The United States’ CHIPS Act allocates a third tranche of $39 billion in funding. During an event in San Jose, California, the US Secretary of Commerce, the famous Gina Raimondo, made it clear in a conference that her country needs a second CHIPS Act if it wants to lead the world. In other words, Raimondo needs much more money to at least match the bets of her global rivals.
It has been less than two years since the first CHIPS Act was signed, and yet the response from the rest of the world, except for Europe, has been as strong or stronger than that of the Americans. Raimondo, therefore, states that “if we want to lead the world, we have to keep investing, whether we call it ‘CHIPS Two’ or whatever. The demand for AI chips is mind-blowing.”
CHIPS Act Two, can the US continue to accumulate debt to replicate various bets?
It could well be a trap for spending to skyrocket even further to unprecedented levels at a time when only AI is driving growth, quite literally, as electric cars seems to be another bubble surpassed, at least partially, after the sales debacle.
Raimondo’s message is clear: $52 billion is not enough, and $39 billion of that is for direct manufacturing incentives, with $2 billion more for mature nodes focused on industries such as electric cars and, of course, defense.
The remaining $13.2 billion is divided between R&D and workforce, with $500 million left for ICT and supply chain. So, has all this money already been distributed? Not at all. The credit began to flow in December, and the first $35 million went to defense contractors, while the second grant was for Microchip Technologý with $162 million, and the third was recently seen with $1.5 billion for GlobalFoundries.
Industry revenues are in decline; why give more money to a shrinking sector?
This is the big question. According to the SIA (US Semiconductor Industry Association), total sales for 2023 were $526.8 billion, representing an 8.2% YoY decline when AI was taking off, and everything that was produced was being sold.
True, there are optimistic figures, such as Q4 sales in 2023 with $146 billion, an 11.6% increase QoQ, but it is not enough. Furthermore, the US and the SIA point to a more significant problem for continuing to fund the semiconductor industry in this hypothetical CHIPS Act Two: a shortage of 67,000 workers in just five and a half years, which is almost the time it takes for students to complete an entire degree.
In addition to this, injecting more money means more projects, more permits, more adjustments in case of expansion, and this would all have to be done in those years when the first tranche of the current law has not yet been completed. Did the US knowingly underestimate the reaction of others?
The article “US needs a second CHIPS Act, the demand for AI chips ‘is mind-blowing'” was first published on El Chapuzas Informático.
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