From Chip War to Chip Brawl

The CHIPS Act, has produced several eye-catching headlines since it was signed into law on August 9, 2022; but a storm brews behind the upbeat press release.

So far, the U.S. government signed preliminary agreements with 15 companies to provide more than $30 billion in investment subsidies, according to a release. The administration also claims more than 115,000 construction and manufacturing jobs will be created, as manufacturing facilities are erected around the country.

The goal is to supply a third of the world’s demand for cutting-edge semiconductors by 2032.

“There’s been lots of activity and a number of announcements and some construction,” said Vishnu Kannan, a critical technologies and national security researcher.

The Department of Commerce’s recently proposed $1.6 billion funding deal with Texas Instruments (TI) under this regulation to expand semiconductor production through three new facilities in Texas and Utah is part of an $18 billion investment by TI. This company joins others like Micron, Samsung, SK Hynix and TSMC that have inked separate agreements with the government.

The law has allocated funds for staffing facilities, which is a key part of ecosystem development.

“Teaching people how to do semiconductor manufacturing, because equipment is really expensive, and to be able to train folks on a very complex equipment would be a great way in which this can be very successful,” said Shaloo Rakheja, associate professor at the University of Illinois.

And once production starts, one of the unanswered questions is how much should be produced.

“One of the things that we have been stressing over the last two years is that if we don’t set some clear targets about how much we need to be made in the U.S. and what needs to be made in the U.S.—and this doesn’t really work,” Kannan told SIGNAL Media in an interview.

The semiconductor production chain reaches far and wide, including commodities, rare earths and chemicals, all the way to proprietary components to build chip production machinery. The U.S. government falls short of defining which stages and raw materials should be brought to the country, according to Kannan.

The CHIPS Act’s $52.7 billion aims to boost U.S. semiconductor manufacturing to enhance supply chain resilience, economic competitiveness, workforce training and security.

However, the law alone is insufficient to achieve these goals fully. Key recommendations include balancing subsidies between fabrication and assembly, improving supply chain transparency, setting clear industry targets and developing semiconductor security standards. Policymakers addressing strategic dilemmas like aligning domestic and international policies, supporting the labor force and sustaining political will for ongoing investments were many of the concerns shared by independent analysts.

Still, a clear definition of goals—and what achieving them would look like—was at the top of the list.

“What becomes difficult is servicing all of U.S. supply—or 75% of U.S. supply—in each of these chip categories with products made entirely in the United States,” Kannan said.

The pledged funds have gone to many players in industry and the research community.

Nevertheless, there’s a segment that sees itself as left behind. Medium-sized component players, especially those working to compete with large cutting-edge chip manufacturers and processing units for AI.

“I see some griping and complaining from the smaller folks that they’re of the belief that there’s a chance that the CHIPS Act might ossify the big players and create a lot more barriers for newer folks to be able to scale,” said Dan Faggella, head of research at Emerj Artificial Intelligence Research.

While smaller players wonder how this regulation will impact them, an expert warned that there is still a long way to go before the effects of this policy are fully understood.

“One thing we could look for are just when our final awards are being announced, because companies may start construction before that, but they may also abandon construction,” Kannan said. “I think we’re still in the promises phase of this.”

And while this regulation round has not reached a conclusion, some are already thinking about the future.

“There should be a CHIPS 2.0 Act because whatever we are doing right now in the country, we need more of that investment,” Rakheja told SIGNAL Media in an interview.