Array
(
    [content] => 
    [params] => Array
        (
            [0] => /forum/index.php?threads/u-s-picks-team-to-oversee-52-7-billion-in-semiconductor-funding.16743/
        )

    [addOns] => Array
        (
            [DL6/MLTP] => 13
            [Hampel/TimeZoneDebug] => 1000070
            [SV/ChangePostDate] => 2010200
            [SemiWiki/Newsletter] => 1000010
            [SemiWiki/WPMenu] => 1000010
            [SemiWiki/XPressExtend] => 1000010
            [ThemeHouse/XLink] => 1000970
            [ThemeHouse/XPress] => 1010570
            [XF] => 2021071
            [XFI] => 1050270
        )

    [wordpress] => /var/www/html
)

U.S. picks team to oversee $52.7 billion in semiconductor funding

Daniel Nenni

Admin
Staff member
2 minute read
Gina Raimondo speaks at a press briefing at the White House in Washington


U.S. Secretary of Commerce Gina Raimondo speaks about semiconductor chips subsidies during a press briefing at the White House in Washington, U.S., September 6, 2022. REUTERS/Kevin Lamarque

WASHINGTON, Sept 20 (Reuters) - The Biden administration on Tuesday named a team of senior advisers to oversee $52.7 billion in government funding to boost semiconductor manufacturing and research.

Commerce Department chief economist Aaron "Ronnie" Chatterji will serve as White House Coordinator for CHIPS Implementation at the National Economic Council (NEC) and will manage the work of the CHIPS Implementation Steering Council created by President Biden's chips executive order signed last month.
Advertisement · Scroll to continue

In August, Congress approved $52.7 billion for semiconductor manufacturing and research and a 25% investment tax credit for chip plants that is estimated to be worth $24 billion.

NEC Director Brian Deese said Chatterji "will help coordinate a unified approach to our key implementation priorities while ensuring that we have guardrails and oversight in place to responsibly spend taxpayer dollars."

The legislation championed by Biden aims to boost efforts to make the United States more competitive with China and alleviate a persistent chips shortage that has affected everything from cars to washing machines to video games and weapons.

 

Daniel Nenni

Admin
Staff member
Progress!

This could very well lead to fab overbuilding in the short term but long term we will need the capacity so it will be a lumpy road, my opinion.


"At Commerce, Treasury official Michael Schmidt will serve as CHIPS Program Office director. Schmidt previously served as New York State Department of Taxation and Finance commissioner.

Eric Lin, director of the government's Material Measurement Laboratory, will be interim director of the CHIPS Research and Development Office. The chips law includes $11 billion for research spending.

Commerce Secretary Gina Raimondo said the chips team would consist of about 50 people."
 

blueone

Active member
The team looks unqualified. Not one person in a leadership role with semiconductor experience, for the CHIPS Act no less. Very disappointing. I hope some of the others in the "50 people" will have worked in the industry in a technical capacity.
 

tonyget

Active member
How many of these "experts" will end up with corruption allegation like their Chinese big fund counterpart
 

nghanayem

Member
This could very well lead to fab overbuilding in the short term but long term we will need the capacity so it will be a lumpy road, my opinion.
Would it? All of these new fabs won't come online until the mid 2020s. By then the current downturn should be well behind us (if not there are probably bigger issues going on in the world than overbuilt fab capacity).
 

nghanayem

Member
How many of these "experts" will end up with corruption allegation like their Chinese big fund counterpart
Relatively speaking not many. The money isn't just a blank check with no oversight like the big fund, and it cannot be overstated that bribery is a fact of life for advancement within the party and for private enterprises (both local and foreign) to circumvent the government's red tape and oversight. This isn't to say the US government is free of corruption (if you did I and every other American would laugh you out of the room). However it is nowhere near as endemic as it is in places like South Korea and China. Rather it is more in line with the amount of corruption you would see in europe.
 

coldsolder215

Active member
How many of these "experts" will end up with corruption allegation like their Chinese big fund counterpart
I've been saying for a while now that what US semiconductors need is a Dick Cheney to stuff no bid contracts into the pockets of Intel shareholders.
 

nghanayem

Member
In the US,there is fancy name for corruption,"political donation",and it is totally legit
I know. But with the big fund you had the administors literally pocketing large swaths of the money. I can almost guarantee that non of these employees will be embezzling CHIPS funding. As for lobbying of course it will occur, and likely it will be of little consequence. What difference does it really make if Samsung Intel or TSMC get the largest cut for building the larger factory. They will all get something, and the scale of government investment depends on the scale of the private investment (and vice versa). As long as the money goes to doing what is supposed to be going to, then the task force has technically done it's job. As long as Micron can shore up some money for their fab, globalwafers gets its cash, and the logic foundry money gets diversified (ie not all in on TSMC and not all in on intel) then I feel like the money was wisely distributed.
 

nghanayem

Member
In the US the contribution limits for individual campaigns is $5,000.


