So far, the Biden administration’s CHIPS Act award funding has focused on providing big awards to big companies, with just four leading semiconductor manufacturers receiving the lion’s share of the $33 billion allocated so far.
Now, with $6 billion left, the focus is shifting to giving smaller bonuses to smaller companies — dozens of them along the supply chain.
The goal, according to government officials and industry experts, is to use remaining funding to attract as much private investment as possible while increasing supply chain resiliency and economic security by funding U.S.-based entities in areas such as materials and packaging.
“We’re really focused on investing across the semiconductor ecosystem,” Michael Schmidt, director of the CHIPS program office at the Commerce Department, told CNBC.
This means that investments are channeled both to upstream suppliers – such as companies that provide materials and equipment – and to downstream players, such as those involved in the advanced packaging that occurs after a semiconductor is manufactured. Schmidt said some currently mature technologies, also known as legacy chipmakers, will likely also receive some of the remaining funding.
“Once we start rebuilding that ecosystem in this country, once we start rebuilding it to the scale that we expect in this country, I think that will lead to sustained investment and investment momentum and continue to make it attractive for companies, to invest in this country’s future,” he said.
The question of where the remaining CHIPS Act award money will go comes after the Commerce Department announced the recipients of nearly 85% of its grant money and committed to distributing the remaining funds by the end of the calendar year.
Hundreds of companies are still vying for some of the remaining money: More than 600 had initially submitted expressions of interest, Trade Secretary Gina Raimondo said in February, but only nine had received awards so far.
Intel, Taiwan Semiconductor, Samsung And micron together will receive nearly $28 billion, while GlobalFoundries received $1.5 billion and four smaller companies – BAE Systems, Microchip, Polar Semiconductor and Absolics – received a combined $392 million. Another $3.5 billion was allocated to the “Secure Enclave” program, which is intended to produce semiconductors for military use.
A general view of the Samsung Austin Semiconductor factory on April 16, 2024 in Taylor, Texas.
Brandon Bell | Getty Images
“The series of awards announced so far underscores the Commerce Department’s focus on what is known in the industry as “front-end manufacturing,” or the production of wafers themselves, said Paul Triolo, head of technology policy at Albright Stonebridge Group.
Triolo attributed this focus to both “the highly political nature of the awards” and the need to demonstrate near-term progress in advanced manufacturing capabilities, he wrote in an email to CNBC.
But Raimondo has promised to expand the U.S. chip supply chain from start to finish by 2030. Achieving this “will require significant juggling of allocations to upstream and downstream actors in the supply chain,” Triolo wrote.
Schmidt emphasized that the Commerce Department’s focus is already on getting funding to all of these players and that there will be “significant investments” across the supply chain.
Given that the awards announced so far have already resulted in private companies investing more than $300 billion in top-end production, Schmidt expects “a tremendous amount of secondary investment” will soon benefit smaller suppliers.
Commerce has also set aside $500 million in awards specifically for companies whose projects have a total capital investment of $300 million or less.
“We’re really going to see these benefits across the industry,” Schmidt said. “And I still think we’re going to make very significant investments in the upstream supply chain and really build an overall portfolio that serves economic and national security interests.”
US President Joe Biden delivers a speech at the Intel Ocotillo Campus in Chandler, Arizona on March 20, 2024. Biden announced $8.5 billion in federal CHIPS Act funding for Intel Corp. to manufacture semiconductors in Arizona.
Rebecca Noble | Getty Images
One such supplier negotiating with Commerce for a CHIPS award is IQE, a U.K.-based company that makes compound semiconductor wafers for major companies like Apple.
IQE CEO Americo Lemos told CNBC that while he understands the interest in funding cutting-edge chip manufacturing to build artificial intelligence systems, funding smaller companies that take on supporting roles is just as important to ensure that the U.S. chip -Supply chain is secure and resilient.
“We need to make sure we continually look at the supply chain as a whole, in an environment where geopolitics are not easy to navigate,” Lemos said in an interview.
“Of course the industry is focused on AI, GenAI and its benefits and applications, but that is not enough to build high-performance chips,” he continued. “There is no AI without compound semiconductors – quite simply.”
As the remaining grant money dwindles, future grants will be smaller than the billion-dollar packages paid out so far, Schmidt said. But for small businesses, even a modest award could have a significant impact.
“These upstream projects can do a lot with a smaller amount of money,” said Jimmy Goodrich, senior advisor for technology analysis at the RAND Corporation. “There’s still a lot of runway left.”
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2024-05-23 20:08:21
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