This story was originally published April 8, 2024
The Joe Biden administration is taking steps to secure CHIPS and Science Act funding for semiconductor manufacturing before its January exit. For its largest recipient, however, the finalized amount is less than expected.
On Tuesday, the U.S. Department of Commerce, which is overseeing the distribution of the CHIPS and Science Act’s $52 billion, awarded Intel up to $7.86 billion in direct funding.
The grant is more than $600 million less than the $8.5 billion initially expected in March. The news follows positive third-quarter earnings for Intel at the end of October but echoes its struggle to find its footing in the chip market as interest in AI surges. Intel plans to use the funds to help build new facilities in Arizona and Ohio, while modernizing existing facilities in New Mexico and Oregon.
On Nov. 15, the Commerce Department also awarded $6.6 billion in funding to TSMC Arizona Corp., a subsidiary of Taiwan Semiconductor Manufacturing Corp. The funds will support TSMC’s $65 billion investment into building three fabrication facilities in Phoenix.
The U.S. is in a global race to boost domestic semiconductor manufacturing as countries look to diversify their supply chains. According to the Department of Commerce, the U.S. is on track to produce roughly 20% of the world’s leading-edge semiconductor chips by 2030, up from a global market share of roughly 11% currently. Asia, including China and Taiwan, maintains the largest share of the semiconductor manufacturing market.
“The CHIPS for America program will supercharge American innovation and technology and make our country more secure — and Intel is playing an important role in the revitalization of the U.S. semiconductor industry through its unprecedented investments across Arizona, New Mexico, Ohio, and Oregon,” said U.S. Secretary of Commerce Gina Raimondo in a Tuesday press release.
As the U.S. races to build out its semiconductor manufacturing capabilities, it will face hurdles such as developing a workforce as it continues to fund more companies.
More semiconductor projects ahead
In April, the Biden administration’s CHIPS and Science Act established preliminary funding agreements for Samsung Electronics for $6.4 billion and up to $6.1 billion for Micron Technology. Neither deal has been finalized as of publication.
SK Hynix, a high-bandwidth memory chip maker, plans to build a $4 billion advanced packaging facility in West Lafayette, Ind. It could potentially receive CHIPS and Science Act funding to support the project.
Over the years, U.S. semiconductor manufacturing has slowly declined as production shifted to Asia. However, the COVID-19 pandemic caused a shortage in semiconductors — essential for powering phones, laptops, cars and other powerful technologies — prompting the U.S. government to reassess domestic semiconductor production and pass the CHIPS and Science Act.
“The idea remains the same, that the U.S. government wants to motivate companies to set up facilities within the U.S. to increase the regional share of chip manufacturing in the U.S.,” Gartner analyst Gaurav Gupta said in April.
He said the success of the CHIPS and Science Act depends on how many fab facilities get built. The SK Hynix facility, for example, isn’t set to be completed until 2028. Meanwhile, workforce challenges and licensing issues have forced TSMC to delay production dates for its newest facilities in Phoenix to 2027 or 2028.
Gupta said time will tell if the new facilities move the needle on U.S. chip manufacturing or keep production the same.
“At least it will prevent the needle from going in the opposite direction,” he said.
Challenges facing U.S. semiconductor manufacturing
Hiring a skilled workforce for the new fab facilities is a challenge, not just for TSMC, but for all chipmakers, Gupta noted. Additionally, these overseas-based companies face the task of navigating increased regulations and employee rules, which are less prevalent in countries like Taiwan.
“The entire chip manufacturing ecosystem moved over to Asia,” Gupta said, noting that these companies have little experience with U.S. regulations and the workforce. “It’s very different in the U.S.,” he added.
Forrester analyst Alvin Nguyen said in April that he’d like to see more emphasis on education and training in the U.S. as an important facet of long-term support for semiconductor manufacturing.
Another difficult part of re-establishing the semiconductor supply chain in the U.S. is making it sustainable, Nguyen said. Superfund sites in California stemming from semiconductor design and manufacturing in the late 1990s demonstrate the dangers of chip manufacturing, something companies will have to consider, he said. A Superfund site is an area polluted by hazardous materials often related to manufacturing.
“There needs to be very smart decisions about where to locate these to provide protection and safety,” he said.
TechTarget’s Senior News Director Nicole Laskowski contributed to this report.
Makenzie Holland is a senior news writer covering big tech and federal regulation. Prior to joining TechTarget Editorial, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
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