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CHIPS Act: Securing Semiconductor Supply - [Business Breakdowns, EP.167]

CHIPS Act: Securing Semiconductor Supply - [Business Breakdowns, EP.167]

Update: 2024-05-31
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This episode of Business Breakdowns features a conversation with Todd Fisher, CIO of the Chips Act Office, delving into the Chips Act's progress and impact on the US semiconductor industry. Fisher highlights the Act's $50 billion investment, with $39 billion dedicated to manufacturing incentives and $11 billion for R&D. He emphasizes the importance of attracting both US and foreign companies to invest in the US ecosystem, including supply chains, R&D, and workforce development. Fisher discusses the challenges of building sustainable, onshore projects, including workforce development, infrastructure, and the need for customer commitment. He emphasizes the program's focus on attracting leading-edge fabrication and the importance of building a resilient supply chain. Fisher also addresses the program's unique approach, emphasizing the importance of a strong team, iterative engagement with industry, and a focus on long-term success. He acknowledges the challenges of workforce development but highlights the program's efforts to build a talent pipeline and support local initiatives. Fisher concludes by discussing the program's milestones and the importance of measuring success over the next five to ten years, aiming to see a significant shift in the US semiconductor manufacturing landscape.

Outlines

00:00:00
Announcement: Colossus Event

This Chapter announces a multi-day event in September co-hosted by the speaker and David Cendra, focusing on business breakdowns and founder collaboration. The event is tailored for the investment community and aims to foster relationships in a private location with limited main stage talks and more breakouts, panels, and one-on-one conversations. Details can be found in the show notes or at Colossus.com/events.

00:03:19
Chips Act: Boosting US Semiconductor Manufacturing

This Chapter dives into the Chips Act, a 2022 Congressional initiative aimed at bolstering US semiconductor manufacturing capabilities to compete with East Asia. The Act addresses the reliance on foreign supply chains, which led to shortages during the pandemic, impacting critical resources and defense systems. The Chips Act provides $53 billion in subsidies, tax credits, and research funding for US companies, aiming to build leading-edge logic and memory fabrication, advanced packaging facilities, and capacity for current generation semiconductors. The guest, Todd Fisher, CIO of the Chips Act Office, discusses the program's progress and challenges.

Keywords

Chips Act
The Chips and Science Act of 2022, a US federal law enacted in August 2022, aimed at boosting domestic semiconductor manufacturing and research. It provides billions of dollars in subsidies, tax credits, and funding for research and development to incentivize companies to build and expand semiconductor production facilities in the United States. The Act is intended to reduce reliance on foreign supply chains, enhance national security, and promote economic growth.

Semiconductor Industry
The industry responsible for designing, manufacturing, and distributing semiconductors, also known as microchips. Semiconductors are essential components in virtually all electronic devices, from smartphones and computers to cars and medical equipment. The industry is characterized by rapid technological advancements, high capital investment, and global competition. Key players include Intel, Samsung, TSMC, and Micron.

Supply Chain Resilience
The ability of a supply chain to withstand disruptions and maintain operations in the face of unforeseen events, such as natural disasters, pandemics, or geopolitical conflicts. Building resilience involves diversifying suppliers, reducing reliance on single points of failure, and establishing alternative sourcing options. In the context of the semiconductor industry, supply chain resilience is crucial for national security and economic stability.

Workforce Development
The process of training and equipping individuals with the skills and knowledge necessary to meet the demands of a particular industry or sector. In the semiconductor industry, workforce development is critical for attracting and retaining skilled workers, particularly in areas like engineering, manufacturing, and research. It involves partnerships between educational institutions, government agencies, and industry players to create training programs, apprenticeships, and other initiatives.

Artificial General Intelligence (AGI)
A hypothetical type of artificial intelligence that possesses human-level intelligence and can perform any intellectual task that a human can. AGI is a major research goal in the field of artificial intelligence, with potential implications for various industries, including healthcare, finance, and transportation. The development of AGI is expected to drive significant demand for advanced semiconductors.

Leading-Edge Fabrication
The production of semiconductors using the most advanced manufacturing processes and technologies. Leading-edge fabs are capable of producing chips with the smallest feature sizes and highest performance, enabling the development of cutting-edge electronic devices. The Chips Act aims to attract leading-edge fabrication to the United States to enhance technological competitiveness and national security.

Advanced Packaging
A set of techniques used to combine multiple semiconductor dies or chips into a single package, enabling higher performance, lower power consumption, and smaller form factors. Advanced packaging is becoming increasingly important in the semiconductor industry, particularly for applications like artificial intelligence and high-performance computing.

Global Foundries
A leading semiconductor foundry headquartered in the United States. Global Foundries provides manufacturing services for a wide range of semiconductor products, including microprocessors, memory chips, and sensors. The company has facilities in the United States, Singapore, and Germany.

