Chip subsidy bill signed by Joe Biden arrives as demand for semiconductors declines

The ink had barely dried on Joe Biden’s signature on the CHIPS-Plus Act, a legislative package that includes $52 billion in subsidies for the expansion of semiconductor manufacturing in the United States, when a wave of unfortunately timed headlines made headlines.

The FinancialTimesWednesday: “US chipmakers hit by sudden slowdown after pandemic boom”

Each story generally addressed the same theme: The semiconductor industry has been turbulent in recent months, with falling demand, stockpiling inventory, and some raw materials, such as metals and gasses. rare earths, which remain rare. The natural juxtaposition of this tumult with a massive injection of federal cash might suggest that lawmakers in Washington were unnecessarily pumping taxpayers’ money into a sector that doesn’t need support.

“It’s kind of dark humor,” Stacy Rasgon, an analyst at Bernstein Research. told Bloomberg. “Politicians are going to find out how quickly shortages can resolve themselves when the industry turns.”

A little patience is required, however.

As a period of uncertainty looms for semiconductor companies, it is worth remembering that the CHIPS-Plus package represents a long-term investment in a critical industry, designed to weather the ups and downs of a highly cyclical sector.

While lawmakers have touted federal funding as a much-needed boost to America’s economic and national security in the wake of the acute pandemic-induced chip shortage, the CHIPS-Plus plan will take several years — at least. – to have a significant impact on the supply of semiconductors.

The subsidies are ultimately intended to increase domestic chip manufacturing, which requires building massive semiconductor factories, called fabs, on US soil. In recent announcements about their plans to build new multi-billion dollar manufacturing plants in the United States, three of the industry’s major players – Taiwan Semiconductor Manufacturing Co., Samsung and Intel – each said they would need at least Three years to bring their facilities online.

Recognizing that reality, federal officials expect the $52 billion in grants to be spread over nine years, with the bulk of the money flowing in the second half of the decade. According nonpartisan Congressional Budget Office estimatesonly 30% of the funds, or about $16 billion, will be disbursed by the end of 2025.

The timing could actually prove fortuitous for semiconductor manufacturers. With industry analysts predicting a down cycle over the next two years, some plan a recovery mid-decade, as new chip-dependent technologies come online and global economic pressures ease.

Critics of CHIPS-Plus, including some Republican lawmakers, still have plenty of reason to be skeptical of the grants.

The money probably won’t turn the United States, which makes a tiny fraction of the world’s most advanced semiconductors, into a global chipmaking powerhouse. Government and industry leaders in South Korea, home to Samsung and several other major chip companies, unveiled national plans in May to spend about $450 billion over the next decade on the industry (it was unclear how much money each side could contribute). Taiwanese officials also said in January that they will use grants to maintain the island’s status as a major chip manufacturing center.

Additionally, Intel, which is expected to receive a significant portion of the CHIPS-Plus money, remains a risky bet gain market share in the competitive semiconductor manufacturing industry. The US chipmaker, which has waned in stature over the past decade, last month released appalling second quarter results which CEO Pat Gelsinger partially attributed to “our own execution issues”.

And as conservative carpers have rightly noted, the US government doesn’t exactly have a reputation for getting value for money when intervening in free markets. (See: higher education, mortgage, health care, etc.)

The CHIPS-Plus Act could very well become a future case study in the federal madness. If so, a lack of current demand will not be the reason.

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Jacob Charpentier

NEW

In search of more stable ground. Apple is explore assembly possibilities some of its watches, MacBooks and HomePods in Vietnam, a potential move that would reduce the tech giant’s reliance on manufacturing in China, Nikkei Asia reported Wednesday. Apple Suppliers foxcon and Luxshare Precision Industry are running test productions of the company’s watch product in Vietnam, with ongoing discussions on test production lines for MacBook and HomePod hardware. Several media reports this spring suggested that Apple was looking to change some manufacturing operations outside China and in its Asian neighbors amid frustrations over the republic’s COVID lockdown policies and mounting geopolitical pressures.

Everyone loses sometimes. Chinese tech conglomerate Tencent revealed his first quarterly decline in year-over-year revenue in company history on Wednesday, a result of COVID lockdowns in parts of the country and an ongoing government crackdown on gambling, CNBC reported. Tencent posted revenue of about $19.8 billion in the second quarter, down 3% from a year earlier, and slightly below analysts’ sales forecasts. The company’s game revenue fell 1% as Chinese government officials continued to limit children’s playtime and approve a few new titles from developers.

A decisive vote. The employees of a Amazon warehouse in Albany, NY, have enough support to hold a union election, paving the way for another showdown between the e-commerce giant and the unions, the Washington Post reported Tuesday. Workers seeking union elections are coordinating with the Amazon Labor Union, which led the first successful union vote against the company earlier this year, winning a victory at a New York warehouse. The Amazon Labor Union later lost a second organizing drive at another New York facility, while Amazon appears to have won a separate election held earlier this year at an Alabama warehouse.

Fight against campaign chicanery. TikTok plans to block content creators from posting videos which contain paid political messages, as part of the short-form video platform’s efforts to reduce violations of its policies ahead of the 2022 midterm elections, Reuters reported on Wednesday. The ByteDance unit has banned paid political ads on its platform since 2019, but political campaigns have circumvented the ban by paying influencers to make statements on behalf of candidates. Meta officials also said on Tuesday that they will institute a blackout on political ads in the week leading up to the November midterms.

FOOD FOR THOUGHT

Advance one level. netflix‘s venture into mobile gaming has been one of the weirdest things to emerge from the tech industry in recent years. The company hasn’t said too much about its ultimate plans, and early results have been hard to gauge. A new protocol report, however, suggests the streaming giant is making steady progress, sticking closely to its plan to gradually build its games portfolio over several years. New industry estimates show that Netflix’s game downloads have surged in the past three months, thanks in large part to the success of its Foreign Things— branded games after the show’s fourth season premiered in May.

From article:

It’s true: Netflix hasn’t released a real blockbuster game yet, and its small but growing catalog of mobile games isn’t as popular as some of its biggest shows and movies. However, the company’s gaming efforts are on an upward trajectory, according to data that mobile intelligence firm Sensor Tower recently shared with Protocol. In fact, July was the best month yet for Netflix’s gaming efforts.

“Netflix is ​​really only at the beginning of implementing its strategy for a new games business, and it’s not a bad start,” said Craig Chapple, mobile insights strategist at Sensor Tower, to Protocol. “With a growing portfolio of globally recognizable entertainment IPs, there’s a lot of potential here.”

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BEFORE YOU LEAVE

A kick in the teeth. For four happy hours on Tuesday evening, a Elon Musk Tweeter letting Manchester United fans believe that the richest man in the world was buying their beloved English football team from the miserable ownership of the American Glazer family. Think about the possibilities. Musk poured some of his billions into the dysfunctional franchise, bringing the team back to its heights. Musk playing with Red Devils royalty like David Beckham, Sir Alex Fergusonand Roy Kean. Musk striker and diva Cristiano Ronaldo trying to put their egos in the same room. Alas, there would be no South African Ted Lasso tale here. The eternal prankster admitted he was joking, calling the comment “a long-standing joke on Twitter”. After last weekend’s 4-0 embarrassment at the hands of tiny Brentford, it’s just more salt on United fans’ painful injuries.

Editor’s Note: This article has been updated to correct the amount estimated by the Congressional Budget Office to be disbursed by 2025 through the CHIPS-Plus Act.

Kimberly B. Nguyen