This is a short post to follow up on some previous themes. This morning, the US Commerce Department announced the last (or close to the last) direct funding from the US CHIPS Act. Under the terms, TI will receive $1.6Bn in funding to expand mature node wafer fabrication in Sherman, Texas, and Lehi, Utah.
There has already been a lot of discussion on the concentration of awards and the possible over investment. Intel is the largest CHIPS act beneficiary but is currently in the process of a painful restructuring. Most readers to this site are familiar with the saga, but for those that aren't, see this recent summary. Today's announced funding recipient, has been going through its own saga. TI has been the target of activist investors troubled by the potential over investment.
Sixteen companies have been awarded $32Bn in direct subsidies from the CHIPS Act. The subsidies represent 9% of the combined ~$375Bn announced Capex investment. It is interesting to compare each project separately. Most subsidies are within a few percentage points of the 9% average. However, Amkor’s subsidy for advanced packaging is a notable outlier. Amkor's subsidy is 20% of the overall project Capex. The higher percentage suggests that it was more challenging for Amkor to justify re-shoring advanced package assembly than for suppliers in the more capital intensive front end part of the IC supply chain. We discussed the economics of advanced packaging and the "reshoring trade" in a previous post.
Likewise, Polar Semi, a niche power discrete semiconductor supplier, was awarded 23% of their proposed Capex expansion for building automotive-grade discretes in the US. The total value of Polar’s Capex is much less significant relative to the size of the other awards. But power discrete fabrication, like advanced packaging, is also much less capital intensive than IC wafer fabrication.
During the submission period, the program office received over 600 proposals exceeding $70Bn in funding requests (link). There was obviously not enough money to go around. Predictably, commerce department officials began laying the groundwork for CHIPS Act 2.0 to compensate for the shortfall. CHIPS Act 3.0 won’t be far behind.
As described on these pages before, the only way for the US to succeed in rebuilding a sustainable ecosystem is to nurture technologies that neutralize the cost advantages of other regions. Lowering a dependency on scale would reduce entry barriers and allow more organizations to make chips, dispersing the capability across the ecosystem. Standardizing process technologies would also go a long way to making advanced packaging more competitive in low-volume, high-mix environments.
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