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  • Largest CHIPS Act Awards Seen Coming for U.S. Companies

    Flag of USA on a processor, CPU Central processing Unit or GPU microchip on a motherboard. Congress passes the CHIPS Act of 2022 to strengthen domestic semiconductor manufacturing, research and design.

    Source: EE Times

    U.S. chipmakers Intel and Micron are likely to win the largest share of the $52 billion in CHIPS Act awards this year, analysts told EE Times. With the U.S. 2024 presidential election approaching, the awards will help President Joe Biden show that he’s creating jobs and returning semiconductor manufacturing to the nation following a long history of offshoring, the analysts said.

    Asian chipmakers Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung, also among the top-four companies that have sought CHIPS subsidies, are lower on the priority list because the U.S.government wants to avoid the perception of subsidizing foreign companies, according to the analysts.

    A major goal of the CHIPS Act funding is to significantly reduce U.S. reliance on imports of chips from Asia. But Paul Triolo, who advises tech clients at Albright Stonebridge Group, said he doesn’t expect the U.S. government program to do much to help build a domestic ecosystem of supporting suppliers to the industry.

    “Increasing the U.S. portion of global manufacturing to 20-30% by 2030 is hugely ambitious and will still leave the U.S. heavily dependent on Asia-centric supply chains for wafers, materials and, most importantly perhaps, advanced packaging,” he told EE Times. “Even with some U.S.-based advanced-packaging capacity coming on line in 2026-2027 via Intel’s Foveros process at New Mexico-based facilities, most or all of the output from TSMC and Samsung facilities will be shipped back to Asia for packaging for the foreseeable future, highlighting the challenges of ‘onshoring’ production of something as complex as an advanced GPU.”

    BAE Systems, Microchip Technology assisted

    So far, the U.S. Chips Program Office (CPO) under the Department of Commece (DoC) has signed a pact to provide $35 million to military contractor BAE Systems to expand an existing chip facility in New Hampshire that makes parts for F-35 fighter jets. The CPO also agreed to provide $162 million to Microchip Technology to help boost its U.S. production of microcontrollers that are also used in defense equipment.

    This month, DoC signed a preliminary agreement to give GlobalFoundries $1.5 billion under the CHIPS Act, to help strengthen U.S. domestic supply chain resilience and bolster U.S. competitiveness in current-generation and mature-node production, DoC said.

    Intel CEO Pat Gelsinger has been lobbying for a large portion of the $52 billion while urging the U.S. to relax export controls that are throttling its sales to China, the world’s largest semiconductor market. Intel counts on China for about one-third of its revenue. More recently, Intel has been urging the U.S. government to give it more than $10 billion in subsidies, according to a Bloomberg report.

    CHIPS Two

    At an Intel event on Feb. 21, Gelsinger urged DoC Secretary Gina Raimondo to support a follow-up “CHIPS Two” act.

    “I suspect there will have to be—whether you call it, CHIPS Two or something else—and continue to invest if we want to lead the world,” Raimondo replied. “We fell pretty far. We took our eye off the ball. We used to manufacture 40% of the world’s chips in this country. If we want to really compete globally, we’re going to have to continue to invest.”

    Analysts say the CPO is walking through a political minefield.

    “It’s the U.S. government: they have more i’s to dot and t’s to cross than any other organization in the world,” Dan Hutcheson, TechInsights senior research fellow, told EE Times. “Worse, it’s been more politicized than normal with the 2024 Presidential election coming.”

    TSMC and Samsung declined to comment.

    Raimondo said at the Intel event that she expects announcements of more subsidies within a few weeks.

    White House and Commerce officials are looking at the timing of big-ticket announcements for particularly domestic firms and looking for splashy ribbon-cutting ceremonies and other events to promote one of President Biden’s signature achievements as the political season heats up, Triolo said.

    “Ideally, the big grants would come closer to the election, but administration officials will have to get these out soon to avoid the appearance that the whole program is facing stiff headwinds,” he added.

    Reliance on Taiwan serious

    Triolo said the CHIPS Act awards will fail to ameliorate the excessive U.S. reliance on Taiwan, which Commerce Secretary Gina Raimondo has called a “massive national security vulnerability.”

    “Even if everything goes per the now-daily-slipping timeline, the advanced-node production coming online in the 2026-2028 timeframe will be a small fraction of the overall dependence of leading U.S. chip design firms on Taiwan,” he said. “Any potential military conflict over Taiwan remains a far greater threat to U.S. national and economic security.”

    TSMC counts U.S. chip designers Apple, AMD and Nvidia among its largest customers. U.S.-based Intel also relies on TSMC to make some of its most advanced silicon. In addition to TSMC, Taiwan’s United Microelectronics Corp. has recently become an Intel supplier.

    Intel, Micron, TSMC and Samsung also count on sales and, in some cases, manufacturing of their products in China, which is one of the “guardrails” that the U.S. government seeks to restrict as part of the CHIPS Act subsidies.

    “The conditions for things like the guardrails will have to be made public as part of the process, and there are a ton of minefields here, particularly if the CPO tries to accommodate individual company preferences to not have to abide by some of the guardrails while agreeing to others,” Triolo said. “There is a lot of pressure on the CPO to show fairness, transparency and vigilance to due diligence to show U.S. taxpayers that money is being well spent, that high quality U.S. jobs are being created, and that China is not benefitting in some way. Intel is arguing for special treatment because of its major commitment to R&D in the U.S., and its financial situation is complicated by U.S. export controls on major customers such as [China’s] Huawei, a major source of the company’s cashflow to fund expansion in the U.S.”

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