In July, Congress bipartisanly passed the US CHIPS Act (CHIPS). This is his $280 billion bill aimed at boosting the semiconductor industry and revitalizing the domestic manufacturing economy.
The tipping law allows for:
• $170 billion over five years to boost US scientific research and make it more competitive with China.
• Provide $52.7 billion in direct financial subsidies over the next five years to boost US production.
The White House reported that the US produces only about 10% of the world’s semiconductor supply. East Asia accounts for her 75% of global production, which includes all top-tier chips. In 1990, the United States produced approximately 37% of the world’s chips.
What is a semiconductor?
Semiconductors are microchips made from pure elements. In a process called doping, small amounts are added to pure elements such as silicon, resulting in large changes in the material’s electrical conductivity. Silicon is the most important and most widely used semiconductor material.
Over the past 60 years, semiconductors have played a vital role in the US economy, job creation, technological leadership, and national security. They are the underlying foundation for the operation of nearly all electronic devices, from the most complex space equipment, weaponry, or information processing circuits to simple everyday tools and gadgets.
Semiconductors power future “winners” technologies such as artificial intelligence, quantum computing, and advanced wireless networks. They enable advances in communications, computing, healthcare, transportation, and countless other applications.
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Without semiconductors, there would be no smartphones, televisions, computers, video games, or advanced medical diagnostic equipment.
SoftBank’s Masayoshi Son said, “Hardware is the skull, the skull. Semiconductors are the brain in the head. Software is wisdom, and data is knowledge.”
Semiconductors will be as important to the 21st century and the transition to the information society as steel was to the 20th century and the Industrial Revolution.
Which company will be the biggest winner?
Bank of America Securities analyst Vivek Arya said in a recent memo that Intel is likely to be the biggest beneficiary. In January, Intel announced that he plans to invest $20 billion to build two new state-of-the-art chip factories in Ohio. Other potential beneficiaries are Micron Technology, Applied Materials and Global Foundries.
What are the reasons for the increased demand for chips that have caused shortages so severe that factories have closed?
Demand for laptops is skyrocketing. Remote work has increased the need for cloud computing services. A surge in demand for his new 5G mobile phone.
Unfortunately, the shortage of semiconductors will not be resolved anytime soon. Adding new chip manufacturing equipment can be expensive and time consuming.
The importance of semiconductors is evident from the number of semiconductors in a single automobile. A conventional car contains an average semiconductor value of $330. For a $1,000 cost, he could have 3,500 semiconductors in a hybrid electric vehicle. The microprocessors and chips that power modern cars are now so ubiquitous that they play as important a role as steel and aluminum.
Success in the semiconductor industry depends on creating smaller, faster and cheaper products. The advantage of being small is that you can put more power on the same chip. The more transistors on a chip, the faster it can do its job. As new technology lowers the production cost per chip, the price of new chips could drop by 50% within a few months.
The CHIPS Act will not only subsidize the decline of advanced research and manufacturing in the United States in recent decades, it will also give policymakers a greater role in crafting the rules that shape the world’s most advanced industries. Become.
Ernest “Doc” Werlin, a Sarasota resident, was a trader and corporate bond salesman for 35 years, working as a corporate bond trading partner at Morgan Stanley in fixed income trading. Please send your suggestions and comments to him at [email protected] or visit docwerlin.com.