Taiwan Semiconductor Manufacturing Company (TSMC)
The world's largest semiconductor foundry, headquartered in Taiwan. TSMC manufactures chips for a wide range of customers, including Apple, Qualcomm, and Nvidia. The company is a major player in the leading-edge fabrication market and has announced plans to build new fabs in the United States.

Samsung Electronics
A South Korean multinational conglomerate that is a leading manufacturer of semiconductors, smartphones, and other electronic devices. Samsung is a major player in the leading-edge fabrication market and has announced plans to expand its semiconductor production facilities in the United States.

Q&A

  • What are the key goals of the Chips Act?

    The Chips Act aims to boost US semiconductor manufacturing capabilities, reduce reliance on foreign supply chains, enhance national security, and promote economic growth. It provides billions of dollars in subsidies, tax credits, and funding for research and development to incentivize companies to build and expand semiconductor production facilities in the United States.

  • How does the Chips Act address the fragility of the US semiconductor supply chain?

    The Act provides incentives for companies to build and expand semiconductor production facilities in the United States, reducing reliance on foreign supply chains. It also aims to foster a more resilient domestic ecosystem by supporting research and development, workforce development, and the establishment of a robust supplier network.

  • What are the challenges of building sustainable, onshore semiconductor manufacturing projects?

    Challenges include workforce development, infrastructure, and the need for customer commitment. The industry requires a highly skilled workforce, and the US needs to invest in training and education to meet the demand. Infrastructure requirements, such as power, water, and cleanroom facilities, can be significant. Additionally, companies need to secure long-term customer commitments to ensure the viability of these projects.

  • How does the Chips Act program differ from traditional government funding programs?

    The program emphasizes a strong team with expertise in investment, finance, and industry, iterative engagement with industry, and a focus on long-term success. It also involves a more active role in supporting companies with workforce development, infrastructure, and environmental challenges.

  • What are the key metrics for measuring the success of the Chips Act program?

    Success will be measured over the next five to ten years by the shift in US semiconductor manufacturing capacity, the development of a robust domestic ecosystem, and the ability to attract leading-edge fabrication. The program aims to see a significant increase in US semiconductor production, a thriving supplier network, and a skilled workforce.

  • How does the Chips Act program address the potential for oversupply in the semiconductor market?

    The program is designed to be a part of a broader set of government and market tools to ensure a balanced approach. It encourages customers to invest in supply chain resilience and diversification, recognizing the importance of having multiple sources of supply. The program also monitors global market trends and adjusts its strategies accordingly.

  • What is the role of workforce development in the success of the Chips Act program?

    Workforce development is critical for attracting and retaining skilled workers in the semiconductor industry. The program supports initiatives to build a talent pipeline, train workers, and create pathways for individuals to enter the industry. It recognizes that a skilled workforce is essential for the long-term success of the US semiconductor industry.

  • How does the Chips Act program address the potential impact of the upcoming election?

    The program is considered to be bipartisan and has gained even more support in light of recent geopolitical developments and the rise of artificial intelligence. The program's focus on economic and national security is seen as a priority across the political spectrum.

Show Notes

We have a special episode today, breaking down the CHIPS Act. We've covered the semiconductor space in depth on Business Breakdowns, but in this conversation, we go broader. We discuss the CHIPS Act, enacted by Congress in 2022, which aimed at boosting the US's semiconductor manufacturing capabilities to better compete with East Asia.

America had been dependent on that foreign manufacturing which created massive shortages, having implications across some of our most important resources and defense systems. The CHIPS Act itself provides just under $53 billion in subsidies for US companies and the goal is to build out these capabilities with leading edge logic and memory fabrication, advanced packaging facilities, and advanced capacity for current generation semiconductors. 

My guest today is Todd Fisher, CIO of the CHIPS Act office. We discuss some of the broader questions any investor might have about subsidized industry programs and how that will shift to the natural free market supply & demand dynamics that you would typically see in industries like semiconductors. It's truly a wide range of conversation and particularly timely with the recent funding announcements from the team. Please enjoy this breakdown of the CHIPS Act.



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Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com).


Show Notes

(00:00:00 ) Welcome to Business Breakdowns

(00:05:23 ) Current State of the Semiconductor Supply Chain

(00:08:50 ) Funding and Incentives Breakdown

(00:11:23 ) Sustainability and Long-term Viability of Projects

(00:15:54 ) Building Economic and National Security

(00:18:25 ) Massive Undertakings in Fab Construction

(00:20:49 ) Vision for Success and Leading Edge Fabrication

(00:29:54 ) Workforce Development and Environmental Considerations

(00:36:55 ) Future Milestones and Program Success Metrics

(00:44:00 ) TSMC Moving Capacity Into the USA

(00:48:43 ) The Effect of the Upcoming Election on the CHIPS Act 

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CHIPS Act: Securing Semiconductor Supply - [Business Breakdowns, EP.167]

CHIPS Act: Securing Semiconductor Supply - [Business Breakdowns, EP.167]

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