The US $280 billion chip bill has passed another hurdle and is only waiting for Biden's signature!

On Thursday, the U.S. House of Representatives voted 243 to 187 to pass the $280 billion Chips and Science Act to strengthen technological innovation in the U.S. The bill, a priority for the Biden administration, includes $52 billion in subsidies to encourage chipmakers to build semiconductor manufacturing plants, or “fabs,” in the United States.

After months of negotiations between the House and Senate, Thursday’s approval resolves a looming threat for chipmakers to reconsider plans to build factories in the U.S. Earlier this month, the groundbreaking ceremony for the $20 billion Intel foundry was delayed while funding remains stalled.

“The American people may not know it, but semiconductors are an integral part of their daily lives,” Rep. Frank Pallone Jr. (D-NJ) said in a statement Thursday before the vote. “They are the microchips that are used in cars, consumer electronics and washing machines.”

The coronavirus pandemic of the past few years has upended a wide variety of industries, especially businesses that make products that require semiconductor chips. As consumers get used to spending more time at home rather than in school or the office, demand for tech products such as laptops, game consoles, and tablets has soared. The confluence of demand and pandemic-related supply chain disruptions has spurred a global semiconductor shortage that hardware suppliers such as Nvidia and AMD are just beginning to address.

But the pandemic’s supply chain crisis has inspired lawmakers, namely Sen. Chuck Schumer (D-NY), to introduce legislation that would make it more feasible for chipmakers to hire American workers and produce products domestically. Over the past few decades, semiconductor factories have shipped factories and jobs overseas, primarily to countries like China, to reduce manufacturing and shipping costs. The Chips and Science Act is the Biden administration’s gamble to incentivize chipmakers to reverse course and build fabs in the United States.

"For decades, some 'experts' said we needed to give up manufacturing in America. I never believed it. Manufacturing jobs are coming back," President Joe Biden said in a statement Wednesday. "Thanks to this bill, we're going to have more."

President Joe Biden has encouraged lawmakers to pass the measure, but it is unclear when he plans to sign it into law.

The CHIPS and Science Act is the final version of an innovation bill that has undergone multiple changes in both name and language since the concept was first introduced in 2019. The original version of the bill was called the Endless Frontier Act, a nod to President Franklin D. Roosevelt. Last summer, the Senate approved an updated version of the bill, the American Innovation and Competitiveness Act, which had stalled as House and Senate leaders negotiated revisions.

But as pressure mounted due to the looming August recess and the midterm election cycle, lawmakers accelerated momentum to pass a smaller bill, the CHIPS and Science Act, which scaled back some of the ambitions of the previous package but includes billions of dollars for domestic chip manufacturing.

As passage of the bill becomes more imminent, progressive opposition to the measure has become more sanguine. In a statement earlier this month, Sen. Bernie Sanders, a Vermont independent who caucuses with the Democratic Party, criticized the bill as a “blank check” to profitable semiconductor companies, even as it supports expanding domestic microchip manufacturing.

"There is no question that chip and semiconductor shortages are a dire threat to our country," Sanders said. "What I cannot understand is why so many in Congress are so eager to pay a bribe."

Sanders' announcement stoked optimism that House Democrats might have enough support to approve the bill. It was unclear how many members of the House Congressional Progressive Caucus would vote for the bill hours before it passed.

In addition to chip subsidies, the bill provides the Commerce Department with $10 billion to award state and local grants to establish "regional technology centers" across the country. These hubs will become mini Silicon Valleys, bringing jobs and economic growth to areas hit hard by globalization. The National Science Foundation will also receive billions of dollars in additional funding for semiconductor manufacturing research and workforce development programs.

The US chip bill, which provides $52 billion in subsidies to the semiconductor manufacturing industry, has been officially passed by the Senate and the House of Representatives, and is only one step away from being signed into law. However, in an interview with Bloomberg, former TSMC spokesperson Sun Youwen also shared her view that the chip bill is not a panacea that can cure all diseases and revive the US semiconductor manufacturing industry.

