The US commerce secretary on Monday revealed she was having tough conversations with semiconductor companies seeking billions of dollars in grants to bring chip manufacturing stateside in the country’s drive to edge out China and achieve more for American security with less money.

“We have to be tough with companies,” Gina Raimondo said in remarks at the Centre for Strategic and International Studies, a Washington-based think tank. “Our tough negotiations with individual companies will result in each one of them doing more for economic and national security at a lower cost to the taxpayer.”

Stressing there was a “finite amount of money to meet our urgent national security goals”, Raimondo noted leading chip makers had requested about US$70 billion in federal funding.

American semiconductor production dropped from 37 per cent in 1990 to just 12 per cent last year owing to significant manufacturing cost differences between the US and other countries like China. No advanced chips are made stateside.

In Washington’s push to keep up with Beijing’s inroads, the US$50 billion Chips and Science Act of 2022 set aside US$39 billion to build American infrastructure for producing advanced semiconductors and cut dependence on imports mostly from Asia.
Today’s most cutting-edge 3-nanometre chips are produced exclusively by TSMC, the world’s largest chip maker, using special equipment from the Netherlands.

TSMC is building two advanced chip fabrication plants in the US state of Arizona at a total investment of US$40 billion. But the project has encountered delays partly because of a shortage of specialist workers.

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Last month TSMC was reported to have held discussions with the US government on the volume of federal incentives it would be receiving.

American tech giant Intel was also expected to land its own 3nm processors this year, and is said to have been in talks with the Joe Biden administration for more than US$10 billion in subsidies.

TSMC and Samsung Electronics are likely to get Chips Act funds for their new factories in the US, and the announcements could come during Biden’s State of the Union address on March 7, according to media reports.

Raimondo on Monday said she was “confident” that American-made leading-edge chips would “go from zero to 20 per cent” of global production by 2030.

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Under the end-of-decade goal, companies with longer-term project proposals would be left out of federal incentives related to the Chips and Science Act, she added.

The older-generation chips are traditionally made using 28nm or larger etching technology. Such integrated circuits are still used widely in cars, home appliances, consumer electronics, military equipment, medical devices and broadband production.

In recent months, the US government has shifted its focus from advanced chips to the lesser-known legacy chips, concerned that Chinese subsidies of cheap chips are flooding the global market.

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The Commerce Department is also conducting a survey of more than 100 companies in the automotive, aerospace, defence and other industries to understand how they procure and use legacy chips.

Raimondo said the Chips and Science Act required the government to invest a minimum of US$2 billion in legacy chips, contending “we’ll certainly exceed the US$2 billion statute”.

“I do feel we can do both. We can do … leading-edge logic, leading-edge memory and current/mature [chips] and still have some for the supply chain,” she added.

Not every dollar the US government would spend was meant solely to incentivise big chip makers, Raimondo said. Rather, the money was meant to “invest in the rest of the ecosystem”.