On May 13, it was reported that countries led by the United States and Europe have invested nearly $81 billion in the research and development and production of next-generation semiconductors, intensifying the competition in the global chip industry, and the competition for chip dominance is intensifying. This is just the tip of the iceberg of the nearly $380 billion that governments around the world have allocated to industry leaders such as Intel and TSMC to boost the production of more powerful microprocessors. The rapid increase in funding has pushed the U.S.-led race for cutting-edge chip technology to a critical turning point, which will shape the future of the global economy. "In the technology race with China, we have crossed the line, especially in the field of semiconductors." Jimmy Goodrich, senior China strategic technical adviser at the RAND Corporation, said, "Both sides see this as the overarching goal of their national strategies." ”
The huge investment of the United States and its allies in the field of chips has exacerbated the situation of international trade wars, including in places such as Japan and the Middle East. However, this is a silver lining for Intel. As a former chip manufacturing giant, Intel has been powerless in the face of strong competitors such as Nvidia and TSMC in recent years. The U.S. investment plan has entered a critical phase. Last month, U.S. officials announced $6.1 billion in funding to Micron Technology, the country's largest maker of computer memory chips. This is the latest multi-billion-dollar U.S. subsidy for advanced domestic chip manufacturing plants, after nearly $33 billion in financial commitments to companies such as Intel, TSMC and Samsung Electronics. Behind all of this is the CHIPS and Science Act of 2022, signed by US President Joe Biden. The bill promises a total of $39 billion in funding for chipmakers, as well as an additional $75 billion worth of loans and guarantees, as well as tax credits of up to 25%. This is an important move by the Biden administration to revive domestic semiconductor production, especially cutting-edge chip production, and a key strategy for its re-election in November. And these U.S. investments are not just aimed at countering China, but also aimed at narrowing the gap with Asia's chip industry centers, such as Taiwan and South Korea. The funding rush has also intensified competition between the United States and its allies in Europe and Asia, as they all compete for markets that demand growing equipment in areas such as artificial intelligence and quantum computing. U.S. Commerce Secretary Gina Raimondo told a conference in Washington last month: "Technology is evolving at an unprecedented rate, and our competitors are not slacking off." They're moving fast, so we have to step up as well. "Not to be outdone, the European Union has launched a $46.3 billion incentive package aimed at expanding local manufacturing capabilities. According to the European Commission's projections, public and private investment in the sector will total more than US$108 billion, mainly to support large manufacturing bases. Two of Europe's largest projects are in Germany: Intel plans to invest about $36 billion in a wafer fab in Magdeburg, which is expected to receive nearly $11 billion in government grants; and a TSMC joint venture worth about $11 billion, half of which will be funded by the government. Despite this, the European Commission has yet to give final approval for the government assistance from the two companies. Some experts warn that the EU's current level of investment may not be enough to meet its target of producing 20% of the world's semiconductors by 2030. Other European countries have faced considerable challenges in raising funds for large-scale projects or attracting companies. Spain announced in 2022 that it would invest nearly $13 billion in semiconductors, but only a small amount of money has been released to a few companies so far due to the lack of a semiconductor ecosystem in the country. Emerging economies are also struggling to enter the chip industry. India approved an investment plan backed by $10 billion government funds in February, including a bid by the Tata Group to build the country's first major chip manufacturing plant. Saudi Arabia's Public Investment Fund is planning an unspecified "massive investment" this year to open the country's foray into semiconductors, with the aim of diversifying its economy away from fossil fuels. Japan has raised about $25.3 billion for its chip program since launching its chip strategy in June 2021. Of this amount, $16.7 billion has been allocated to projects that include two TSMC foundries in Kumamoto and another in Hokkaido. In addition, Rapidus, a local Japanese company, plans to start mass production of 2-nanometer chips in Hokkaido in 2027. Japanese Prime Minister Fumio Kishida wants to raise $64.2 billion, setting a goal of increasing domestic chip sales to about $96.3 billion by 2030, about three times the current level. In contrast, instead of providing direct financial assistance and financial support as the United States and Japan, the South Korean government has chosen to act as a facilitator to support its deep-pocketed chaebol group. In the field of semiconductors, the South Korean government has played a supporting role in spending about $246 billion, as part of the government's broader vision for homegrown technologies, from electric vehicles to robotics. South Korea's finance ministry revealed on Sunday that they will soon unveil a $7.3 billion chip plan to further the effort. However, the surge in funding for government support around the world also poses a potential risk that it could lead to an oversupply of chips. Sara Russo, an analyst at Bernstein, warned: "All of this investment in manufacturing, which is largely driven by government investment rather than market-driven, could eventually lead to the problem of overcapacity." "However, this risk has been mitigated to some extent as the planned new capacity will take longer to come online. Export controlsCompanies like Nvidia, Qualcomm, and Broadcom are currently leading the world in chip design in key areas such as artificial intelligence. However, there are differing opinions in the industry on the magnitude of this lead. Some experts believe that China is years behind the lead, while others insist that China, the world's second-largest economy, is at a critical juncture to catch up. Currently, China has the largest number of semiconductor factories in the world, not only producing conventional conventional chips, but also accumulating the know-how needed for leapfrogging technological advancements. In addition, China is working on developing domestic alternatives that rival Nvidia's AI chips and other high-end silicon chips. In order to prevent its geopolitical rivals from gaining access to the latest semiconductor technology, the United States has imposed a series of restrictions, which have hindered China's development to some extent. Currently, the Biden administration is trying to win over allies in Europe and Asia to impose export controls on the precision equipment necessary to make the most cutting-edge chips. Paul Triolo, a former U.S. government official and now a China and technology policy expert at the Albright Stonebridge Group, said the U.S.-led crackdown has actually given Chinese companies a significant incentive to upgrade their capabilities, move up the value chain and promote cooperation between companies. This process has also strengthened government support for domestic companies. The threat of chip supply disruptions has also caught Raimondo's attention. The former Rhode Island governor and former venture capitalist aims to produce 20 percent of the world's most advanced logic semiconductors at U.S. factories by around 2030. According to the Semiconductor Industry Association, the United States is expected to occupy 28% of the market by 2032, thus becoming the world's second largest chip producer. In the process of building these factories, competition has also intensified, which poses a certain risk for Biden, who is seeking re-election. He put the promise of a manufacturing revival at the heart of his re-election campaign with Donald Trump. Billions of dollars have been awarded for chip projects in Arizona, which the state is seen as key to victory in the U.S. election in November. However, the fab that Intel and TSMC plan to build in the United States will take a long time to build and start producing chips, which will test voters' patience to see the promised jobs delivered. As of now, Trump has not articulated his plans for semiconductors, including CHIPS Act funding. After a lengthy period of due diligence, these funds are not expected to begin disbursing until around election day.
Source | NetEase Technology Channel
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