The top manufacturers will share 90% of the subsidies, and more than 400 manufacturers will stare at it?
On February 21, local time, U.S. Secretary of Commerce Gina Raimondo (Raimondo) said in an online format when attending Intel's first "IFS Direct Connect" event that it is necessary to continue to invest in the U.S. semiconductor industry, and may launch "CHIPS 2" in order to regain global leadership and meet the demand for artificial intelligence (AI) processors.
"I SUSPECT THAT IF WE WANT TO LEAD THE WORLD, WE HAVE TO KEEP INVESTING – WHETHER IT'S CALLED 'CHIPS 2' OR WHATEVER. Raimondo said.
In her speech, Raimondo emphasized the importance of the semiconductor industry, especially in light of the growing computing needs of AI technology. She cited her discussions with OpenAI CEO Sam Altman, who is seeking support from the U.S. government for his "core-making" program.
Raimondo said that as industry leaders predicted, the number of chips needed for AI applications is staggering. At the same time, the surplus of AI processors will enable more businesses to adopt AI, which will become a competitive advantage for the United States.
In August 2022, U.S. President Joe Biden officially signed the CHIPS and Science Act of 2022 (referred to as the "CHIPS Act or CHIPS Act") at the White House, making it an official effective law. The bill will provide about $52.7 billion in government subsidies for semiconductor production and research in the United States, and provide more than $200 billion in funding to stimulate innovation and development in other U.S. technology fields to enhance U.S. competitiveness in the technology field.
Of the $52.7 billion in subsidies, $39 billion will be used to subsidize the chip manufacturing industry, of which $37 billion will be used to subsidize the construction of advanced process fabs to promote the economic and national security interests of the United States. In addition, the U.S. government will provide $75 billion in loans and loan guarantees for chip manufacturers.
Although the $39 billion subsidy provided by the CHIPS and Science Act for the chip manufacturing industry seems to be a lot, in fact, the construction cost of a cutting-edge process fab has exceeded $20 billion, not to mention the plans of Intel, TSMC, Samsung, GF, Micron, Global Wafer and many other semiconductor manufacturers to invest and build factories in the United States, there will undoubtedly be a situation of "more monks and less porridge".
After more than a year of review, the U.S. Department of Commerce has recently begun disbursing subsidies to a large number of applicants, and three announced subsidy programs include BAE Systems' U.S. subsidiary, Microchip, and GF.
On December 11, 2023, the Biden administration announced that BAE Systems, a U.S. defense contractor, will receive the first federal grant of approximately $35 million for a new program designed to support critical semiconductor manufacturing in the United States. BAE Systems will use the $35 million grant to quadruple its U.S. domestic production of chips for F-15 and F-35 fighter jets, as well as satellites and other defense systems. The subsidy is intended to help ensure a safer supply of components that are critical to the United States and its allies.
On January 5, 2024, the U.S. Department of Commerce said it plans to release $162 million in government subsidies to Microchip Technology to increase the company's chip and microcontroller (MCU) production. The funds will allow Microchip to triple production of semiconductors and MCUs at its two U.S. facilities.
On February 20, 2024, GF announced that the U.S. Department of Commerce has decided to provide $1.5 billion in direct subsidy funding to GF under the U.S. CHIPS and Science Act. In addition, the company will receive more than $600 million in support from New York State over the next 10 years to help it grow and modernize. GF said it has a $12 billion investment plan for its U.S. manufacturing base over the next 10 years, which is expected to help it meet growing demand for domestic chips and create more than 1,500 manufacturing jobs and about 9,000 construction jobs.
Recently, according to Bloomberg, citing anonymous sources, the Biden administration is negotiating with Intel and may provide Intel with more than $10 billion in subsidies, which is expected to be the largest subsidy so far in the United States to promote local production of semiconductors. Intel has previously spent $20 billion to expand its Arizona fab, invested $3.5 billion to upgrade its New Mexico factory, and invested $20 billion to build a large wafer fab in Ohio, promising "it could grow to as much as $100 billion in the next decade," and the new fab is expected to be the largest chip factory in the world. However, due to the slowdown in the chip market and slow federal funding, the completion of Intel's Ohio factory has been delayed until 2026.
Judging from the information that has been exposed so far, BAE Systems, Microchip, GF and Intel will receive a total of $11.697 billion in subsidy funds for the CHIPS and Science Act. In other words, the $39 billion chip manufacturing subsidy is only about $27.3 billion.