There are also multiple kinds of PACs (Political Action Committees), which can accept unlimited donations, but the PAC money cannot be used for personal or campaign expenses.


So your implication, that political donations are equivalent to taking bribes, is incorrect.
The folks in the commerce department also don't run for election they are appointed by the executive branch or move up the ladder like any normal employee would.
 

tonyget

Active member
The folks in the commerce department also don't run for election they are appointed by the executive branch or move up the ladder like any normal employee would.

There is lots of ways they could pocket the money. Such as collaborate with an up stream semiconductor supplier,the supplier give some share to these bureaucrats,in return the bureaucrat can ask the fab to source from this supplier if they want to get subsdise.
 

blueone

Active member
There is lots of ways they could pocket the money. Such as collaborate with an up stream semiconductor supplier,the supplier give some share these bureaucrats,in return the bureaucrat can ask the fab to source from this supplier if they want to get subsdise.
An Israeli colleague once told me of an old saying they like there. “If you’re in a hole, stop digging.”
 

Daniel Nenni

Admin
Staff member
Would it? All of these new fabs won't come online until the mid 2020s. By then the current downturn should be well behind us (if not there are probably bigger issues going on in the world than overbuilt fab capacity).

It's not just new fabs. We are optimizing/upgrading existing fabs to squeeze every possible wafer out as fast as we can:

 

nghanayem

Member
It's not just new fabs. We are optimizing/upgrading existing fabs to squeeze every possible wafer out as fast as we can:

And it is impressive, but if your concern is that we are building too many fabs today, isn't this not super relevant. Surely at some point you can't squeeze out any more wafer starts or faster wafer turn arounds. Presumably the capacity we have now will be insufficient three to five years from now (with or without efficiency projects and running at higher utilizations than the fab was ever designed to run at).

Am I neglecting some detail? If so please let me know, you are far more experienced in this industry than I am.
 

Daniel Nenni

Admin
Staff member
And it is impressive, but if your concern is that we are building too many fabs today, isn't this not super relevant. Surely at some point you can't squeeze out any more wafer starts or faster wafer turn arounds. Presumably the capacity we have now will be insufficient three to five years from now (with or without efficiency projects and running at higher utilizations than the fab was ever designed to run at).

Am I neglecting some detail? If so please let me know, you are far more experienced in this industry than I am.

We definitely need more fabs but will we need as many as have been announced? I don't think so. But you are right, we can have empty fab shells without equipment until the need arises. We have had them in the past. That may save 1 year or more of the total fab build. But today it is an arms race: TSMC vs Intel vs Samsung. We also have the onshoring trend in multiple countries including the US. The good news is that the semiconductor equipment companies will guard band hyper fab building.

Look at the Q2 numbers. It will be interesting to see what Q3 brings.

Top Semiconductor company Revenues 1H 2022.jpg
 

nghanayem

Member
We definitely need more fabs but will we need as many as have been announced? I don't think so. But you are right, we can have empty fab shells without equipment until the need arises. We have had them in the past. That may save 1 year or more of the total fab build. But today it is an arms race: TSMC vs Intel vs Samsung. We also have the onshoring trend in multiple countries including the US. The good news is that the semiconductor equipment companies will guard band hyper fab building.

Look at the Q2 numbers. It will be interesting to see what Q3 brings.

View attachment 905
For sure this will be a sluggish 2H22 for many semiconductor companies. As for future capacity being overbuilt for future demand it is hard for me to say anything without it being anything more than a guess. But it is certainly a potential problem. Onshoring might solve this, (as well as being part of the problem in the first place) because customers seem willing to spend a bit more to have chips closer to where they are being used. This could potentially allow their customers to justify spending extra per wafer to effectively prop up these new fabs that they begged for; reducing the degree that oversupply would causing a pricing/profitably crash.
 

Daniel Nenni

Admin
Staff member
For sure this will be a sluggish 2H22 for many semiconductor companies. As for future capacity being overbuilt for future demand it is hard for me to say anything without it being anything more than a guess. But it is certainly a potential problem. Onshoring might solve this, (as well as being part of the problem in the first place) because customers seem willing to spend a bit more to have chips closer to where they are being used. This could potentially allow their customers to justify spending extra per wafer to effectively prop up these new fabs that they begged for; reducing the degree that oversupply would causing a pricing/profitably crash.

Cost is the thing that bothers me still. The fabless industry was built on multi sourcing to keep costs down. Cost is critical to the majority of fabless semiconductor companies. Will the consumer pay more for American made goods? History says no they will not. And just because the wafer is made in the United States does that mean it will be made into a complete and tested chip in the US? No it does not. Will the product that contains the chip be made in the US? Probably not. So who are we really kidding here?
 

nghanayem

Member
Cost is the thing that bothers me still. The fabless industry was built on multi sourcing to keep costs down. Cost is critical to the majority of fabless semiconductor companies. Will the consumer pay more for American made goods? History says no they will not. And just because the wafer is made in the United States does that mean it will be made into a complete and tested chip in the US? No it does not. Will the product that contains the chip be made in the US? Probably not. So who are we really kidding here?
I mostly agree. However I think there is a big market for more embedded/automotive/telecom chip onshoring, as the things these chips go into are actually made in the USA. For these products the chip is a relatively insignificant part of the BOM or the margins are already huge, and I think manufacturers would be wiling to pay extra for extra resilience. To say nothing of the massive savings in shipping or potentially having to deal with rolling lockdowns and power outages in the PRC.