The CHIP Act plans to provide US$52 billion in subsidies to US semiconductor companies, provide tax breaks for the semiconductor manufacturing industry, and invest in the innovation and development of other technologies. But does the passage of this bill really mean that the US semiconductor manufacturing industry will be revitalized? Former TSMC spokesperson Sun Youwen believes that it may not be that simple.

Sun Youwen recently had an online conversation with Bloomberg Technology on Twitter. During the one-hour conversation, although the topic was TSMC's secret to success, the topic also discussed the US's $52 billion in semiconductor subsidies.

Sun Youwen worked at TSMC from 2003 to 2019. As a spokesperson, she was the face of TSMC and represented the company in dealing with numerous investors. However, at the beginning of the conversation, she said that she is now just a retired person and no longer represents the company. She does not have any inside information, but can share her personal observations on the semiconductor industry.

The host mentioned that the US government allocated $52 billion to subsidize the development of the semiconductor manufacturing industry, but Sun Youwen bluntly said that the actual help this money can bring is not great. "$52 billion is really not a lot. You can look at TSMC's capital expenditure for one year."

At TSMC's legal briefing in April this year, it announced that the scale of capital expenditure in 2022 is expected to be between US$40 billion and US$44 billion. In other words, the subsidy given by the US government may not be much more than a company's budget, and it may not be enough to revive the semiconductor manufacturing industry.

Analysts have previously stated that if the United States wants to build semiconductor manufacturing capabilities, the $52 billion subsidy alone is definitely not enough, and it must continue to invest every year to at least have a slim chance of success.

As TSMC founder Morris Chang has said many times, semiconductors are an industry that requires global division of labor, and each country or region must perform its duties and play its role in the supply chain to maintain the operation of the industry. Sun Youwen also mentioned that the semiconductor industry relies on global division of labor, and the United States has spent a lot of effort to keep manufacturing in the country, but it cannot avoid the threat of supply chain disruptions.

Earlier, she used the iPhone as an example to illustrate how much the semiconductor supply chain relies on the cooperation of various regions. "The design is in the United States, the memory is from South Korea, the brain of this device is made in Taiwan, China, and a large number of chips such as image sensors and power management ICs come from other parts of Asia, not just Taiwan," Sun Youwen pointed out.

At the same time, semiconductor manufacturing equipment comes from European and Japanese manufacturers such as ASML and Tokyo Electron, while the chemical raw materials and gases required for the manufacturing process are supplied by the United States and Japan.

"As long as one link is missing, the supply chain will be interrupted," Sun Youwen said. "But how can you guarantee that everything you need will be locally available at any point in time? This is unrealistic."

Therefore, she believes that rather than trying to localize the semiconductor supply chain, what should be done is to enhance the cooperation capabilities of various regions and avoid international conflicts. "Without an international system of global cooperation, we will not have semiconductors. If we want an advanced semiconductor industry, we must avoid direct conflicts."

Instead of spending money trying to build semiconductor manufacturing capabilities, the United States should use its resources on research and development to study more innovative materials and architectures, which is a better approach to promote the growth of the semiconductor industry.

The host then mentioned that China is actively working to achieve self-sufficiency in semiconductors, and asked Sun Youwen what she thought of China's layout. Just as she was negative about the United States' attempts to build semiconductor manufacturing capabilities, she did not think that China could easily catch up.

"China didn't just start making chips today. They've been investing for decades and have government support," Sun said. "But where are they now? I think this tells you that if you want to catch up with your competitors in this industry, you have to work hard. It's not enough to just have money to buy equipment and tools."

At the same time, she also pointed out that China lacks sufficient industry experience, and even industry professionals rarely have access to advanced manufacturing opportunities, which is a major weakness of China. In addition, to establish a semiconductor supply chain, it is necessary to start with raw materials and equipment, but current semiconductor equipment companies have decades of experience and excellent products. As long as the current leading companies maintain investment and maintain competitiveness, I don’t think any company can catch up in a short time.

*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.

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