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The CHIPS Act won't end US reliance on foreign foundries
For all the billions poured in, is a 'Made in America' sticker worth it?
Analysis With all the fanfare and foundry expansions around the signing of the $280 billion CHIPS and Science Act, you'd be forgiven for thinking that the semiconductor shortage will soon be over, and the US will emerge as a silicon powerhouse rivaling that of Taiwan's TSMC and South Korea's Samsung and SK Hynix.
But that is a nationalist fantasy that proponents of the bill on both sides of the political aisle have peddled for well over a year, and one companies like Intel, Micron, and others have only been too happy to play into.
The reality is the $52 billion in subsidies and $24 billion in tax credits allotted by the bill to fund domestic foundry expansions won't go very far given the extreme cost of these facilities and only keep pace with foreign rivals building on American soil already.
Building a foundry in the US can cost anywhere from $10 billion to $17 billion and take three to five years to complete. The subsidies will barely cover four wafer fabs in their entirety, and none of them will come online until the latter half of the decade at the earliest. A quick fix, the bill is not.
Divide the funding up among the growing list of foundry operators scrambling for a piece of the pie, and there's even less to work with.
Of course there's the argument that US tax dollars should go toward American chipmakers and shouldn't be used to prop up Asian-Pacific foundry operators. After all, the CHIPS bill was influenced heavily by the idea that, to secure its future, the US needed to end its reliance on foreign-made chips.
By this logic, Intel, which is in the process of opening its fabs to contract manufacturing, would be first in line for a payout. It's the kind of thinking that the company's CEO, Pat Gelsinger, was betting on. And to his credit, he's put tens of billions of dollars of his company's money where his mouth is and didn't wait to start building new fabs until the bill was passed.
But Intel, as massive and influential as it is, doesn't have a lot of experience producing the kinds of microcontrollers needed for things like engine control units, air conditioners, or even your coffee maker. Intel is currently mass producing chips based on a 10nm process and is expected to debut a 7nm process sometime next year.
But that's not going to help the automakers, who've seen their production lines crippled by a lack of chips. It's not economically sound to build the litany of microcontrollers necessary to make your engine run in perfect harmony using the latest fab tech.
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- Intel close to deal for semiconductor plant in Italy
- Micron pledges $40b for US fabs as financial headwinds mount
Intel previously offered to help chipmakers adapt designs meant for older processes for production in its fabs. However, chipmakers probably aren't keen on the idea of paying Intel twice to produce their chips when they can go to TSMC or Samsung and have it built for a fraction of the cost.
Further, Intel isn't the only US foundry operator. GlobalFoundries is the fourth largest foundry operator just behind Taiwan's UMC, and has made a name for itself producing a diverse set of process tech targeted at areas that don't necessarily want or need bleeding-edge silicon. These include radio communications, imaging, optical, automotive, industrial, and IoT.
The US simply doesn't have a replacement for TSMC and Samsung's leading-edge 5nm and soon 3nm tech that Apple, AMD, Nvidia, Qualcommm, and other American chipmakers rely on. GlobalFoundries tops out at 12nm using a process designed by Samsung, and Intel has yet to bring a 7nm process to market.
The US CHIPS and Science Act has done its job; it has attracted hundreds of billions of dollars of domestic and foreign foundry capacity and packaging tech to the United States. What it won't do is end US reliance on Asian-Pacific fabs. US foundry operators like Intel, GlobalFoundries, and Micron simply aren't in a position to replace them, and $52 billion in subsidies isn't about to change that.
The fact remains that Americans aren't just addicted to chips, they're addicted to cheap chips, and for that, we're still going to need TSMC, Samsung, SK Hynix, and others. The good news is all of these companies are investing in the US to the tune of tens of billions of dollars. So while the bill may have been sold on the promise of semiconductor independence, we may have to make do with "Made in America." ®