TSMC, Samsung Rake in $13.2B for US Chip Ambitions

The Biden administration announced plans this week to dole out $6.6 billion in funds for Taiwan Semiconductor Manufacturing Company (TSMC) for a $25 billion expansion at its Arizona operation. And on Tuesday, sources told Reuters the administration would soon announce the same level of funding for South Korea’s Samsung to bolster chipmaking plants in Texas.

The sources told Reuters that Samsung would double its US investment to over $44 billion as part of the deal. TSMC’s $25 billion expansion is on top of its $65 billion total spend in Arizona, which will include a third factory by 2030.

Last month, the administration announced $20 billion in CHIPS Act grants and tax incentives for Intel’s $100 billion effort to build silicon manufacturing operations in Ohio, Arizona, New Mexico, and Oregon. With $33.2 billion in funding already earmarked, the administration has made quick work of doling out the $52 billion “Chips for America” Act signed into law in 2022. The US Commerce Department has said 460 companies have signaled interest in winning grants through the legislation.

“These are the chips that underpin all artificial intelligence, and they are the chips that are necessary components for the technologies that we need to underpin our economy …,” Commerce Secretary Gina Raimondo said in a statement after the TSMC announcement. The department said the company’s $65 billion investment is the largest foreign direct investment in a completely new project in US history.

Related:Biden to Inject Nearly $20B into Intel’s US Chip Plan

How IT Leaders Can Prepare for Changing Chip Landscape

Jeffrey Macher, professor of strategy at Georgetown University’s business school, tells InformationWeek in an email interview that while domestic chip manufacturing is an exciting prospect, leaders need to temper their enthusiasm and realize this process will play out over many years.

“I would expect delays in domestic production becoming available and online,” he says. “I would expect delays in some amount of production moving from foreign to domestic semiconductor facilities because of this … I would expect continued negotiations by those firms receiving funds around establishing own-investment and production benchmarks … and continued ‘asks’ for additional funding.”

Another issue for domestic semiconductor production: lack of domestic talent supply.

“Thousands of operators, technicians, engineers, and managers will be required,” Macher says. “Semiconductor manufacturing does offer higher wages on average, in comparison to all manufacturing, so it will be able to hire/steal from related industries … But the supply of qualified individuals will lag the demand for many years.”

Related:$52.7B CHIPS Act Lures Hundreds of Businesses in First Year

Leaders also need to understand that the semiconductor industry is a broad, multinational industry, even as the US tries to boost domestic production, according to Shaloo Rakheja, director of Grainger College of Engineering’s Center for Advanced Semiconductor Chips with Accelerated Performance. Rakheja tells InformationWeek via email that IT leaders should understand “that the semiconductor industry truly is a global industry. That is, the semiconductor ecosystem is not just semiconductor manufacturing. We need raw materials, rare earth metals, packaging materials, IP [intellectual property], EDA [electronic design automation], manufacturing equipment, etc., to complete the ecosystem.”

However, she says, “It is crucial that we are able to produce more semiconductors in-house.”

The Chip War: China’s Likely Response

The COVID-19 pandemic laid bare our dependence on the global supply chain, particularly with access to semiconductors that power everything from our cars and household electronics, to our most sensitive national defense systems. While the US was once a leader in semiconductor production, the country now produces just 12% of the world’s supply, according to the Semiconductor Industry Association (SIA).

Related:Confronting the AI Energy Drain

Georgetown University’s Macher says the US should expect a response to its massive semiconductor ambitions. The US has been applying pressure on China by limiting its ability to supply chips, and attempting to limit access to important technologies, like Dutch company ASML’s lithography machines.

“China will probably respond in the ‘nonmarket’ environment via a strategic communications campaign that attempts to undermine the CHIPS Act. This will most likely be done through an extensive social media approach that will attempt to undermine US domestic and foreign technology policy,” he says, adding that China will likely file complaints with the World Trade Organization.

But the US is still very dependent on China's important chip-making resources, Rakheja notes. “We rely on China for raw materials (gallium, germanium, cobalt, rare earth), and we already know that China imposed restrictions on export of some raw materials. Many companies are now trying to move facilities to other locations, which might give them a better chance to insulate themselves from these geopolitical tensions.”

What’s Next?

While the country’s move toward a self-sufficient semiconductor supply is exciting, Rakheja says companies need to make energy efficiency a top priority. “We are trying to make very powerful chips for AI and scientific computing,” she says. “We are constantly burning through energy, and it will not be feasible to continue on this path … So we must think of ways to augment silicon chips with new materials and new technologies that can bring down that energy consumption while continuing to deliver on the performance.”

For Macher, the country must focus on education efforts to sustain the massive semiconductor rebirth effort. “Community colleges (for technicians and operators) and universities (especially engineering schools for technicians and engineers) will be key and will need to step up and revamp their semiconductor-related curricula in order to train and educate the talent required.”

Even with that effort, “I suspect that the supply of educated individuals will lag the demand for several years.”