Why US chip manufacturing is in line for a $37 billion windfall
25 February 2021 | Melanie Mingas
US chip manufacturers had their wishes granted yesterday when President Joe Biden pledged US$37 billion in funding to boost manufacturing.
The move is part of an executive order, signed by Biden Wednesday, to conduct a 100-day review into the supply chains of key products, including semiconductor chips.
The order calls for a review of four supply chains – computer chips, large capacity batteries, active pharmaceutical ingredients and critical and strategic materials, including rare-earth minerals – followed by six further sector-specific supply chain reviews.
These will focus on defence, public health and biological preparedness, energy and food production, among other areas. Reviews will be complete within a year, but no timeline to implement recommendations was put forward.
As part of the review Biden said he would seek US$37 billion in funding for legislation to increase chip manufacturing in the US after a shortfall of semiconductors forced automakers and other manufacturers to cut production.
Biden said on Wednesday: "I’m directing senior officials in my administration to work with industrial leaders to identify solutions to the semiconductor shortfall.
“Congress has authorised a bill but they need ... $37 billion to make sure that we have this capacity. I’ll push for that as well."
The measures were also included in this year’s National Defense Authorization Act.
While talk currently focuses on supporting the auto industry, other sectors which depend on the technology, are likely to benefit too. For example, Apple Inc, Qualcomm Inc and Nvidia Corp currently rely on outside manufacturers such as Taiwan Semiconductor Manufacturing Co Ltd (TSMC) or Samsung Electronics Co Ltd for their chips. The shortage has already hit gaming consoles such as Microsoft Corp’s Xbox and Sony Corp’s Playstation, while Foxconn’s chairman revealed on Saturday that there will be “limited impact” from the ongoing shortage.
In addition to boosting production, Biden wants to protect and strengthen supply chains.
In January the bipartisan CHIPS for America Act was introduced to Congress, a move applauded by the Semiconductor Industry Association (SIA).
It said at the time such action would "invest tens of billions of dollars in semiconductor manufacturing incentives and research initiatives over the next five to 10 years to strengthen and sustain American leadership in chip technology, which is essential to our country’s economy and national security."
SIA president and CEO Keith Jackson, said: "Semiconductors were invented in America and US companies still lead the world in chip technology today, but as a result of substantial government investments from global competitors, the U.S today accounts for only 12% of global semiconductor manufacturing capacity."
The CHIPS for America Act includes a range of federal investments to advance U.S. semiconductor manufacturing, including $10 billion for a new federal grant program that would incentivize new domestic semiconductor manufacturing facilities. The bill also includes a refundable investment tax credit for the purchase of new semiconductor manufacturing equipment and other facility investments.
Earlier this month, SIA sent an open letter to the White House asked for " substantial funding for incentives for semiconductor manufacturing" to be considered in Covid recovery plans. The letter was signed by the CEOs of AMD, Intel Corp, IBM Qualcomm Inc, Micron Technology Inc and Advanced Micro Devices Inc, among others.
Warning "the cost of inaction is high", the letter called for "substantial funding for incentives for semiconductor manufacturing, in the form of grants and/or tax credits, and for basic and applied semiconductor research".
At the time of writing SIA had yet to comment on Wednesday's executive order.
The US has commercial chip manufacturing in 18 states, and semiconductors are the country's fifth-largest export. However, SIA said significant semiconductor manufacturing incentives have been put in place by other countries, and "US semiconductor manufacturing growth lags behind these countries due largely to a lack of federal incentives".
Biden said yesterday: "The bottom line is simple: The American people should never face shortages in the goods and services they rely on, whether that's their car or their prescription medicines or the food at the local grocery store,
"This is about making sure the United States can meet every challenge we face in this new era. Pandemics, but also in defense, cybersecurity, climate change and so much more. And the best way to do that is by protecting and sharpening America's competitive edge by investing here at home," he continued.
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