With the passing of the CHIPS Act of 2022, semiconductor companies are evaluating how, and whether to pursue a piece of the $52.7 billion in federal subsidies allocated to support chip manufacturing. About three-quarters of the CHIPS Act funding to be allocated over the next five years ($39 billion) is designated for the construction of semiconductor fabrication plants, or “fabs,” including $2 billion specifically designated for mature semiconductors essential to the military as well as the automotive and manufacturing industries. The remainder of funds will advance a more robust domestic ecosystem for semiconductor production, including research and development and workforce cultivation.
The CHIPS Act prohibits funding recipients from expanding semiconductor manufacturing in China, and other countries defined by US law as posing a national security threat to the United States. These restrictions would apply to any new facility, unless the facility produces legacy semiconductors predominately for that country’s market. The CHIPS Act may present semiconductor companies with an opportunity, but realizing its potential will require companies rethinking of global strategy as well as a plan for digital transformation, capital project management and financial planning. Geopolitical uncertainty, combined with recent dramatic shifts in the market, requires companies to make careful assessments about their place in the semiconductor value chain and how they can improve their position.
Successful expansion of semiconductor capacity will require companies to work together across their partner ecosystem, including foundries, semiconductor equipment, intellectual property, design services, fabless companies and system manufacturers. Here is an opinion piece we found of interest relating to the CHIPS Act to the importance of it for the US semiconductor industry.
The Chips Act Puts the Semiconductor Industry Back on the Right Path
In an opinion piece “The Chips Act Puts the Semiconductor Industry Back on the Right Path” for Barron’s, Glenn O’Donnell, vice president and research director at Forrester Research, discusses the importance of the Chips and Science Act which contains a huge appropriation of $280 billion, but he believes the most important aspect is on the $54 billion segment commonly known as the “Chips Act.” O’Donnell says most of the lobbying efforts to pass this legislation revolve around national security issues to bring more semiconductor manufacturing facilities, or fabs, to U.S. soil. He believes this will help the US to compete more effectively on the world stage.
O’Donnell feels the real value to having more fabs in the U.S. and Europe is a more diverse, therefore, more resilient semiconductor supply chain. He adds that 80% of semiconductor chips are now made in Asia. He adds that while the ongoing chip shortage has many causes, geographic focus is certainly prominent among them. Some of the beneficiaries of the Chips Act are the chipmakers. Intel, Micron, Samsung, and TSMC are some of the more prominent names at the center of this movement because they actually own and run the fabs. While he admits that semiconductor company investors are likely in for a rough ride for the short term, but we are optimistic for the long term. O’Donnell argues that everything we touch seems to need semiconductors, and that need is growing despite the economy. Read the full article on Barron’s.
Disclosure: Fatty Fish is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
The Fatty Fish Editorial Team includes a diverse group of industry analysts, researchers, and advisors who spend most of their days diving into the most important topics impacting the future of the technology sector. Our team focuses on the potential impact of tech-related IP policy, legislation, regulation, and litigation, along with critical global and geostrategic trends — and delivers content that makes it easier for journalists, lobbyists, and policy makers to understand these issues.
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