You must know that the current subsidies in the United States for many semiconductor manufacturers such as TSMC, Samsung and Micron have not yet been announced.
Among them, TSMC's investment in the Arizona wafer factory in the United States is as high as 40 billion US dollars, second only to Intel's new wafer factory investment in the United States, if Intel can get a subsidy of 10 billion US dollars, according to normal rules, TSMC is also expected to be able to get a subsidy of close to 10 billion US dollars.
Samsung has also previously invested $17 billion to build a 5nm wafer fab in Taylor, Texas, USA. Referring to the proportion of Intel's investment and subsidy amount, Samsung is expected to receive a subsidy of nearly $5 billion.
On the day the passage of the U.S. "Chips and Science Act", Micron announced a $40 billion investment plan, which will last until 2030, and will build advanced memory chip manufacturing facilities in the United States in stages. Also referring to the proportion of Intel's investment and subsidy amount, Micron is expected to get close to $10 billion in subsidies.
According to the above data, if the subsidies that the above seven manufacturers can obtain are deducted, then the chip manufacturing subsidies of the "CHIPS Act" in the United States may only be about 2.3 billion US dollars.
According to the news released by the U.S. Department of Commerce on August 9, 2023 local time, on the first anniversary of U.S. President Joe Biden's signing of the CHIPS and Science Act, more than 460 companies have expressed interest in applying for the $52.7 billion in subsidy funds for the bill. Earlier information shows that as of May 2023, the U.S. Department of Commerce has received more than 400 letters of intent to apply for chip project subsidies.
Obviously, BAE Systems, Microchip, GF and Intel will receive a total of $11.697 billion in subsidies, and TSMC, Samsung and Micron may receive a total of $25 billion in subsidies, and obviously the remaining $2.3 billion of $39 billion in subsidies is far from enough to subsidize the other remaining 400 or so semiconductor companies.
In other words, Intel, TSMC, Samsung and Micron, the four leading manufacturers, may take away $35 billion (nearly 90%) in subsidies, leaving more than 400 companies that apply for subsidies to share the remaining $4 billion.
So, for the U.S. government, how to solve this situation of too many monks and too little porridge?
Method 1: The only way to do this is to lower the subsidy standard that all enterprises can get, and everyone will get a little less, so that everyone can get a little bit. However, the big manufacturers at the top may not agree.
For example, Intel signed an agreement with the German government last year to invest more than 30 billion euros in Magdeburg to build a large-scale chip manufacturing base, and the German government has provided Intel with subsidies of about 10 billion euros; NXP Semiconductors and Bosch have cooperated to invest 10 billion euros in the eastern German city of Dresden to build a semiconductor factory, and the German government will also provide subsidies of about 5 billion euros, and TSMC's first wafer factory in Kumamoto, Japan, has also received nearly half of the subsidies from the Japanese government.
If the U.S. government is unable to provide sufficient subsidies to these leading wafer manufacturers, it will cause the relevant manufacturers to reduce their investment in the United States and increase their investment overseas.
For example, Intel had postponed the groundbreaking ceremony of its Ohio fab for a time, and the reason for speculation at that time was the uncertainty caused by the stagnation of the "CHIPS Act" in the United States. Recently, Intel has postponed the mass production of its Ohio fab to 2026.
TSMC announced in July that the mass production of its 4nm fab in Arizona would be postponed from 2024 to 2025. At the beginning of this year, TSMC postponed the mass production of its 3nm wafer fab in Arizona from 2026 to 2027 or 2028. Although the official reason given is the shortage of skilled workers and other reasons, the outside world speculates that it may also be affected by the delay in the subsidy of the US Chips Act.
Although Global Wafers announced on June 27, 2022, it plans to invest $3 billion to build a 12-inch semiconductor wafer factory in Sherman, Texas, USA. However, Global Wafers also said that the investment will depend on the US Chips Act providing subsidies for its factory construction plans.
OPTION 2: LAUNCH WHAT RAIMONDO CALLS THE "CHIPS 2" PROGRAM, THE SECOND "CHIPS ACT" PROGRAM, TO RAISE MORE MONEY TO SUBSIDIZE SEMICONDUCTOR MANUFACTURERS WHO BUILD OR EXPAND PRODUCTION IN THE UNITED STATES.
Of course, it may still take a long time for the plan to be signed off by the U.S. government, and it is unclear how much money will be raised. But re-"drawing a big pie" can at least appease those semiconductor companies that may not receive subsidies or can only get less subsidies. Let them continue to invest in the United States.
Editor: Xinzhixun-Rogue Sword