Semiconductor Monthly News February

Considerable investments across the semiconductor industry

 

The semiconductor market is undergoing substantial investment in the U.S. and Europe. This is an effort to set up new FABs to catch up with industry leaders in China and Taiwan. Considering the staggering costs of constructing these Fabs, the U.S. is an expensive area to build, compared to Asia and Europe, where it is 40% to 70% more expensive. 

 

Europe, meanwhile, has greenlit the EU Chips Act, which pledges a substantial €43 billion for its semiconductor industry. Europe aims to produce 20% of the world’s semiconductors by 2030, a 10% increase from its current level.

 

McKinsey reports a staggering USD$280 billion in total pledged to fund the CHIPS and Science Act over the next ten years in the U.S. USD$200 billion of that is specifically for scientific R&D and commercialisation. A smaller sum of USD$52.7 billion is for semiconductor manufacturing, R&D, and workforce development, with another USD$24 billion worth of tax credits for chip production.

 

The CHIPS and Science Act funding is an attempt to entice new private investments to grow the semiconductor manufacturing and research market in the United States. If successful, this would remove the reliance on foreign suppliers that provide chips for computers, consumer technology, household appliances, cars, and other devices. This would jump-start R&D and commercialisation of leading-edge technologies, such as quantum computing, artificial intelligence (AI), clean energy, and nanotechnology, and create new regional high-tech hubs and a bigger, more inclusive STEM workforce.

 

We have seen announcements from domestic and foreign-owned semiconductor manufacturers who plan to begin construction on new projects in Arizona, Texas, and other states. If the U.S. wants to make the most of these investments and subsidies in its manufacturing market, it must tackle the higher operating and capital expenditures.

 

Exploring the new terms for subsidies in the U.S.

 

This week, the Biden administration announced terms for semiconductor manufacturers. These terms come with a focus on their workers and affordable childcare services, as well as new limitations on stock buybacks. Furthermore, companies receiving these subsidies must share excess profits with the government.

 

Gina Raimondo, the U.S. Secretary of Commerce, has said these initiatives will entice more women to fill open roles to battle talent shortages. Raimondo further states that chip makers “will not be successful unless you find a way to attract, train, put to work and retain women, and you won’t do that without childcare.”

 

Additional requirements include a law where chip manufacturers accepting subsidies from the government will be prohibited from investing in new technologies in China and other countries of concern. Overall, this aims to ensure that the U.S. taxpayer money isn’t building operations in China. These mandatory requirements could be seen as an attempt by the American federal government to spearhead the nation into collectively accomplishing its economic and national security objectives.

How Arizona is positioning itself for federal funding

 

The state of Arizona has become a semiconductor hub for TSMC and Intel, where they have positioned themselves for the influx of federal funding. The state has been home to semiconductor manufacturers since the 1940s and has 115 chip-related companies, whereas Ohio is home to only one major manufacturer.

 

TSMC and Intel have led the nation in chip investments since 2020, with the announcement of two new chip-making plants from TSMC and two additional factories from Intel, that will cost a combined USD$60 billion. State leaders have incentivised this by offering big tax breaks, water, and energy grants, and, additionally, have promised to expand technical and engineering education in the state.

 

Pressure on the UK Government for strategic planning

 

In contrast, UK semiconductor leaders are looking to move operations overseas, as the UK has fallen to the back of the pack in the race to develop a plan for a domestic semiconductor market. It’s been made clear that semiconductor companies need significant government support packages in the form of subsidies to stop them from relocating abroad. As other governments are providing this, it would be in their best interests economically and strategically as businesses to move overseas if the UK can't support their expansion.

 

Rishi Sunak needs to provide an effective, strategic plan that outlines the next moves for the British semiconductor market to prevent this. The UK is an understated player in the global chips market, specialising in designs, intellectual property, research, and fabrication of compound semiconductors. The UK is essential to the semiconductor industry, with companies like Arm, a Cambridge-based semiconductor designer, who provide chips in roughly 95% of the world's smartphones. It’s one downside? The size of the market here is far outweighed by almost every other country who have a vested interest in the chips industry.

 

Financial support from the British government could aid the current semiconductor market located in the UK and encourage its development. Paired with governmental incentives, it would be in the best interest of semiconductor companies and the UK government alike to develop the current market and remove its over-reliance on overseas suppliers.

 

Samsung looks to move production out of China and into India

 

China has revamped its chip strategy and has prepared a hefty package of more than one trillion yen (USD$147 billion) for its semiconductor industry, states Reuters. A strategic move to battle the current trade sanctions it has faced since December from the U.S.

 

India has seen significant investments from Samsung Electronics as a result of this. India sits at the centre of the global smartphone market, where Samsung produces mid and low-priced smartphones. As U.S. export sanctions disrupt the semiconductor market in China, this could soon force Samsung to move its semiconductor production facilities elsewhere. 

 

Samsung faces another problem, as US restrictions on cutting-edge technology could disrupt the production of its NAND memory chips in China. Samsung currently produces 40% of its NAND memory chips in Xian, China.

 

To conclude, the global semiconductor market is seeing major change. Nations are investing in domestic markets to combat the reliance on overseas markets, exports, and imports. Can the industry overcome the talent shortage and reach the numbers needed to accommodate the growth?