U.S. Congress Passes $258 Billion CHIPS Act to Boost Local Semiconductor Development, TSMC Chairman Hopes for No Discrimination

After months of back and forth, the CHIPS and Science Act has finally been passed by the U.S. Congress and is headed to President Biden’s desk. The historic legislation, worth a whopping $258 billion USD, will offer $52 billion in subsidies to semiconductor manufacturers producing chips in the US, in an effort to reduce foreign reliance for silicon.

The bill was passed in the Senate with 64 : 33 votes in bipartisan support, then it saw the same fate in the the House of the Representatives, where it was passed with 243 votes in support, and 187 against. At last, America’s mission to snatch back the technological leadership it once singlehandedly possessed is now in full effect.

Intel and Micron, two US-based fabs who operate in the country are said to benefit the most from this new act, the former in particular. Companies like AMD and NVIDIA, two of the biggest players in the semiconductor industry, design their chips in the US and are registered as American companies, but they outsource manufacturing to Asian giants, such as TSMC and Samsung

The main point of the CHIPS Act is to ensure that the US can get a leg-up over the Asian-dominated semiconductor industry as it stands right now. TSMC works from Taiwan while Samsung is a South-Korean company; using either to manufacture your microprocessors means you’re entirely dependent on an outsider for the success of your business. 

TSMC and Intel buildings | Notebookcheck

Now, it’s not like TSMC isn’t “trustworthy” or anything. TSMC produces the world’s most advanced chips and also holds the largest chunk of market share in the field (64%). The problem stems from the region these fabs are located in. TSMC being situated in Taiwan makes it extremely volatile to Chinese interference, which is an active threat that could unfold any time.  

I hope that we don’t get discriminated because we are close to China. No matter your relationship to China, Taiwan is Taiwan. You have to look at Taiwan by itself, a vibrant society. We want to unleash innovation for the world into the future continuously and not to be scared because we have some dispute with our neighbors. That is not worth it.

That’s what Dr. Mark Liu, Chariman of TSMC said in his recent interview with CNN. He went on to reinstate the idea of an all-out war breaking out between the Taiwan and China would only result in net losses for all parties involved. Dr. Liu wishes that the acceptance of the CHIPS Act, which very clearly discriminates against foreign semiconductor manufacturing, doesn’t cut off Taiwan from the landscape. 

The war can only create problems on three sides. . . all the sides. We need to prepare the worst, but we should hope for the best.

At least not lose. Yes, if you are at war it will be that. If it is peaceful, it’s on the competition. Strategies on all three sides. And I think that is, nobody in the business world want to see a war happen. And why do we jump again into another trap?

Despite that, it’s important to note that TSMC itself doesn’t sell chips, it only manufacturers them for its clientele. That means the US—where most semiconductor companies are—still maintains a lead over countries like China when it comes to the silicon arms race. 

The CHIPS Act simply aims to continue this trajectory for as long as possible, and even soar local industries to new heights. That’s where the $52 billion subsidies come in. This financial aid is reserved to entice semiconductor manufactures to come and produce chips inside the borders of the States. 

On top of that, TSMC is already investing in America by building a $20 billion fabrication plant in Arizona. Construction on the site began last year, but it is reportedly costing more than expected. Situations like these is where the CHIPS Act can help TSMC, especially when the state knows a TSMC plant in Arizona is extremely lucrative in the long run.

The current plans

Intel CEO Pat Gelsinger is eager for the CHIPS Act to finally start bearing its fruit. The company’s plans to build two large fabrication plants in the state of Ohio depended on the approval of this act. Gelsinger let it be known that he would pull out of building the factories if the CHIPS Act were rejected, which would’ve been a significant blow to the US semiconductor dream.

“We’ve made it abundantly clear to McConnell, the Democrats, and the Republicans that if this doesn’t pass, I’m going to change my plans. The Europeans have moved forward aggressively, and they are ready to provide us with the incentives we need to move forward.”

Micron also serves as a catalyst in this equations as it has said it will invest up to $150 billion USD into research and development, and manufacturing chips inside the US. Both Micron and Intel will want a chunk of that $52 billion cheque to accelerate operations, for which the CHIPS Act needs to be in motion.

Going forward, if everything works according to the plan, we should be seeing a lot more plants and fabs open up in America with localized production from top to bottom. Exporting chips outside the borders can even fuel the economy, alongside removing the country’s need for Asian manufacturers to produce chips for them.

Perhaps, the most interesting outlier here is Apple. The world’s biggest and most profitable company that 100% outsources its SoCs to TSMC and has had a great working relationship with the Taiwanese manufacturer for almost a decade now. I’m most excited to see how Apple reacts to these new developments and what side it choses in this new environment. 

Apple and TSMC have been working together for years on iPhone and Mac Chips.

Again, if other companies like AMD and NVIDIA wish to benefit from this legislation, they will need to start thinking about in-house production within the United States. Getting silicon from Asian countries will only position them as adversaries standing in the way of America’s climb-back to silicon dominance. 

It should only be a few days from now till President Biden signs the CHIPS Act into law. It will also be interesting to see what happens to the other silicon-development-focused bill, the FABS Act, after the passing of this legislation. For now, though, it’s clear that, given the current political-economic state of the world, the US has a tumultuous journey ahead.  

Huzaifa Haroon
Born and raised around computers, Huzaifa is an avid gamer and a Windows enthusiast. When he's not solving the mysteries of technology, you can find him writing about operating systems, striving to inform the curious.