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Wednesday, February 21, 2024

The Chips and Technology Act – I’m from the government and I’m here to help you build a wafer fab. (Updated 2/23/24)

In 1986 President Reagan warned that adverse effects could result from misdirected government policy. His famous quote is preserved in the hope of guiding future generations of Americans. [1] "The nine most terrifying words in the English language are: I'm from the Government, and I'm here to help."

Some claim American semiconductor manufacturers have lost their competitive edge in the global market place. It’s a complex market to be sure. Semi manufacturers have been evaluating foreign investment opportunities seeking over seas tax shelters but for strategic marketing and national security interests, emphasis is now being placed on US based wafer fab/foundry construction and operation. Although American technology is cutting edge, complications encountered in US wafer fab construction have been compounded by the Chips and Technology Act. Intended as an incentive for investment in the technology sector, applicants seeking Chips Act funding can incur significant barriers to program entry. Participants can experience delays in the resolution of application and compliance issues, construction schedules and the timely release of granted funding. Further delays can be incurred resolving regulatory and zoning issues, immigration policy and skilled work force/ labor union issues. Election cycles and the prevailing political climate can also impact capital amortization timing and future program cost. 

Some participants in the Chips Act program have experienced delays in the release of granted funding. Samsung’s new fab project near Taylor, Texas was scheduled to begin operation in late 2024 but has been delayed till 2025 awaiting the release of Chips Act funding and an improvement in the economy. Similarly, other fabs have been delayed (see Tom’s Hardware web site link: [2] https://www.tomshardware.com/tech-industry/semiconductors/us-govts-sluggish-chips-act-payouts-slam-the-breaks-on-samsungs-fab-company-delays-mass-production-at-texas-fab-to-await-further-chips-funding-report.

A few industry pundits advocate US government intervention as a guiding force in strategic semi-industry program management. The automotive industry has already seen the unintended effect of government subsidies on electric vehicles. A glut of unsold EVs have auto manufacturers pondering a return to hybrid and gasoline vehicles until charging stations and the energy grid are complete. Auto makers will incur a huge loss in the interim. Ill advised political forces steering the Chips Act could similarly throw the semi industry out of sync. Multi $Billion delays in grant funding can result in the government defining semi market cycle timing. Given the size of the grants some may be content to await funding. The caveat: A government driven economy vs. a consumer economy.

Fabs and foundries have become multi-billion dollar projects with infrastructure and scale commensurate with the DOE. Semi industry management must be independent of undue US government influence on market strategy, finance or regulatory compliance requirements. At the same time we must consider the opportunity to secure funding on the scale required for tomorrow’s wafer fabs. Government grants are one such option provided they're in the best interest of the recipients.

Semi Industry CEOs must navigate global and financial markets with great skill and diligence. We might explore the idea of modifying the Chips Act, and to expand the transparency of program grant applications and awards. Only then can we ensure the success of capital intensive projects and their critical completion timetables.

That said, it’s important everyone understand the scale of the Chips Act and the positives/negatives of the program. I encourage you to click on this link to the Chips Act and study it in detail (all 78 pages). It's important to comprehend it’s scope, and potential to impact the semiconductor economy.

[3] The Chips Incentive Program
https://www.nist.gov/system/files/documents/2023/06/23/CHIPS-Commercial%20Fabrication%20Facilities%20NOFO%20Amendment%201.pdf

The semiconductor industry provides a strategic dual purpose product to the both the consumer and our military. American investors and capital markets have always sustained a robust and innovative US semi industry. Let’s stay the course and make sensible decisions for the future.

Regards to all,

Thomas D. Jay
Semiconductor Industry Consultant
Thomas.Dale.Jay@gmail.com
TDJ Technology Group.com
Thomas D. Jay YouTube Channel



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References and acknowledgements:

[1] Excerpt, Ronald Reagan Presidential Library https://www.reaganfoundation.org/ronald-reagan/reagan-quotes-speeches/news-conference-1/
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