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US Semiconductor Industry Awaits Funding One Year After CHIPS Act
The CHIPS Act: A Year Later
A year has passed since President Joe Biden signed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act into law. The US semiconductor industry, however, is still awaiting the financial windfall promised by this legislation. "We will start to distribute the funds later this year," stated Secretary of Commerce Gina Raimondo. She emphasized the importance of speed in this process but noted that accuracy was paramount.
The CHIPS Act, a $52.7 billion package, was designed to bring the semiconductor supply chain back to America. This move aimed to bolster national security by reducing dependency on foreign nations. The legislation also restricts funding recipients from expanding semiconductor manufacturing in China or any other country considered a national security risk by the US government.
The Impact of Federal Subsidies
Federal subsidies were intended to counterbalance the high costs of constructing these manufacturing hubs. However, no funding allocated by the legislation has been awarded yet. Raimondo revealed that the Department of Commerce has received over 460 expressions of interest from global companies hoping to secure federal funding for their projects. This figure marks an increase from the agency's previous update, which reported nearly 400 expressions of interest.
The possibility of federal funding has stimulated potentially significant investments in the semiconductor sector. The White House reports that private sector semiconductor investments in the US have reached a total of $231 billion. However, many of these projects hinge on the receipt of federal government aid.
Companies Eager for Funding
Integra Technologies, a provider of semiconductor packaging and other services, plans to construct a 1-million-square-foot facility in the Wichita, Kansas area, contingent on receiving federal funding. "The back-end semiconductor manufacturing sector that Integra participates in operates on very thin margins that just don't make it possible without the CHIPS Act support to do this," explained Integra CEO Brett Robinson. The project is expected to create nearly 2000 direct, high-paying jobs.
Similarly, SkyWater Technology, a pure-play technology foundry, is collaborating with coalitions to recruit construction workers for its planned $1.8 billion plant in West Lafayette, Indiana. The company plans to hire 700 new employees but remains in the planning stage, awaiting confirmation of federal funding.
Government Preparation and Industry Response
The Department of Commerce has hired 140 staff members to evaluate CHIPS Act applications and is in active discussions with many potential recipients. As companies await federal funding, several larger semiconductor firms, including Intel, Taiwan Semiconductor Manufacturing Company, and silicon carbide producer Wolfspeed, have initiated expansion efforts despite not receiving any federal CHIPS Act funding.
Despite the public announcements, marketing campaigns, and presidential visits promising billions of dollars in chip investments, not all applicants should expect to receive aid. "We're going to have a bunch of tough choices ahead in terms of how we allocate our capital," a senior Commerce Department official warned. "There's definite expectations that not every applicant is going to be happy. Some will be disappointed."
Implications for New Businesses: A Fresh Perspective
The delay in the disbursement of funds from the CHIPS Act presents both challenges and opportunities for new businesses in the semiconductor industry. The anticipation of federal funding has sparked significant interest and potential investments in the sector, indicating a promising future for businesses in this field.
However, the uncertainty surrounding the allocation of these funds may pose a risk for new businesses that rely heavily on this financial support. The potential disappointment for some applicants underscores the importance of diversification in funding sources and the development of robust business models that can withstand such uncertainties.
Furthermore, the CHIPS Act's focus on reshoring the semiconductor supply chain and reducing dependence on foreign nations highlights the growing importance of national security considerations in business operations. This trend may influence new businesses to prioritize domestic operations and partnerships.
The actions of larger semiconductor firms, such as Intel and Taiwan Semiconductor Manufacturing Company, demonstrate the potential for growth and expansion even in the absence of federal funding. This resilience serves as an inspiration for new businesses to pursue their growth strategies despite potential obstacles.
In conclusion, while the CHIPS Act presents certain challenges, it also offers valuable lessons and opportunities for new businesses in the semiconductor industry. By adapting to these circumstances, new businesses can navigate their growth journey more effectively.
Article First Published at: https://www.cnbc.com/2023/08/09/chips-act-semiconductor-makers-wait-for-checks-one-year-on.html
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