Changing Landscape
The White House announced on Aug. 9 (local time) that in the first year since the implementation of the CHIPS and Science Act it has attracted investments amounting to US$166 billion from over 460 companies worldwide.
The U.S. Department of Commerce stated that “More than 460 letters of intent for investment have been submitted by domestic and foreign companies” and explained that “This includes everything from semiconductor manufacturing to the supply chain and research and development.” This is more than double the approximately 200 companies that had been considered for support funds until last April.
U.S. President Joe Biden declared through a statement, “We invented the semiconductor, but we make only 10% of the world’s semiconductors,” vowing to “Make America a leader in semiconductor manufacturing once again.” The White House also revealed that “Projects related to the Semiconductor Law are beginning in 42 of the 50 U.S. states,” and that “the semiconductor supply chain is returning to the United States.”
U.S.-based CNBC described this as “Many semiconductor businesses depend on government grants for success,” and stated that “The U.S. semiconductor industry is awaiting a windfall.”
The Semiconductor Law focuses on supporting the expansion of semiconductor production facilities within the U.S. by a total of 52 billion dollars (about 68 trillion won). Controversy arose over a clause prohibiting the use of grants for expanding advanced semiconductor equipment in factories in China and requiring companies receiving U.S. grants to share some of their excess profits.
This self-praising assessment from the U.S. is viewed with mixed feelings by various governments and the semiconductor industry. While most agree with the “mission” of countering China, disagreements about maximizing national and corporate interests in the new order are growing. Following the U.S., the European Union also approved a “European version of the Semiconductor Law” this year, mobilizing 43 billion euros to find its way.
Samsung Electronics and SK hynix have also begun to respond to the overall importance of supply chain management by strengthening their Global Public Affairs (GPA) organization.
Moreover, since semiconductor factories (fabs) are now recognized as national strategic assets, the segmentation of production lines has made chip production more expensive. This has become a significant burden on South Korea and Taiwan, which specialize in chip manufacturing, rather than the U.S., which houses fabless companies like Apple, Qualcomm, and Nvidia that specialize in semiconductor design.
Taiwan’s TSMC, the global leader in semiconductor foundry contract manufacturing, has started to express explicit discontent. While actively cooperating in the U.S. strategy of countering China, TSMC is drawing a line at attracting production bases. TSMC has delayed the operation of its under-construction Arizona factory in the U.S., which will cost a total of 40 billion dollars, by one year to 2024. Although it cited a local skilled labor shortage as the reason, analyses have emerged that it indirectly expressed dissatisfaction with the high production costs in the U.S. TSMC’s founder, Morris Chang, stated that “producing the same chips in the U.S. costs more than 50% than in Taiwan,” and argued, “I support efforts to block China’s chip development, but it’s hard to find a reason to continue producing semiconductors in the U.S.”
Meanwhile, TSMC has embarked on diversifying production bases by consecutively increasing factories in Europe and Japan. On Aug. 8 (local time), TSMC officially announced the construction of its first European factory in Dresden, Germany, and also plans to expand a factory under construction in Kumamoto, Japan. Both countries have responded with substantial subsidies, with Germany covering half of the factory investment of 10 billion euros, and the Japanese government offering 40% of the total investment as a subsidy.
Still, key processes under 5 nm are being kept in Taiwan. An industry insider mentioned, “TSMC recently raised the prices of advanced processes by more than 10% again,” stating that the strategy is “to pass the soaring semiconductor production costs onto U.S. fabless companies and minimize risk by adding government subsidies.”
With enormous investments pouring in, the U.S. is in the mood to raise the threshold for subsidies again. A senior U.S. Department of Commerce official recently told CNBC, “Not all companies that applied for semiconductor support will be satisfied. Someone will be disappointed.” It is also known that there is talk of dividing the grants among more companies as more companies than expected have applied for the subsidies.
Professor Kang Jun-young from the Graduate School of International and Area Studies at Hankuk University of Foreign Studies said, “The tug-of-war over semiconductor production bases will continue until the U.S. elections next year,” and noted that “In the end, the situation leaves companies with no other response but to somehow continue to hold onto state-of-the-art processes.”