CHIPS Act final $6 billion in semiconductor rewards

The Biden administration's CHIPS Act prize money rollout has so far focused on providing big awards to big companies, with just four leading semiconductor makers receiving the lion's share of the $33 billion allocated to this point.

With $6 billion left, the focus shifts to sending smaller prizes to smaller companies – dozens of them, both up and down the supply chain.

The goal, say government officials and industry experts, is to leverage remaining grant money to leverage as much private investment as possible while boosting supply chain resilience and economic security by financing U.S. facilities in areas such as materials and packaging .

“We're really focused on investing across the entire semiconductor ecosystem,” Michael Schmidt, director of the CHIPS Program Office at the Commerce Department, told CNBC.

That means directing investments to both upstream suppliers – companies that provide materials and equipment, for example – and downstream players, such as those involved in the advanced packaging that takes place after a semiconductor is produced. Schmidt said some currently mature technologies, known as legacy chipmakers, will also likely be eligible for some of the remaining funds.

“Once we start rebuilding that ecosystem in this country, once we start rebuilding the scale that we expect in this country, I think that will create continued investment and investment momentum and continue to make it attractive for businesses to invest in the future. future,” he said.

The question of where the remaining CHIPS Act grant money will go looms large now that the Commerce Department has announced the recipients of nearly 85% of the grant money and committed to allocating the remaining funding by the end of the calendar year .

Hundreds of companies are still competing for a share of the money that remains: more than 600 initially submitted declarations of interest, Commerce Secretary Gina Raimondo said in February, but only nine have received an award so far.

Intel, Taiwanese semiconductor, Samsung And Micron combined will receive nearly $28 billion, while GlobalFoundries received $1.5 billion and four smaller companies – BAE Systems, Microchip, Polar Semiconductor and Absolics – together received $392 million. Another $3.5 billion is earmarked for the “secure enclave” program, which will produce semiconductors for military use.

A general view of the Samsung Austin Semiconductor factory on April 16, 2024 in Taylor, Texas.

Brandon Bell | Getty Images

The series of awards announced so far shows the Commerce Department's focus on what is known in the industry as “front-end manufacturing,” or the production of wafers themselves, said Paul Triolo, technology policy lead at the Albright Stonebridge Group. .

Triolo attributed that focus to both “the highly political nature of prices” and the need to make near-term progress on advanced manufacturing capacity, he wrote in an email to CNBC.

But Raimondo has promised to build out the U.S. chip supply chain from end to end by 2030. To achieve that, “there will be a need for a fair combination of rewards for upstream and downstream players in the supply chain,” Triolo wrote.

Schmidt emphasized that the Commerce Department's focus is already on securing financing for all these players, and that there will be “significant investments” across the supply chain.

Furthermore, given that the awards announced so far have already secured commitments from private companies to invest more than $300 billion in leading manufacturing, Schmidt expects that “a huge amount of secondary investment” will soon benefit the smaller suppliers .

The trade has also set aside $500 million in prize money specifically for those companies whose projects will total $300 million or less in capital investments.

“We will really see these benefits across the industry,” Schmidt said. “And I still think we're going to make very significant investments in the supply chain and really build an overall portfolio that advances economic and national security interests.”

U.S. President Joe Biden delivers a speech at Intel Ocotillo Campus on March 20, 2024 in Chandler, Arizona. Biden announced $8.5 billion in federal CHIPS Act funding for Intel Corp. to produce semiconductors in Arizona.

Rebecca Noble | Getty Images

One such supplier in talks with Commerce for a CHIPS award is IQE, a British-based company that produces compound semiconductor wafers for major companies like Apple.

IQE CEO Americo Lemos told CNBC that while he understands the interest in funding leading chip manufacturing to build out artificial intelligence systems, funding smaller companies that play a supporting role is just as critical to ensuring that the U.S. supply chain chips are safe. and resilient.

“We have to make sure that we are constantly looking at the supply chain as a whole, in an environment where geopolitics is not easy to deal with,” Lemos said in an interview.

“Of course the industry is focused on AI, GenAI and its benefits and applications, but it is not enough to build high-performance chips,” he continued. “There is no AI without compound semiconductors – plain and simple.”

With remaining grant money dwindling, the coming awards will be smaller than the multibillion-dollar packages given out so far, Schmidt said. But for small businesses, even a modest reward can have a significant impact.

“There's a lot that a smaller amount of money can do for these upstream projects,” said Jimmy Goodrich, senior adviser for technology analysis at the RAND Corporation. “There's still a lot of runway left.”

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