The Biden Administration’s rollout of the CHIPS Act awards has so far focused on providing large awards to large companies, with just four cutting-edge semiconductor manufacturers receiving the lion’s share of the $33 billion allocated so far.
Now, with $6 billion remaining, the focus is shifting to sending smaller cash prizes to dozens of small businesses up and down the supply chain.
The aim, according to government officials and industry experts, is to use the remaining grant funds to attract as much private investment as possible, as well as provide funding to U.S.-based facilities in areas such as materials and packaging, making supply chains more resilient and economically secure.
“We’re committed to investing across the entire semiconductor ecosystem,” Michael Schmidt, director of the Commerce Department’s CHIPS Program Office, told CNBC.
That means focusing investments on both upstream suppliers — companies that provide materials and equipment, for example — and downstream players, such as those involved in the advanced packaging that happens after semiconductors are made.Schmidt said some of the now-mature technologies, also known as legacy chipmakers, will also likely receive some of the remaining funding.
“As we start to rebuild the ecosystem in this country, as we start to rebuild the scale that we expect to see in this country, that will create continued investment, investment dynamics and will maintain an attractive environment for companies to invest in the future,” he said.
Now that the Commerce Department has announced the recipients of about 85% of the grants and committed to allocating the remaining funds by the end of the year, a major question is where the remaining CHIPS Act grant money will go.
Hundreds of companies are still vying for the remaining funding: Commerce Secretary Gina Raimondo said in February that more than 600 companies initially submitted expressions of interest, but only nine have received awards so far.
Intel, Taiwan Semiconductor, Samsung and micron Together, they will receive about $28 billion. GlobalFoundries $1.5 billion and four smaller companies (BAE Systems, MicrochipThree companies — Samsung Electronics, Polar Semiconductor and Absolix — received a combined $392 million. Another $3.5 billion was set aside for the “Secure Enclave” program, which produces semiconductors for the military.
A bird’s-eye view of the Samsung Austin semiconductor factory in Taylor, Texas, on April 16, 2024.
Brandon Bell | Getty Images
The string of awards announced so far highlights how the Commerce Department has focused on what the industry calls “front-end manufacturing” — the making of the wafers themselves, said Paul Triolo, director of technology policy at the Albright Stonebridge Group.
In an email to CNBC, Triolo said the focus stems from both the “highly politicized nature of the awards” and the need to demonstrate near-term progress on advanced manufacturing capabilities.
But Raymond Pledged The goal is to build an end-to-end U.S. semiconductor supply chain by 2030. Achieving this will “require significant adjustments to contracts with companies up and down the supply chain,” Triolo wrote.
Schmidt stressed that the Commerce Department is already focused on getting funding to all of these companies and that there will be “significant investments” made throughout the supply chain.
Additionally, with private companies already committed to investing more than $300 billion in cutting-edge manufacturing through awards announced so far, Schmidt said he expects “huge secondary investments” to soon benefit smaller suppliers.
The Commerce Department is also offering $500 million in awards specifically for companies with projects with total capital investments of $300 million or less.
“You’re really going to start seeing those benefits across the industry,” Schmidt said, “and we’re going to make very significant investments in the upstream supply chain to really build a comprehensive portfolio that advances our economic and national security interests.”
U.S. President Joe Biden speaks at Intel’s Ocotillo Campus in Chandler, Arizona, on March 20, 2024. President Biden announced that Intel will receive $8.5 billion in federal funding under the CHIPS Act to manufacture semiconductors in Arizona.
Rebecca Noble | Getty Images
One supplier in talks with the Commerce Department for a CHIPS award is IQE, a UK-based company that produces compound semiconductor wafers for major companies such as Apple.
IQE CEO Americo Lemos told CNBC that while he understands the interest in funding cutting-edge chip manufacturing to build artificial intelligence systems, funding supporting smaller businesses is just as important in ensuring the security and resilience of the U.S. chip supply chain.
“We need to continually monitor the entire supply chain in an environment where geopolitical issues are not easily addressed,” Lemos said in an interview.
“Obviously, the industry is focused on AI, GenAI, and the benefits and applications of it, but it’s not enough to just make high-performance chips,” he continued. “Without compound semiconductors, there is no AI. It’s very simple.”
Schmidt said that because remaining grants are dwindling, future grants will be smaller than the billions of dollars in grants that have been given out so far, but even small amounts can have a big impact on small businesses.
“There’s a lot more that can be done with less money in upstream projects,” said Jimmy Goodrich, senior adviser for technology analysis at the RAND Corporation. “There’s still a lot of potential.”