For consumer products, yeah I don't expect iphones to be assembled in the US anytime soon. But I could see why fabless companies might want some foundry capacity outside of Taiwan in case there is a natural or manmade disaster/trade disruption. Yes I am well aware that this would screw up the whole market regardless. However, some diversification wouldn't cause any harm and might speed up a bounce back.

Additionally the whole supply chain wouldn't need to be from the US, and I don't think the US govt or most US companies care to have total autarchy. As it stands much of the semiconductor ecosystem is already "out of the line of fire". Chems are already mostly from Japan, tools from the US/EU/JP, wafers are already partially/could further be sourced from the US/JP, a great deal of assembly takes place in Malaysia/Vietnam/SK/(in the future the EU for intel). To my understanding the only big things that are basically monopolized by the Chinas are PCBs and consumer electronics assembly (which is partially shared with SK and Malaysia with India trying to break into this field). So if US policy makers want to reduce US dependence on the Chinas for critical electronics then I think this should at least build a basic level of supply chain resilience (enough for national security purposes and a bit extra for the niceties of modern life) which could grow as the PRC continues to become less business friendly/more companies continue to pull out to cheaper and less uncertain nations. After all the same thing happened to Japan and they were a stable democracy with a relatively open door to trade/less bureaucratic barriers. I see no reason why China should be immune to the middle income trap that so far has struck every developing nation since the beginning of the individual revolution.
 

Daniel Nenni

Admin
Staff member
I mostly agree. However I think there is a big market for more embedded/automotive/telecom chip onshoring, as the things these chips go into are actually made in the USA. For these products the chip is a relatively insignificant part of the BOM or the margins are already huge, and I think manufacturers would be wiling to pay extra for extra resilience. To say nothing of the massive savings in shipping or potentially having to deal with rolling lockdowns and power outages in the PRC.

Good conversation, thanks.

I don't think we would even be talking about this without the chip shortage narrative. Would there even be a CHIPS ACT and on-shoring? The truth is there was never really a wafer shortage. Companies cancelled orders then had to get back in line. This was a total supply chain management debacle to the highest order. The foundries were very happy with the shortage narrative because it allowed them to raise prices and spend CAPEX with impunity. And if/when over capacity comes it will be back to price and no one makes wafers cheaper than TSMC. They have nothing to lose either way. I never thought I would see TSMC build fabs in the US but here they are. Brilliant move, absolutely.

Look at the TSMC automotive numbers: In Q2 2019 it was 4%. In Q2 2020 it was 4%. In Q2 2021 it was 4%. In Q2 2022 automotive was 5%. No additional wafer capacity needed here.

Take a look at the latest automotive numbers. In 2020 automotive dropped -15%, in 2021 it rose +2.4% and 2022 looks like +6%. 2023 is expected to drop again a percent or two. So help me understand why automotive is still experiencing chip shortages? I just don't see it.
 

Tanj

Active member
"building too many fabs" is code for the oligopolies having enough capacity that they might actually need to compete for customers.

A mature industry should not be on a knife-edge, where customers end up paying fat margins and still get screwed when demand cannot be met, including when some fab or supplier to fabs has a problem. Is that really optimizing the costs to customers? No.

If the industry had 10 to 20% more capacity than is utilized, something most mature industries regard as normal, then yes prices would need to cover the costs of more capital. Not clear that is worse for customers than the current margins built into prices. Of course some of that capacity is bottlenecked by EUV machines, still a lot of chips do not need those. But oligopolies of 3 or 4 companies in key semi sectors have discovered that balancing on the knife edge works for them, so long as they have financial reserves to weather the occasional downturn.

We should not repeat the "overbuild - sky is falling!" narrative without thinking about who really benefits from it, and what other possible marketplaces might be like.
 

Tanj

Active member
Another reason the industry is so volatile is the very long lead times, especially for new custom parts. Almost no end markets have the luxury of securely planning a product 4 years out. Markets may change. But the semi industry commonly has 3-to-4-year lead times from product definition to production on a new process, or a bit shorter 2 years on a recent process. Errors in product planning can produce huge swings in chip demand either way. Like an analog circuit with a 180 degree phase shift in feedback, planning capacity with that double delay of new plant and unknown products is inherently unstable.

It is a hard problem, but things which shorten lead times - better informed and skilled customers, better EDA, mix-n-match chiplets, briefer incremental changes to fabs, better verification, shorter maskmaking, etc. - can contribute to stabilizing the industry and making it more routine to have capacity ready when needed.
 
Top