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Chipmakers Warn About U.S. Fabs Delays if CHIPS Act Not Passed Soon

GlobalFoundries
(Image credit: GlobalFoundries)

GlobalFoundries and Intel may have to delay deployment of new fabs if the U.S. Senate fails to pass government semiconductor production subsidy bill in the coming weeks. While the buildings themselves will likely be constructed, they will not be equipped with manufacturing tools without subsidies from the U.S. 

"To do it sooner rather than later, we would need government co-investment with us," Thomas Caulfield, chief executive of GlobalFoundries, said in an interview with Reuters this week. "We have good free cash flow generation, but we'd have to build up the balance sheet to go make those investments." 

Meanwhile the CHIPS act has passed the first procedural barrier in the U.S. Senate on Tuesday, which cleared the road for its broader discussion and eventual approval, reports SeekingAlpha

GlobalFoundries last year allocated $1 billion on expanding production capacity of its Fab 8 in Malta, New York. The company said it would build a brand new fab in the state, in a bid to further enhance its manufacturing capability. However, to build that fab, GlobalFoundries needs subsidies from the government to quickly construct and equip the facility. Without support, the foundry that builds chips used by the military and other organizations crucial for the U.S. national security and economy, will have to slowdown the project. 

Thomas Caulfield is not the first U.S. semiconductor company CEO to warn the U.S. legislators about possible delays of new fab projects because the CHIPS act proposed in early 2021 has still not become the law. About a week ago Pat Gelsinger, chief executive of Intel, said that his company might build a new mega site in Europe instead of Ohio if the U.S. fails to pass appropriate semiconductor production subsidy legislations. 

In a bid to be competitive with South Korea and Taiwan-based producers of chips, companies like Intel and GlobalFoundries have to gain capacity in the U.S. But building fabs in the USA is expensive, so they badly need funding from the government, but the latter cannot act before legislators pass the appropriate laws. 

Under the CHIPS act, the U.S. will provide $52 billion in subsidies, grants, tax credits, and various incentives to chipmakers that produce microelectronics in the USA. For the U.S., it is important to produce more chips locally as it can boost the economy and is a matter of national security since modern high-tech weapons use a variety of microelectronics components.  

For companies like Intel, GlobalFoundries, TSMC, and Samsung Foundry the U.S. government subsidies are crucial to build their new fabs in the country rather sooner than later. Without support from federal and local authorities, the said companies will not be able to fund the projects as quickly as they would hope. Modern advanced fabs cost well over $10 billion dollars even for one phase. Meanwhile, Intel has said that its mega site in Ohio — which is set to house both semiconductor fabs and advanced packaging facilities — will require investments of $100 billion to be fully built up.

Anton Shilov
Anton Shilov

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

  • garrett040
    Of course, what corporation would want tax payer money to the tune of 550 Billion US dollars. If this passes I better get a good discount on raptor lake
    Reply
  • logainofhades
    garrett040 said:
    Of course, what corporation would want tax payer money to the tune of 550 Billion US dollars. If this passes I better get a good discount on raptor lake

    It is about getting them online sooner, for more domestic production. If these companies don't get said assistance, it will delay the fabs being completed. It is in our best interest to get more chip production here at home. The pandemic, and the chip shortages it caused, are a perfect example of why these fabs need to be operational, ASAP. It's a whole lot easier to transport product, within you own country vs depending on overseas companies to bring it to you. This is one of the rare times I am in favor of a company getting assistance with building something.
    Reply
  • ezst036
    Look at all the wealthy, holding their hands out for free taxpayer money. They should spend the billions they already have, independently. I don't like the blending of corporation and state.
    Reply
  • logainofhades
    I normally do not either, but this really is a matter of national security, so government involvement, in expediting the process of getting these fabs built, make this the exception. It's not like when say a sports team tries to extort the taxpayer to build a new stadium, to avoid leaving to another city.
    Reply
  • Giroro
    "To do it sooner rather than later, we would need government co-investment with us,"

    Do they really want the US government as a shareholding investor? Because, I'm pretty sure they're actually asking for a blind donation with no strings attached.
    Reply
  • logainofhades
    Giroro said:
    "To do it sooner rather than later, we would need government co-investment with us,"

    Do they really want the US government as a shareholding investor? Because, I'm pretty sure they're actually asking for a blind donation with no strings attached.

    It most likely would be in the form of a loan.
    Reply
  • chaz_music
    One topic that I have not found yet is exactly what they are offering the IC fab companies and for what products. One of the things I run into as an engineer is that the commodity parts are getting hard to find as well. Some engineers call them bubble gum parts (op-amps, resistors, comparators, etc.). Many US fabs walked away from these commodity parts because it makes more money to manufacture high end parts, just like drug companies stopped making low profit drugs for the expensive high profit margin drugs. And there are other very important technologies and materials that are getting dangerously hard to buy such as rare earth metals for PM motors (like in EVs and clothes washers) and cobalt for Lithium batteries. Foreign countries decimated the US mining for these materials and now they are getting hard to buy. What if we get an embargo for these? Our economy would suck wind fast.

    I truly hope that they are paying attention that for US self reliance, we need lower tech investments as well as high tech. And not just processors and computers. I can't find high power 600V 75A MOSFETs hardly anywhere. They used to be very easy to buy. These are used in cars, mid sized UPS systems (20-50KVA), motor drives and servo drivers, and other common high uses.
    Reply
  • ko888
    logainofhades said:
    It most likely would be in the form of a loan.
    The CHIPS Act is subsidies. There's no mention of loans. Loans have to be payed back. Subsidies are grants or gifts of money.
    Reply
  • edzieba
    chaz_music said:
    One topic that I have not found yet is exactly what they are offering the IC fab companies and for what products. One of the things I run into as an engineer is that the commodity parts are getting hard to find as well. Some engineers call them bubble gum parts (op-amps, resistors, comparators, etc.). Many US fabs walked away from these commodity parts because it makes more money to manufacture high end parts, just like drug companies stopped making low profit drugs for the expensive high profit margin drugs. And there are other very important technologies and materials that are getting dangerously hard to buy such as rare earth metals for PM motors (like in EVs and clothes washers) and cobalt for Lithium batteries. Foreign countries decimated the US mining for these materials and now they are getting hard to buy. What if we get an embargo for these? Our economy would suck wind fast.

    I truly hope that they are paying attention that for US self reliance, we need lower tech investments as well as high tech. And not just processors and computers. I can't find high power 600V 75A MOSFETs hardly anywhere. They used to be very easy to buy. These are used in cars, mid sized UPS systems (20-50KVA), motor drives and servo drivers, and other common high uses.
    Don't forget passives and casings! The little geographic region around the South China Sea is packed not just with chip fabs, but PCB fabs, PCB substrate manufacturers, component manufacturers, component raw material manufacturers (e.g. electrolytes for caps), injection moulders, injection mould die shops, bulk plastic manufactures, metal refiners, etc. All a few days away by sea-freight in bulk quantities, and sometimes available overnight (or even same day for some regions and components). That's crazy hard to build from the ground up elsewhere to match the capabilities of far east manufacturing, far moreso than any wage disparity (smaller than you would think for high-tech industries).
    Reply