CHIPS Act: US legislators introduce $22 billion chip aid bill

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3 trends influencing the semiconductor industry in a coronavirus world.

Last week, U.S. legislators representing both parties introduced a $22.8 billion aid bill for the American semiconductor industry. The proposal includes federal funding for the construction of new domestic foundries and research and development support.

The bipartisan initiative is designed to help the United States maintain its leadership in the global semiconductor arena.

Semiconductor Industry Aid Bill Details

CNBC reports Senators John Cornyn (R-TX) and Mark Warner (D-VA) introduced Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act to the Senate. Their bill earmarks $10 billion to match state initiatives to incentivize the creation of new local component factories. The legislation also directs $12 billion to the research and development of cutting edge microelectronics.

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The CHIPS bill also offers a 40 percent refundable income tax credit for the purchase of semiconductor fabrication equipment. In addition, the proposal calls upon the Commerce Department to provide support for STEM job training, advanced microelectronic assembly and testing capability, as well as 5G deployment.

On his website, Sen. Cornyn said the CHIPS Act is crucial to ensuring U.S. national security and leadership in technological innovation.

Global Focus on Component Sector Development

After the coronavirus pandemic significantly disrupted the global semiconductor supply chain, various world powers have sought to bolster their domestic component supply chains.

Last month, Trump administration officials reportedly met with representatives from Intel and the Taiwanese Semiconductor Manufacturing Company (TSMC) to discuss establishing more U.S. foundries. The meeting resulted in TSMC’s announced plan to build a $12 billion 5nm plant in Arizona. Given the generous provisions of the CHIPS Act, other corporations will likely soon follow the East Asian manufacturer’s lead.

In addition, the Taiwanese government revealed a plan to stimulate its semiconductor industry with NT$10 billion ($334 million) in incentives. The initiative covers up to half of a foreign chipmaker’s research and development costs if it establishes a facility in-country.

Similarly, India’s Ministry of Electronics & Information Technology recently unveiled a ₹500 billion ($6.6 billion) electronics manufacturing incentive project. New Delhi launched the program to cultivate locally based microelectronics production as part of a larger push to foster a $1 trillion regional digital economy.

Not to be outdone, China has committed to spending $161 billion on domestic semiconductor development through 2028.

As competition is a driver of excellence, the current global focus on state-sponsored development will likely produce some revolutionary component innovations.

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