[Chip Talk] 'Gaebongbakdu' Catch the $69 Trillion US Semiconductor Subsidy

Biden Administration Marks 1 Year of Semiconductor Support Act Implementation
"Will Distribute Within the Year"... Over 460 Companies Submit Letters of Intent
Companies Strive to Secure Maximum Subsidies for Profitability
State Governments and Lawmakers Busy Lobbying for Investment

The Biden administration's ambitious 'CHIPS and Science Act (CSA)' aimed at dominating semiconductor supremacy has passed its first anniversary, intensifying competition over subsidies amounting to approximately 69 trillion won. With the U.S. Department of Commerce, responsible for distributing the subsidies, announcing plans to allocate funds within the year, semiconductor companies that have begun investing, as well as several U.S. state governments seeking to attract investment using federal subsidies, are actively working behind the scenes.

President Joe Biden [Photo by AP News]

◇ Over 460 Companies Submitted Letters of Intent... "Subsidy Distribution to Begin by Year-End"

On the 9th (local time), marking the first anniversary of the CSA enactment, the U.S. Department of Commerce announced in a press release that more than 460 companies have submitted letters of intent expressing their desire to receive subsidies under the CSA totaling $52 billion (approximately 69 trillion won), and that these submissions are currently under review. In February, the Department formed a 140-member 'Chips for America' team to receive and examine companies' subsidy applications.

Commerce Secretary Gina Raimondo recently told reporters, "We will start distributing subsidies by the end of this year," adding, "We are pressuring the team to speed up, but what’s more important is to do it correctly." This is interpreted as a commitment to ensure that funds are allocated in a way that benefits the U.S., rather than wasting taxpayer money, especially given the controversy over preferential tax support for specific industries and companies during the CSA's legislative process.

Previously, the Department stated that direct funding for semiconductor manufacturing facility construction would range from 5% to 15% of the investment amount, and overall would not exceed 35% of total capital expenditures. Once the Department decides to grant subsidies, further discussions will be held on how to structure the subsidy support for the respective investments.

A senior official from the Department of Commerce told CNBC that they are actively discussing with companies expected to receive subsidies. The official added, "We will have to make difficult decisions regarding the distribution method," and "Not all applicants will be satisfied. Some will be disappointed."

◇ U.S. Investment Depends on Subsidies... Intel Says "We Want More Than Foreign Companies"

According to the White House, total U.S. semiconductor manufacturing facility investments announced since COVID-19 amount to $231 billion. The world’s largest foundry, Taiwan’s TSMC, plans to invest $40 billion in Phoenix, Arizona, and leading U.S. semiconductor company Intel is investing hundreds of billions of dollars in Arizona and Ohio. Samsung Electronics has also committed $17.3 billion to Taylor, Texas.

For these companies, federal subsidies are crucial. Given that facilities and labor costs in the U.S. are several times higher than in China or Southeast Asia, securing as much subsidy as possible is essential to maintain profitability during factory construction and operation. CNBC reported, "Many projects depend on federal support."

Pat Gelsinger, CEO of Intel, is one of the vocal figures on this issue. He mentioned meeting Secretary Raimondo at an event last month and emphasized that Intel, as a U.S. company, wants to receive more subsidies than foreign companies. He said, "It’s certainly good that Samsung and TSMC are building manufacturing facilities in the U.S., but we conduct core research and development (R&D) here, while they do it overseas. We should definitely receive more benefits."

Other U.S. companies share similar views. According to CNBC, Brett Robinson, CEO of Integra Technologies, a semiconductor post-processing company headquartered in Kansas, mentioned plans to build a 1 million square foot facility, stating, "The post-processing sector has such thin margins that it cannot operate without the CHIPS Act." SkyWater Technology, a U.S.-based foundry, announced plans to build a new $1.8 billion plant but said construction would be difficult until federal subsidies are confirmed.

Foreign companies are also highly interested in securing subsidies as they plan large-scale investments in the U.S. Brian Harrison, president of TSMC’s Arizona plant, said, "(Federal subsidies) are necessary," and that they will be used to build two factories and equip them.

◇ "Invest in Our Region" ? Busy State Governments and Legislators

It is not only semiconductor companies that covet federal subsidies. U.S. states and their congressional representatives, aiming to attract investment by effectively utilizing these funds, are also actively working behind the scenes.

The New York Times (NYT) recently reported that Chuck Schumer, Senate Majority Leader and a key figure in passing the CSA, is leveraging his position to ensure significant investment in his home state of New York. Even before the law was passed, he reportedly contacted companies to inquire about their investment timelines in New York. Three months after the law’s enactment, in November last year, he sent a video message to the Semiconductor Industry Association (SIA) event, urging many industry stakeholders to consider investing in the Empire State. In a June interview with the NYT, he also stated, "When drafting the bill, I kept New York companies in mind."

Indiana, which lacks semiconductor experience, has also been working hard to attract semiconductor companies using federal subsidies. Over the past year, Indiana state officials have visited Korea, Taiwan, and Japan to meet with semiconductor company representatives and have invited senior Biden administration officials to introduce the expansion of local universities and R&D facilities. Todd Young, a Democratic senator representing Indiana, is reportedly working tirelessly to attract investment, according to the NYT.

This content was produced with the assistance of AI translation services.