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Computer Chip Shortage/Manufacturing


CHIPS Act Funding Distribution Strategy

The Department of Commerce released (February 28) its detailed funding opportunity plan to guide the award and distribution of semiconductor industry grant and loan/loan guarantee resources under last summer’s CHIPS and Science Act.

Under the plan, funding for companies seeking resources will be assessed based on the following program priorities:

  • Economic and national security priorities will receive the greatest consideration, with a focus on projects “that meaningfully increase U.S. semiconductor production and strengthen global supply chains,” as well as those which further US national security interests.

  • Projects have commercial viability, where the applicant company has a plan for reliable cash flows and continued company investment to ensure the commercial viability of facilities over the long term.

  • Projects show financial strength, including through detailed financial models for their proposed project. In this regard, companies “are directed to maximize private-sector contributions” (i.e., not rely predominately on Federal support).

  • Projects show technical feasibility and readiness, including a clear project execution plan, including major construction and operational milestones, construction rights and permits, including meeting environmental and permitting requirements “in a timely fashion.”

  • Projects commit to workforce development, including that they “must commit” to developing and maintaining a highly skilled, diverse workforce, including by outlining their plans to hire economically disadvantaged individuals.

  • Projects provide child care, where companies requesting more than $150 million in funding “must provide a plan for access to affordable, accessible, reliable, and high-quality child care for both facility and construction workers.”

  • Projects commit to broader goals, such as company plans to support US research and development programs & facilities; create opportunities for minority-owned, veteran-owned, and women-owned businesses; demonstrate climate and environmental responsibility; invest in communities by addressing barriers to economic inclusion; and commitments to American-made construction materials.

The Department says it will “protect taxpayer resources” by:

  • Requiring companies that receive more than $150 million in direct funding to share with the government a portion of project revenue that exceeds projections by an agreed-upon threshold. Government proceeds would be re-used by the government to further the objectives of CHIPS Act programs.

  • Prohibiting companies from using CHIPS funds for dividends or stock buybacks, and detailing plans for company stock buybacks over five years, including whether they intend to refrain from, or at least limit them.

  • Releasing funds in tranches tied to construction and operational milestones.

Application processes will begin at the end of March and will be ongoing likely through the summer. Actual financial awards may not occur until late summer and early fall.

(updated: 3-1-23)


Recent US Capacity Expansion Announcements

IBM - announced (October 6) that it plans to invest $20 billion in the Hudson Valley Region over the next ten years "to expand the vibrant technology ecosystem in New York to unlock new discoveries and opportunities in semiconductors, computers, hybrid cloud, artificial intelligence and quantum computers." Based on the announcement alone, it is not clear that substantial new manufacturing and/or research capacity will be forthcoming, but clearly IBM will be looking to secure at least new R&D resources contained within the recently-enacted CHIPS & Science Act. Expanded capacity to some degree is likely. IBM currently has a major facility in Poughkeepsie, New York.

Micron - announced (October 4) that it will invest $20 billion by the end of this decade as the first installment in the development of a DRAM “megafab” production facility in Clay, New York, with a total potential capacity-building investment of $100 billion over the 20 years at the location. This announcement is connected to Micron’s $40 billion investment plan announcement made at President Biden’s summer 2022 signing of the CHIPS law, and is also linked to the company’s broader 2021 announcement of a total $150 billion U.S.-wide investment on R&D and manufacturing, including a separate fabrication plant in Boise, Idaho.

Qualcomm and GlobalFoundries - announced (2022) as part of the President's signing of the CHIPS law, a partnership that includes $4.2 billion to manufacture chips in an expansion of the GlobalFoundries upstate New York facility. GlobalFoundries previously announced (July 2021) a plan to build a new production facility on its existing campus in Malta, New York.

Skywater Technology announced (July 2022) that it plans to build a $1.8 billion semiconductor R&D and production facility in West Lafayette, Indiana.

