I usually leave this sort of commentary to Phil Garrou and Dean Freeman. But after a year of debate and revisions, the CHIPS and Science Act (Formerly the CHIPS Act), has made it to President Biden’s desk, and who knows, by the time you read this, he may have signed it into law.
Over the past year, I’ve interviewed a lot of people about this topic, asking questions like, is $52 billion enough to return the US to a leadership position? How should the $52 billion be allocated? I now know enough to be dangerous – or at least to have an opinion of my own.
So, is this the moment we’ve all been waiting for? Will the passing of the Chips and Science Act bolster the US semiconductor industry the way it needs to? That depends on where you sit. There are many who are thrilled by this turn of events. Others think it’s a joke. Long-time colleague, Jim Walker, former Gartner Analyst, said as much in a recent LinkedIn Post.
Congressional supporters of the CHIPS and Science Act say passing it is critical to addressing the chip shortage and supply chain issues, and that strengthening the US semiconductor manufacturing industry is a matter of national security as China has invested heavily in its domestic semiconductor ecosystem.
Bernie Sanders opposed the bill calling it “corporate welfare,” because it subsidizes already profitable chip manufacturers. This is the first time he’s aligned with the conservatives who oppose the bill because it adds $79B (tax credits and funding combined) to the federal deficit.
SEMI says it applauds the effort, saying it will ensure the competitiveness and resiliency of the US semiconductor ecosystems. “Enactment of the investment tax credit and funding for CHIPS Act programs was made possible by the steadfast support of President Biden, Secretary Raimondo, the original CHIPS Act sponsors, leadership in Congress, and the committees of jurisdiction,” said Ajit Manocha, SEMI president, and CEO, in a press release today. “We thank them for their leadership and support and look forward to working to ensure these policies and programs are implemented quickly and consistently with the objective of strengthening the semiconductor supply chain in the United States.”
According to the release, the bill provides a 25% tax credit for U.S. facilities that produce semiconductors or chipmaking equipment and $52 billion in funding for new semiconductor programs. The funding includes $39 billion for a grant program available to semiconductor manufacturers as well as equipment and materials suppliers and $11 billion for federal semiconductor research programs.
This information was also presented in a keynote by Lori E. Lacassio, Under Secretary for NIST National Institute for Science and Technology, at SEMICON West. She went in a little deeper. First of all, the $52B will be spread over five years. And as I noted in a previous blog post, the allotment for advanced packaging falls under the $11 billion bucket that also includes a technology center, a packaging program, a US manufacturing institute, and a metrology program.
I don’t have to call Jan Vardaman on the phone to know what she thinks of this. Earlier this year, she told me in an ISS podcast interview: “We need a little bit more into (advanced) packaging. Folks are a little negligent on the back-end side of things, and they need to understand how this whole ecosystem works.”
In that same interview, Gartner analysts Bob Johnson was even more vocal about it. “I’m going to be a total heretic, I don’t think ANY of that money should go to the companies building the fabs, because they’ve figured out the financing of the fabs to begin with,” he said, adding that what we need is funding for education, STEM programs beginning in elementary school, advanced packaging and fundamental semiconductor research not already being funded by industry.
In an earlier podcast interview with Bob Patti, Nhanced Semiconductor; Dick Otte, QP Technologies, and Allan Huffman (then with Micross and now with Skywater); we talked about the concern that the areas that needed it the most; namely smaller manufacturing companies and advanced packaging houses, would be largely overlooked in favor of the Tier One giants. And it kind of feels like that’s what happened.
At a fundamental level, I do believe passing this legislation is a good start. As my Kiterocket colleague and semiconductor industry veteran Joe Cestari pointed out to me, it’s not really about the money. “What matters most is the focus and support from the government,” he said.”This is something we haven’t seen since SEMATECH in the late 80s/early 90s.”
But maybe it would have made more sense to flip those allocations and leave out the Intels, TSMCs, and Samsungs, who aren’t strapped for cash. Isn’t the 25% in tax credits enough for these companies? Why not allocate $39B for the workforce, technology research, advanced packaging, and metrology? $11B for tool manufacturers and materials suppliers? Just a thought. As I said, I know just enough to be dangerous.