The US Department of Commerce is preparing to allocate funds from its semiconductor manufacturing revitalization plan.
US Secretary of Commerce Gina Raimondo said on February 5 that the Department of Commerce plans to allocate funds from the US$39 billion US government's semiconductor manufacturing revitalization plan within the next two months.
Raimondo said the Department of Commerce is engaged in complex and challenging negotiations with chip companies and added that more decisions will be announced in the next 6 to 8 weeks, per Reuters.
The US 2022 CHIPS and Science Act aims to provide subsidies for investments in chip manufacturing and related supply chain infrastructure. Raimondo emphasized that these are highly advanced semiconductor fabs. Companies like TSMC, Samsung Electronics, and Intel plan to invest in and construct the latest generation semiconductor fabs in the US, unprecedented in scale and complexity.
Raimondo previously stated in December 2023 that around 12 semiconductor chip investment incentives would be made in 2024. She is actively involved in regular dialogues with CEOs of chip companies.
No rush
Despite the passage of the Chips and Science Act by the US Congress in August 2022, which aimed to address semiconductor challenges, only two small grants have been issued. Raimondo expressed that she does not believe the US government is falling behind in the funding process.
One of the most significant applicants of the Chips and Science Act's grants is Taiwan's semiconductor king, TSMC. The company is planning to build two manufacturing plants in Arizona.
TSMC hoped to start manufacturing chips in Arizona by late 2024, but the production start date has been pushed back to 2025 due to labor and cost-related challenges. Intel is also building a semiconductor manufacturing facility in Ohio.
Bloomberg noted the importance of the Arizona and Ohio plants in the context of the forthcoming presidential election. In 2020, Biden secured victory in the initial state by a narrow margin of 10,000 votes, and manufacturing is poised to emerge as a pivotal issue in a crucial Senate race in Ohio, per Bloomberg.
The journey so far
The Chips and Science Act has traveled a bumpy road to fruition. Several companies have reportedly grumbled about bureaucratic hurdles in their funding applications.
Firms benefiting from US subsidies exceeding US$150 million must contribute a portion of profits exceeding mutually agreed-upon thresholds. Furthermore, these manufacturers will face stringent reporting obligations, restrictions on Chinese investments and stock buybacks, and obligations for providing childcare support to employees, per The Register.
Funding can be a combination of grants, government loans, and loan guarantees, with a maximum of approximately 35% of the capital cost of the investment project. Despite cyclicality challenges in the semiconductor market, Raimondo maintains an optimistic outlook on chip demand, driven by artificial intelligence in unprecedented ways.
Speaking to the House Committee on Science Space & Tech in September 2023, the country's Raimondo said, "The US will become the premiere destination in the world" in the design, development, and manufacturing of semiconductors if the country is successful in the implementation of the CHIPS and Science Act. That is the vision the Department of Commerce hopes to achieve, she added.