Intel announced (March 2021) that it will spend $20 billion to build a new production facility (the company broke ground in September 2021) at an existing Intel location in Arizona, and also announced (January 2022) that it plans to spend more than $20 billion on a new production facility in Columbus, Ohio. Intel has indicated that the Ohio location could, with a Federal CHIPS Act investment, be expanded to a total of 8 new production facilities with a $100 billion total investment.

Texas Instruments - announced (November 2021) that it will construct one, and potentially four new chip facilities within Texas. Its first new facility in Sherman, Texas is beginning construction this year.

Samsung - announced (November 2021) that it will spend an estimated $17 billion to build a chip factory in Taylor, Texas. Construction will begin this year with chip production expected by 2024.

Taiwan Semiconductor Manufacturing Company (TSMC) - announced (2020) its intention to build a new production facility in Phoenix, Arizona for advanced semiconductor, and construction began last year. Semiconductor production at the facility could start in 2024.

(updated: 10-6-22)


Semiconductor Manufacturing Law

President Biden signed into law (August 8th) the CHIPS and Science Act, long awaited legislation intended to help facilitate the growth U.S. semiconductor manufacturing in the United States. The final Senate vote to approve the legislation was 64-33 (July 27) and the House vote was 243-187 (July 28).

The core elements of the new law include:

  • $39 billion to "build, expand, or modernize domestic facilities and equipment for semiconductor fabrication, assembly, testing, advanced packaging, or research and development," and a related $2 billion for Defense-focused semiconductor funding.

  • $11 billion for Department of Commerce research and development including creating a National Semiconductor Technology Center (NSTC) a public-private partnership to conduct advanced semiconductor manufacturing and other specialized R&D programs.

  • $200 million for a CHIPS for America Workforce and Education Fund to help develop the U.S. semiconductor workforce.

  • $1.5 billion for the Public Wireless Supply Chain Innovation Fund, to advance 5G, software-based wireless technologies, and innovations in U.S. mobile broadband.

(updated: 9-8-22)


Current Semiconductor Chip Market Conditions

The U.S. Commerce Department released the results (January 25, 2022)  Request for Information (RFI) -- i.e., a survey -- of the semiconductor conducted in late September through early November 2021. The key finding of the RFI the median inventory of semiconductor products highlighted by buyers fell from 40 days in 2019 to less than 5 days in 2021, and in some cases even less for "key industries." Further, Commerce says that the primary bottleneck appears to be wafer production capacity "which requires a longer-term solution."

Current reporting of industry and analyst thinking generally concludes that the current global semiconductor shortage could last through 2022 and potentially into 2023. Some of the reasons include:

  • Increases in demand accelerated by both pandemic-driven purchasing and growth in semiconductor use in manufacturing and consumer products.

  • The complexity and high cost of manufacturing that undermines rapid response to market changes.

  • High market concentration in a few key so-called "foundry" producers -- i..e, companies who are the outsourced producers for other semiconductor companies. Taiwan-based TSMC is said to produce over 50% of the world's semiconductors. United States production encompasses just 12% of the world's semiconductors according to the Semiconductor Industry Association. 

(updated: 2-2-22)


Vulnerability Report Recommendations

The Biden Administration issued the results of a review of supply chain vulnerabilities (June 2021) covering four industries, one of which was semiconductor manufacturing. Among the semiconductor-focused recommendations:

  • Congress support at least $50 billion in investments to advance domestic manufacturing of leading edge semiconductors. Note: TSMC founder (retired) Morris Chang recently stated that a U.S. investment of $50 billion is not nearly enough to build a complete supply chain in the United States for semiconductor production.

  • Expand capacity in mature node and memory production to support critical manufacturing, industrial, and defense applications.

  • Promote R&D to ensure the next generation of semiconductors are developed and produced in the United States. 

(updated: 2-2-22)


Connected Policies


No Results Found

Competition in the American Economy / EO
Competition in the American Economy / EO

This Executive Order (14036) is an amalgam of policy positions under a "competition" policy umbrella. For the most part, these policies are proposed in that they "encourage", "suggest", or instruct/direct agencies to do something related to each policy request.

Status: this EO was published on July 14, 2021.


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