The Biden administration is set to announce subsidies worth billions of dollars for major semiconductor companies, including Intel (INTC) and Taiwan Semiconductor Manufacturing Co. (TSM), under the $53 billion Chips Act. The law aims to reshore advanced microchip production to the U.S. and counter China’s growing chip industry.
According to The Wall Street Journal, the slow implementation of the bipartisan 2022 Chips Act has led to frustration due to permitting, negotiations, and worker shortages. So far, only two small grants have been awarded out of 170 applications. However, industry executives anticipate larger announcements in the billions to jumpstart the production of advanced semiconductors.
The expected announcements, likely before Biden’s State of the Union address on March 7, aim to showcase economic achievements amid the upcoming election season. Key beneficiaries may include Intel and TSMC, with projects underway in battleground states like Arizona, Ohio, and New Mexico.
The Chips Act, featuring $39 billion in manufacturing grants and other financial support, faces challenges in timely implementation. Lawmakers and industry officials have expressed concerns about permitting delays, potentially extending the timeline for taxpayer-subsidized factories to produce American-made chips.
These delays could impact Biden’s re-election push, as voters hold a skeptical view of his economic stewardship. Despite concerns, administration officials have highlighted private sector investments exceeding $200 billion spurred by the Chips Act.
However, there are hurdles to overcome, including the National Environmental Policy Act, negotiations complicated by unclear program rules, and industry dissatisfaction. Additionally, there is a shortage of skilled workers in the semiconductor industry, with an estimated shortfall of 67,000 workers by 2030, according to the Semiconductor Industry Association.
As negotiations continue, industry experts stress the need for predictability to encourage significant investments and global competitiveness. Other prominent stocks to monitor in light of this development include Samsung Electronics (SSNGY), Micron Technology (MU), and Texas Instruments (TXN). Investors should also keep an eye on related ETFs such as the iShares PHLX Semiconductor ETF (SOXX) and the VanEck Semiconductor ETF (SMH).
Overall, the subsidies for major semiconductor companies aim to boost domestic chip production and counter China’s dominance in the industry. While there are challenges to overcome, the Biden administration’s efforts could have a significant impact on the future of the U.S. semiconductor industry and its global competitiveness.
