“Even though the world’s advanced economies are largely considered post-industrial, chipmaking is an area where domestic manufacturing is now being treated as a high priority for economic and national security reasons.” - Jon Martin, Writing for the ‘More than Moore’ substack
For all of the global chatter about reshoring, semiconductors seem to have made the most progress so far - and yet the full vision of the 2022 CHIPS and Science Act has yet to be realized.
Despite making $52.7 Billion in Federal dollars available to companies looking to manufacture semiconductors in the U.S., and granting 85 percent of that amount in binding contracts, only about $4.3 Billion has actually been distributed.
Forming productive partnerships between the public and private sectors is always complicated - even when everyone’s interests seem to be aligned.
Reversing the Downward Slide
The global semiconductor market was valued at $700 Billion in 2024 by the Semiconductor Industry Association, and with enthusiasm about AI continuing to grow, some project that the market will hit $1 Trillion by the year 2030.
Naturally, domestic manufacturers want to get in on the action, but in order to do so, they will have to reverse a steady trend of declining global market share. U.S. semiconductor manufacturing fell from 40 percent of the global market in 1990 to about 10 percent.
Nobody paid much attention to this until pandemic-era supply chain disruptions made the level of global dependency painfully clear. All of a sudden, semiconductors were a matter of national security - especially given China’s prominent role in global supply chains. If China should ever make a move against Taiwan, home of the vast majority of global semiconductor manufacturing, there was no plan B.
Six companies have since been awarded over $1 Billion in grants apiece, plus additional tax credits. But all of that ‘largesse’ is expensive. As large as the Federal grant dollars are, CHIPS Act funding typically only represents 5-15 percent of the cost of a project
These companies have committed about $450 Billion in private investments to new chip manufacturing initiatives, according to the Semiconductor Industry Association, but these companies have to be financially healthy enough to benefit from the program.
Intel: $7.86 Billion
TSMC: $6.6 Billion
Micron: $6.1 Billion
Samsung: $4.7 Billion
Texas Instruments: $1.6 Billion
GlobalFoundries: $1.5 Billion
Red Tape Reality
Each of the companies on the list above faces its own individual challenges, but there are complexities associated with the CHIPS Act that they are all contending with.
There are serious labor shortages to build and then staff these new manufacturing plants, and while the law provides funding for workforce development, those dollars were made available on the same timeline as the manufacturing grants - and they are less straightforward to claim. It is hard to understand how to access the funds, especially by organizations that are smaller and more distributed than large companies like Intel and TSMC.
Companies also have to hit “milestones” to receive their funds, and they have to do it while following the Federal government’s rules; rules that keep changing.
The Department of Commerce published a “final rule” at the end of 2023 clarifying the meaning of terms associated with the CHIPS Act. This step made it clear that you could both expand existing facilities and also build new ones with the funding. That clarification ate up 16 months worth of construction and development time.
Global semiconductor manufacturing is a race. To get funds, to put them into use in accordance with the government’s rules, to keep the technology up to pace, and to be cost competitive.
A lot of pieces will have to come together just right for this to work, and we need to keep an eye on the horizon, because semiconductors are absolutely critical to national security, global trade, and innovation.
