Government funding could help set up 'seven to 10 new chip factories'

Government funding is needed to unlock private capital for chip invest, suggests US Commerce Secretary Gina Raimondo

The US government's proposed $52 billion funding for microchip research and production could help establish seven to 10 new chip fabrication plants in the US.

"We just need the federal money ... to unlock private capital," US Commerce Secretary Gina Raimondo said at an event outside a Micron Technology chip factory.

"It could be seven, could be eight, could be nine, could be ten new factories in America by the time we're done," she added.

Raimondo said government funding could help generate "$150 billion-plus" investment in chip research and production, including contributions from state and federal governments and private firms.

Senator Mark Warner, a Democrat, said government funding cannot solve the chip shortage issue overnight, however; it will take several years for the Commerce Department to make those investments.

Last week Senate Democrat Leader Chuck Schumer unveiled bipartisan legislation that proposes to spend $52 billion on US semiconductor chip research and production over next five years.

The draft summary, seen by Reuters, says the government would spend $49.5 billion in emergency supplemental appropriations to fund the chip provisions included in this year's National Defense Authorization Act; including $39 billion in research incentives and production and $10.5 billion to run programmes like the National Advanced Packaging Manufacturing Program and National Semiconductor Technology Centre.

Supporters of the legislation argue that the US had a 37 per cent share in microelectronics and chip production in 1990, which has drastically dropped since. Now, just 12 per cent of semiconductors worldwide are manufactured in the USA.

"There is an urgent need for our economic and national security to provide funding to swiftly implement these critical programmes. The Chinese Communist Party is aggressively investing over $150 billion in semiconductor manufacturing so they can control this key technology," the draft summary says.

Earlier this month, Raimondo said in a virtual conference of the Council of the Americas that the US is manufacturing "0 per cent of leading-edge chips", which is "a problem."

"We ought to be making 30 per cent, because that matches our demand. So, we will promise to work hard every day, and in the short term also see if we can have more chips available so the automakers can reopen their factories," she noted.

In February a group of US chip makers, including Intel, AMD, and Qualcomm, signed a letter to President Joe Biden, asking him to provide 'substantial funding for incentives for chip making firms' as part of his economic recovery plans.

Many industries in the US and other countries are suffering from the global chip shortage, which analysts believe could last until next year - or longer.

Cisco CEO Chuck Robbins said last week that the company is set to increase prices on certain products, in light of the rising cost of securing components in the global chip shortage.

Robbins said that the company was paying more per component, and spending more to speed up shipments.

He added that he expects the issues with chip supply to last until Q3 this year, while IBM president Jim Whitehurst predicted two years of shortages.

In Japan, the ruling Liberal Democratic Party is launching a new chip task force, aiming to secure the nation's semiconductor supply and strengthen domestic chip industry.

The task force's main responsibility will be to work with the USA and other allies to build stronger chip supply chains. The group will also discuss establishing a new fund to foster domestic talent and promote semiconductor research in Japan.

South Korea also announced this month that it would offer tax incentives and loans to local chipmakers to boost the country's non-memory chip industry and to tackle the global shortage of automotive chips.