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Congress continues playing hot potato with $52b CHIPS Act subsidies

Senate throws funding act back over to House to pass

Senators today inched billions of dollars in US semiconductor fabrication subsidies a little closer to reality.

After more than a year of back-and-forth debate, the Senate voted 64-33 to approve the CHIPS and Science Act [PDF], which among other things aims to bolster domestic chip manufacturing and accelerate scientific research. The bill now heads to a crunch vote in the House of Representatives.

Specifically, the $280 billion bill [PDF] unlocks roughly $52 billion in subsidies – known as the CHIPS Act fund – for more semiconductor factories on US soil.

“Looking backwards for many years, American semiconductor companies lead the world in both design and manufacturing of this critical technology. But the truth is, our leadership has languished,” Senator Mark Warner (D-VA) said Tuesday on the Senate floor in which he urged a speedy vote on the bill.

“This funding sends a message that the United States is putting a strong downpayment on maintaining our edge in the global technology race in preventing global supply chains from being weaponized against the US or, for that matter, against our allies.”

The Senate’s vote may be fueled in part by efforts to combat growing competition from China in the semiconductor arena. Last week, we learned Chinese semiconductor giant SMIC has been making chips based on a 7nm process, despite concerted efforts to prevent the foundry operator from acquiring the necessary equipment and intellectual property to do so. Previously, it was thought the Chinese had only recently managed to produce 14nm chips.

The majority of funds allocated by the bill will go toward subsidizing the construction of semiconductor fabs in the US, many of which are already under construction. Intel, one of the strongest proponents of the spending bill, has already delayed breaking ground on more than $40 billion worth of new foundry capacity over the Congressional stall, with as much as $80 billion of additional investments hinging on the CHIPS Act’s passage.

At the heart of the issue: the Senate and House previously and separately approved legislation enabling the public investment but – thanks to politics and differences in Democrat and Republican priorities – both halves of Congress have been unable to reconcile their versions into one bill for the President to sign.

Now it's hoped this simplified bill, which will also create startup-supporting regional technology hubs around the nation among other initiatives, will make it through the House and to Biden's desk.

Meanwhile, Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung, the two largest foundry operators, have announced $12 billion and $17 billion fabs in Arizona and Texas respectively. And if documents filed with Texas comptroller's website last week pan out, Samsung’s US foundry investments could exceed $200 billion over the next two decades.

And that’s not counting the roughly $20 million chipmakers are estimated to have spent lobbying for the bill’s passage.

If the act survives the House, don’t expect immediate results. It typically takes three to five years to bring leading-edge foundries online, and in many cases longer to work out any kinks in the assembly process. So-called copy exact manufacturing, in which new fabs follow existing fabs, should spin up faster.

What’s more, these facilities aren’t cheap, costing in the neighborhood of $10-$15 billion each. As a result, the first fabs funded by this bill are unlikely to make a meaningful dent in the global semiconductor shortage until long after the 2024 presidential election.

In addition to funding domestic semiconductor manufacturing, Reuters reports the bill will allocates up to $170 billion in new spending on US scientific research over the next five years, largely in a bid to out compete China. However, an additional appropriations bill will need to be passed before that funding can be made available.

As to which chipmakers stand to benefit most from the bill, the jury is still out, though Intel is likely a safe bet. ®

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