Washington’s US$39 billion of incentives to boost US production of semiconductors is unlikely to fully close the output cost gap with Asia, but other benefits such as proximity to clients bolster the case for more US output, the official leading the project said.
“We have a lot of strategic advantages as a country. We also have a cost gap, which the CHIPS [and Science] Act is designed to address,” US Department of Commerce CHIPS Program Office Director Mike Schmidt said.
The act aims to narrow the cost difference in the short term, “but then make sure that we are creating enough scale, enough cluster dynamics and enough innovation that 10 years from now the cost of doing business here is competitive enough,” he said.
Photo: REUTERS
The US Congress last year passed the CHIPS and Science Act to return advanced semiconductor manufacturing to the US after COVID-19 pandemic lockdowns and supply chain disruption laid bare US reliance on chips from Asia and particularly Taiwan.
The act gives the commerce department almost US$40 billion over five years to boost production, and a further US$11 billion for research and development in advanced semiconductor manufacturing, development of new technologies and training workers.
Schmidt, who spoke at an event hosted by the Information Technology & Innovation Foundation on Thursday, was responding to a question by Coalition for a Prosperous America chief economist Jeff Ferry, who said that Taiwanese fabs have a 40 percent cost advantage over those in the US.
Despite the investment and development incentives that the administration of US President Joe Biden is providing, it would still be cheaper to make chips in Asia — where many customers are based — which could prompt plant closures in a decade, Ferry said.
Schmidt said his office is thinking about how to use the US$39 billion as starter capital to create an ecosystem that would have “self-sustaining competitive dynamics.”
“That means creating enough scale now that you have enough of a supplier base, a strong-enough workforce, the infrastructure and the kind of cluster dynamics that make ongoing investment economically attractive now,” he said. “We might not close the cost gaps, but there are a lot of attractive things about doing business in the United States right now, including the major semiconductor customers in the world.”
There are “really attractive dynamics around shared innovation that happens with co-locating with those companies,” Schmidt said.
The Biden administration has received more than 200 applications from companies for access to the US$39 billion, US Secretary of Commerce Gina Raimondo said on April 14.
Schmidt said his office, which has a team of about 80 people that would grow to about 150 by the end of this year, is “going to have to make tough choices.”
“There are going to be a lot of really high-quality applicants that are not going to get as much funding as they might have hoped,” he said. “A lot of good applicants might get no funding at all.”
Another round of pre-applications — this time, from current generation, mature-node and back-end output facilities — opens on Monday, and full applications would be accepted from June 26, he said.
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