seemingly natural thing to enhance the competitiveness of high-tech in the United States and curb the rise of China, it will not be possible to do it in two or three years from the time it is proposed to the passage of the bill.
In the end, even if it is passed, the 52 billion will be apportioned to a few years, and the effect will not be so optimistic.
Second, the actual results: the United States 52 billion US dollars chip industry support can be achieved?
We must know that this amount of money is not enough for the chip industry with high investment in the early stage, but it also shows the attitude of the United States, and in the face of the current chip shortage, it is really urgent.
Whether it can succeed or not is not to say, anyway, first give those big companies some benefits, after the mid-term elections and then say something else, after all, everything is done for political gain.
Not long ago, Intel had begun to promote two new chip factory projects in Ohio, and they were the kind that could accept external foundry orders, with a total investment of more than $100 billion, and Intel's other facilities in the U.S. empire were to be expanded.
At the same time, the United States just got the chip giant data at the end of last year, but with this and 52 billion US dollars, there are still 18,000 miles away from supporting Intel to start and reach the level of TSMC's technology. Otherwise, there are many big factories with lithography machines, which one has successfully broken through?
Moreover, $52 billion alone can only be regarded as an appetizer, and it is not enough to fill the stomach. But the big table for chip competition in the United States has just begun, and every big dish will come up.
Referring to last year, South Korea did a ten-year chip base construction plan, in order to cope with the competition between China and the United States, South Korea will invest 450 billion US dollars for the development of the chip industry, most of which are enterprise investment, the South Korean government encourages enterprise investment through low-interest loans, subsidies, tax cuts and talent training, etc., and the overall investment in the United States is definitely much greater than that of South Korea, what can 52 billion do?
Moreover, the 52 billion US dollars were finally put into practice, and I am afraid that there was not even 520 million US dollars for the construction of chip factories. To be honest, how to spend all $52 billion on building a chip production plant, and all patents need to be purchased, even if all patents can be bought, the patent party is willing to sell, the result is that $52 billion is not enough.
Of course, the US government's 52 billion can at least leverage about 800 billion of capital in the financial markets. If it was the United States 20 years ago, this money would have been enough to kill Japan and prop up a new puppet, and it was the same way back then.
However, in the United States now, how much of this 52 billion yuan is more than the hands of these vested interest groups such as Intel? The disaster relief fund does not come out of the direct subordinate drama, it is really too much acting, but the actors are different.
Finally, 52 billion stimulus chip production? The key to the impact lies in the construction of the chip industry chain
Finally, let me combine SMIC to make an analysis, first think about a question: Why did the semiconductor concept and other stocks of the chip concept before it soared, and SMIC is still lying still?
Saying that the chip leader of A shares is SMIC, it is estimated that no one will have objections, but the strange thing is that the dragon head is lying still, and some upstream and downstream of the supply chain are soaring. The reason is also very simple, the competition in the chip industry is originally based on the supply chain situation.
SMIC's role is to revitalize domestic supply chains and allow the entire industry to take root and sprout in the mainland. Therefore, SMIC's biggest task is to live, at this stage does not need to impact the world's first, does not need to lead the industry, as long as you live, even if it is stumbling to live, the entire industrial chain is alive in China, as long as you live, China's semiconductors will always have the opportunity to win.
But if there is only one enterprise firing chip, the materials in each link must be imported, the instruments in each link must be imported, the talents must be imported, if everything is imported, then why should the enterprise build a factory in this place, after all, there is a place with complete supporting facilities and low prices, why should it be willing to seek far away?
Therefore, this matter needs to be promoted by the United States, because the market economy they advocate can no longer solve this problem. The US business community reshaped the pattern of the semiconductor industry, in general, strategic and tactical tendencies to continue to consolidate and enhance its advantages in the most cutting-edge field of integrated circuits, especially in the integration of the design-manufacturing industry of chips, and continue to deepen the moat.
Intel now even has to do foundry, plus pulling TSMC over, and Samsung, which is actually in the hands of the United States. Such a cutting-edge manufacturing part, the United States to produce capacity + cost scale advantage double kill.
That is to say, the United States wants the final molding of terminal products to get rid of China, which is still far away and impossible. The upstream raw materials and downstream application markets of the chip industry chain are in East Asia, and the funds invested by the United States are not enough to move these two to the United States, so the actual effect may not be as good as South Korea.
Finally, the chip is the crystallization of human wisdom, is an indispensable core product for future development, is a good industry that can bring huge increments to the economy, good business, the United States wants to use just 52 billion to eat alone?
Final words: it shows that the American eagle sauce has finally returned to taste, and a completely free market economy will not work
Why doesn't it work? Because of the completely free economy, it is the big fish eating the small fish, and then the big fish look at where there is money to be made, where to go. Where is the money to be made now? Asia, especially China. To be precise, the consumer side of the United States also has a lot of money to make, but it is the best solution to put the production end in Asia and make money from Asia and the United States at the same time.
So the American Eagle Sauce has been advocating the free market for many years, and it turns out that it is a piece of meat in the free market, so it is urgent to engage in industrial support, you are all industrial support, and it is still a free economy.