Global Powers Fuel Chip Manufacturing Race

Major global powers are significantly increasing investments in domestic semiconductor manufacturing, aiming to reduce their reliance on Asian supply chains, Reuters reported on May 29, 2024. This strategic push involves unprecedented sums, reshaping the global technology landscape.

www.reuters.com reported, The United States, Japan, and European nations are pouring billions into this critical industry, driven primarily by national security concerns, according to a recent analysis by Bloomberg. These investments seek to secure a stable supply of advanced chips, essential for modern economies and defense.

In the U.S., the CHIPS and Science Act of 2022 has allocated over $52 billion to boost domestic production, the U.S. Department of Commerce announced. This legislation provides substantial grants and incentives to attract leading chipmakers to American soil.

www.reuters.com noted, Intel, for instance, is set to receive up to $8.5 billion in grants and $11 billion in loans under the U.S. CHIPS Act, the Commerce Department confirmed in March 2024. These funds support large-scale manufacturing projects across Arizona, Ohio, New Mexico, and Oregon.

Similarly, the European Union has launched its own Chips Act, aiming to mobilize €43 billion in public and private investment, as reported by the European Commission. The EU seeks to double its global market share in semiconductors to 20% by 2030.

www.reuters.com reported, Japan is also heavily investing, with significant government subsidies supporting new fabs, Nikkei Asia reported in February 2024. This includes partnerships with global leaders like TSMC and the development of its own advanced chip venture, Rapidus.

These massive subsidies and incentives are intensifying a global race for technological supremacy, according to industry analysts at Gartner. Nations are vying for leadership in the critical chip industry, recognizing its strategic importance.

• www.reuters.com noted, The global push for domestic chip manufacturing is a direct response to vulnerabilities exposed during the COVID-19 pandemic, which caused severe supply chain disruptions, as noted by the World Economic Forum. This highlighted an over-reliance on a concentrated few Asian manufacturers, particularly Taiwan, for advanced semiconductors, posing significant economic and national security risks, according to a 2021 report by the U.S. Congressional Research Service.

• Key stakeholders include major governments (U.S., EU, Japan), leading chip manufacturers like Intel, TSMC, and Samsung, and equipment suppliers such as ASML. Governments are acting as primary funders and policy drivers, while companies are the recipients of subsidies, committing to build and operate advanced fabs, Reuters reported in March 2024, detailing Intel's plans in Europe and the U.S.

• www.reuters.com reported, Economically, these investments aim to create high-paying jobs, stimulate innovation, and foster regional economic growth, according to a U.S. Department of Commerce fact sheet. However, critics, as cited by The Wall Street Journal in late 2023, warn of potential market distortions, increased production costs, and the risk of global oversupply in the long term, impacting profitability.

• In the U.S., the CHIPS Act has already committed billions to companies like Intel, TSMC, and Samsung, with Intel receiving the largest package for its expansion across four states, as announced by the U.S. Commerce Department in March 2024. TSMC is building multiple fabs in Arizona, while Samsung is expanding its presence in Texas, further diversifying the American semiconductor landscape, Bloomberg reported in April 2024.

• www.reuters.com noted, Europe's strategy, outlined in the EU Chips Act, aims to strengthen its entire semiconductor ecosystem, from research to advanced manufacturing, the European Commission stated in 2023. Intel's planned mega-fab in Magdeburg, Germany, receiving substantial state aid, is a cornerstone of this effort, alongside investments in R&D and design capabilities across the continent, according to a recent analysis by the Financial Times.

• Japan's approach involves both attracting foreign investment and nurturing domestic champions. The government has provided significant subsidies for TSMC's new plant in Kumamoto, which began operations in February 2024, Nikkei Asia confirmed. Additionally, Japan is heavily backing Rapidus, a joint venture aiming to produce cutting-edge 2nm chips by 2027, demonstrating a commitment to advanced technology, as reported by the Japan Times.

• www.reuters.com reported, The long-term implications include a more geographically diversified but potentially more expensive global chip supply chain, according to a report by Deloitte. While reducing geopolitical risks, this decentralization could lead to higher manufacturing costs and increased competition for skilled labor, potentially impacting consumer prices and industry profitability in the coming decade, as suggested by industry experts at McKinsey & Company.

• Future developments are expected to include continued government funding rounds, a focus on advanced packaging technologies, and increased international collaboration on R&D, according to a forecast by Gartner. The race for quantum computing and AI-specific chips will also intensify, with nations vying for leadership in these next-generation technologies, as highlighted by a recent White House report on critical and emerging technologies.