Staying ahead: A semiconductor manufactured by TSMC on display at a global conference in China. The Act is designed to help close the gap with Taiwan and South Korea in terms of manufacturing capacity and prowess. — AFP

LONG-AWAITED funding for the Chips Act is a win for a cabal of US chipmakers and foreign companies, but largely ignores the nation’s true semiconductor leaders who have been propping up the domestic sector for two decades.

Three-quarters of the US$52bil (RM231.4bil) allocated to the industry by Congress was earmarked “to strengthen semiconductor advan- ced test, assembly, and packaging capability in the domestic ecosystem.“The rest of the funds will largely go to a technology centre to be set up by the commerce and defence departments, and a new Manufacturing USA Institute that will mostly research new ways to make chips, according to the funding schedule outlined in Senate Amendment 5135. It passed the House last Thursday.

The Act was designed to help close the gap with Taiwan and South Korea in terms of manufacturing capacity and prowess, while ensuring the US stays ahead of China, which is also spending significant sums to boost its own chip sector.

But the move will barely put a dent in American reliance on foreign manufacturing, and won’t boost resilience against supply shocks, either. Taiwan Semi-conductor Manufacturing Co’s (TSMC) factory in Arizona will end up accounting for a minuscule 1% of its global capacity.

And even then, once those chips are manufactured, they’ll be popped straight onto a plane to be tested and packaged in Asia, before being assembled into a phone or personal computer in China.




Even after all this government money is spent, Taiwan and South Korea will retain a dominant share of capacity andvcontinue to be technology leaders. That said, Intel Corp, which designs, manufactures and packages chips at factories in global locations including the United States, Israel, China, Vietnam and Ireland, is set to be a big winner.

Texas Instruments (TI) Inc can also expect to benefit. Neither company is capable of making chips using the world’s leading manufacturing nodes.

Yet foreign players, including TSMC, Samsung Electronics Co and materials supplier GlobalWafers Co have already put their hand up for subsidies and are likely to receive funds, too.

Missing out, though, will be the companies that have come to dominate the most-advanced semiconductor technologies on the planet including Nvidia Corp, Qualcomm Inc and Broadcom Inc.

That’s because these companies, each of which have a larger market capitalisation than Intel and TI, are purely focused on the design and development of chips, without manufacturing them.

Driving the political rhetoric behind the promotion and drafting of the Creating Helpful Incentives to Produce Semiconductors or Chips Act is the notion that making physical goods – manufacturing them – is more important and crucial to national security than designing them.

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