Opinion: These are the chip companies that will benefit the most from major government incentives
The pandemic has created enormous challenges for semiconductor companies.
Unprecedented demand has pushed up prices and backlogs of chips and equipment as supply chains slow down. At the same time, there is growing concern about dependence on China and Taiwan. As a result, policymakers passed $53 billion Chips and Science Act.
With the golden age of globalization likely behind us, we are seeing an increase in nationalist policies. Some of this is due to circumstances that cannot be controlled, such as Xi Jinping’s violation of Taiwan and Vladimir Putin’s war with Ukraine. Even Taiwan Semiconductor Manufacturing Co.
TSM,
Founder Morris Chang is calling globalization almost dead.
The passage of the Science and Chips Act is the start of a longer process to build greater resilience and reduce dependence on Taiwan and China. It’s also about protecting domestic technological leadership and responding to threats to national security. These three items form a trio of key concerns for legislation passage: national security, supply chain resiliency, and technology leadership.
And even though the bill passed, there’s still a second wave of activity among semiconductor companies, and that’s how the dollars are misappropriated. That begs the question of how the United States “should” distribute subsidies to get the best results for the United States and our global trading partners.
How funding should flow
I believe Intel
INTC,
The largest semiconductor manufacturer in the United States, will receive the largest share of the total $52.7 billion, led by $39 billion in manufacturing incentives.
An American company, Intel has made huge commitments to expand manufacturing in the US, including foundry services. That would meet critical defense and infrastructure requirements. With questions surrounding Intel’s capabilities looming, there will be many doubts, making this the last time for Intel to show its plans under CEO Pat Gelsinger to regain its leadership position in the industry. turmeric.
The next biggest part of the Chips Act will belong to Micron Technology
MU,
global foundry
GFS,
and IBM
IBM,
in that order.
Micron has already made major domestic commitments, including a recent $40 billion investment in memory manufacturing, which will create tens of thousands of jobs over the long term following this temporary bearish cycle for memory. with semiconductors. The company is single-handedly boosting U.S. memory production from single-digit lows to nearly 10% globally over the next decade.
GlobalFoundries and Tower Semiconductor
TSEM,
will be important in expanding production of lagging semiconductors. The Chip and Science Act has invested very little in this area, but semiconductors above 14 nanometers (nm) make up the majority of all semiconductors used in manufacturing. The lack of expansion of this type of chip is causing ongoing supply chain problems for items such as cars and home appliances.
With customers including Samsung Semi and Intel, IBM plays an interesting role in semiconductor manufacturing as well as research and development in the United States, which is not talked about often. The company’s New York-based research centers continue to generate key ideas driving semiconductor manufacturing, ideas that will be implemented in future process innovations , such as the company’s 2 nm semiconductor wafer.
With Senator Chuck Schumer looking to put New York on the map as a tech hub, IBM, GlobalFoundries and Micron benefit from his acquisitions and I hope they all get the numbers. substantial money from the Science and Chips Act.
the best of the rest
Finally, I support continued substantial investment in leading fabless chipmakers committed to producing more semiconductors in the United States to receive out of $13.2 billion in R&D grants. and workforce development.
AMD
AMD,
Nvidia
NVDA,
Qualcomm
QCOM,
and others are significant contributors to the United States’ strong global technology leadership in the data center, edge, artificial intelligence, automotive, and appliance sectors. And their investments in R&D are critical to maintaining that leadership position.
We should want US-based companies to continue to invest in critical research and development. While the act focuses more on manufacturing, it would be short-sighted not to see the interdependence of global chipmakers, manufacturers and technology leaders.
How does Taiwan Semi understand this?
This is not to say that Taiwan Semi will no longer be a strong leader in bulk production of top-notch semiconductor products for leading US-based companies like Apple.
APL,
Qualcomm, Nvidia, AMD and Marvell
MRVL,
among others.
However, funding TSMC, a company that has benefited greatly from globalization and outsourcing, does little to support the key tenets of the Science and Chip Act. Our largely favorable trade relationship with Taiwan has made the company a global semiconductor company — in other words, without additional subsidies. Given the fragility of China-Taiwan relations, further investment in Taiwan Semi seems too risky and uncertain to support dollars under the Science and Chips Act.
Daniel Newman is the principal analyst atFuture research, has provided or has provided research, analysis, mentoring or consulting to Oracle, Cisco, Juniper, and dozens of other technology companies. Neither he nor his company hold any equity positions in the cited companies. Follow him on Twitter@danielnewmanUV.
