US Senate approves $52 billion for chipmakers—but not designers

The CHIPS Act will provide funding and tax relief, among other incentives, to companies looking to manufacture semiconductors in the US.

chips / processors / memory cards
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The US Senate, by a vote of 64-33, has approved the CHIPS Act, a bill that would provide $52 billion in assistance funds for semiconductor manufacturers looking to make products in the US, along with a 25% tax credit for investment in the industry, as well as research and workforce development grants.

The bill still needs the approval of the US House of Representatives and President Biden, a vocal supporter of the legislation, to become law.

While $2 billion of the direct assistance funds is already earmarked for legacy programs—specifically, technologies that the Department of Defense wants to produce within the US—the other $50 billion is generally available for the development of additional domestic silicon manufacturing in the country.

The big winners, should the CHIPS Act be signed into law, will be companies like Intel, who either already have chip fabrication facilities in the US or are planning to build them—but other chip companies, particularly those that take a lead role in chip design but don’t manufacture products themselves, warn that the bill doesn’t go far enough in helping the US silicon industry.

Lawmakers urged to aid chip designers as well

The CEO of wireless chip design company EdgeQ, Vinay Ravuri, said in a statement that the US risks losing its edge in innovation by not providing funding for designers and other fabless silicon businesses.

“The CHIPS [Act] addresses a scaling issue. But it does not address ingenuity,” he said. “To remain relevant, we need to invest in cutting-edge companies, especially those pushing to disrupt and elevate the industry in new frontiers, like 5G and AI.”

Gartner Research vice president and analyst Gaurav Gupta said that EdgeQ is far from the only company irked by the bill’s exclusive focus on the manufacturing end of the silicon industry.

“If you talk to folks Iin the industry, you’ll get that view that it’s not going to benefit everyone equally,” he said.

Nevertheless, said Gupta, the CHIPS Act remains a game-changer for chipmaking in the US, making it far more competitive with semiconductor manufacturing overseas, which generally has far lower production costs.

“This gives OEMs and fabless companies the option to buy devices from here,” he said. “And the reason is that these companies won’t come here unless there’s motivation through the CHIPS Act, because there’s obviously a cost gap between running a fab in Asia and running one here.”

Chip revenue forecast to decline

The CHIPS Act’s probable passage comes at the right time for the semiconductor industry overall, as new figures released today by Gartner show semiconductor revenue growth slowing sharply over the next 18 months. Global revenue is projected to grow by 7% over the course of 2022, down from a whopping 26% in 2021, and to actually decline by 2.5% in 2023.

Practice vice president Richard Gordon said that that could be good news for customers, however, as prices may begin to decline and lead time between purchasing and delivery shrinks.

“The semiconductor market is entering an industry down cycle, which is not new, and has happened many times before,” he said in a statement accompanying the results. “While the consumer space will slow down, semiconductor revenue from the data center market will remain resilient for longer (20% growth in 2022) due to continued cloud infrastructure investment.”

Copyright © 2022 IDG Communications, Inc.

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