Chip manufacturing and controlling the global semiconductor trade has become a volatile issue over the last two years, especially because of China and Taiwan’s relationship. China considers Taiwanese-manufactured chips as an essential cornerstone of its technological might.

China’s plan and the first phase of the package could be implemented as soon as the first quarter of next year. The majority of the financial assistance would be used to subsidise the purchases of domestic semiconductor equipment by Chinese firms, mainly semiconductor fabrication plants, or fabs, they said. A large portion of this money will go to setting up China’s own lithography system and cracking using UV light to manufacture semiconductors. This follows the Netherlands’ decision to curb exports to China.

The fiscal support plan comes after the U.S. Commerce Department passed in October a sweeping set of regulations, which could bar research labs and commercial data centres’ access to advanced AI chips, among other curbs. The United States has also been lobbying some of its partners, including Japan and the Netherlands, to tighten exports to China of equipment used to make semiconductors

With the incentive package, Beijing aims to step up support for Chinese chip firms to build, expand or modernise domestic facilities for fabrication, assembly, packaging, and research and development. Beijing’s latest plan also includes preferential tax policies for the country’s semiconductor industry.

ASML’s CEO Peter Wennink

While the Netherlands houses ASML Holdings, Japan’s Tokyo Electron Ltd is another major player in lithography and in making machinery that is used to print circuitry on the silicon wafers.

It would be nearly impossible for Chinese chip makers to produce the current generation of processors without access to the cutting-edge products and tech provided by ASML, Tokyo Electron, and other US companies like Applied Materials Inc., Lam Research Corp., and KLA Corp. This effectively their ability to design and develop the next generation of processors as well.

ASML is the only company in the world that currently produces extreme ultraviolet (EUV) lithography machines, which are used to produce cutting-edge microchips. It also builds other types of machines, refurbishes existing machines, and designs software, and has a robust training and customer service support program.

China is the single largest market for semiconductors and silicon chips whereas the US is where the technology originated and where most of the engineering and research and development take place. The Chinese tech industry’s dependency on imported silicon chip has led China to try and lessen its reliance on imports.

As for Tokyo Electron and ASML, both of these companies too, seem annoyed by the decisions taken by their respective governments. Tokyo Electron has said the general clampdown on its Chinese customers is already hurting business, whereas ASML has put out a statement saying that demand elsewhere in the world for its most advanced products can make up for any revenue shortfall from China.

In an effort to halt Beijing’s scientific and military advancements, the Biden administration unveiled a comprehensive set of export regulations in October, including measures that severely restrict Chinese access to US chipmaking technology.

US President Joe Biden and Japanese Prime Minister Fumio Kishida and Dutch Prime Minister Mark Rutte at the White House

China has decided to infuse more than 1 trillion yuan or about $143 billion into its semiconductor industry to become self-sufficient in chips, and to counter the US going after China’s technological advances.

Beijing plans to roll out what will be one of its biggest incentive packages over a period of five years. This will be in the form of subsidies and tax credits to local manufacturers and companies who set up their production plants in India, and help China bolster its semiconductor production and research activities at home, said the sources.

What companies benefit from CHIPS Act?

The CHIPS Act, which stands for Creating Helpful Incentives to Produce Semiconductors, was passed by the U.S. Congress in 2020 to boost the domestic semiconductor industry. This act aims to address the global chip shortage by providing financial incentives and funding for chip manufacturing and research in the United States. While the CHIPS Act benefits the semiconductor industry as a whole, there are certain companies that stand to gain more from this legislation than others. In this essay, we will discuss the companies that benefit most from the CHIPS Act.

The first set of companies that benefit from the CHIPS Act are the semiconductor manufacturers themselves. This includes companies like Intel, AMD, and Qualcomm. With the financial incentives and support provided by the CHIPS Act, these manufacturers can expand their operations, invest in new technologies, and increase their production capacity. As the demand for semiconductors continues to rise, these companies will be well-positioned to meet the market needs, thereby increasing their competitive advantage and market share.

Another set of companies that benefit from the CHIPS Act are those in the supply chain of semiconductor manufacturing. These include companies involved in designing, testing, packaging, and distributing semiconductors. By supporting domestic chip production, the CHIPS Act ensures a reliable and secure supply chain for these companies, reducing their dependence on foreign suppliers and mitigating the risks associated with global disruptions.

Furthermore, the CHIPS Act also benefits the automotive industry. With the increasing digitization and connectivity of vehicles, semiconductors have become an integral part of modern cars. However, the chip shortage has severely impacted the automotive sector, leading to production delays and increased costs. By supporting domestic chip manufacturing, the CHIPS Act enables automakers such as General Motors, Ford, and Tesla to secure a stable supply of semiconductors, ensuring the smooth production of vehicles and the timely integration of advanced technologies in the automotive industry.

The consumer electronics industry is yet another sector that stands to benefit from the CHIPS Act. Companies like Apple, Samsung, and Sony heavily rely on semiconductors for their smartphones, tablets, TVs, and other electronic devices. With the support of the CHIPS Act, these companies can ensure a steady supply of semiconductors, avoiding production disruptions, and meeting the growing consumer demand for their products.

Moreover, companies operating in the defense and aerospace sectors are also major beneficiaries of the CHIPS Act. Semiconductors play a critical role in military equipment, communication systems, and aerospace technology. By promoting the domestic production of semiconductors, the CHIPS Act enhances the national security of the United States by reducing the country's dependency on foreign chip manufacturers and ensuring a secure supply of semiconductors for defense-related purposes.

Additionally, the CHIPS Act benefits companies engaged in emerging technologies such as artificial intelligence, the Internet of Things (IoT), and autonomous vehicles. These cutting-edge technologies heavily rely on semiconductors for processing power and data storage. By supporting the domestic semiconductor industry, the CHIPS Act fosters innovation in these sectors, enabling companies like NVIDIA, Google, and Tesla to develop advanced technologies and gain a competitive edge in the global market.

Furthermore, the CHIPS Act also benefits the pharmaceutical and healthcare industry. The pandemic has highlighted the importance of semiconductors in medical devices, diagnostic equipment, and vaccine research. By promoting domestic chip manufacturing, the CHIPS Act ensures a stable supply of semiconductors for the healthcare sector, enabling companies like Johnson & Johnson, Pfizer, and Medtronic to continue their critical work in developing and manufacturing life-saving technologies.

Companies involved in renewable energy and environmental technologies also stand to benefit from the CHIPS Act. Semiconductors are essential for solar panels, wind turbines, energy storage systems, and electric vehicles. By supporting the domestic semiconductor industry, the CHIPS Act accelerates the development and deployment of clean energy technologies, facilitating the transition to a sustainable and low-carbon future.

Lastly, the CHIPS Act benefits start-ups and small enterprises in the semiconductor industry. The act provides funding and incentives that can level the playing field for these companies, enabling them to compete with larger and established players. This fosters innovation, diversity, and entrepreneurship in the semiconductor industry, ultimately driving economic growth and job creation.

In conclusion, while the CHIPS Act benefits the semiconductor industry as a whole, it provides significant advantages to specific companies and sectors. Semiconductor manufacturers, automotive, consumer electronics

The CHIPS and Science Act: Here’s what’s in it

October 4, 2022 | Article

The act invests $280 billion to bolster US semiconductor capacity, catalyze R&D, and create regional high-tech hubs and a bigger, more inclusive STEM workforce.

Article (8 pages)

The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act), signed into law on August 9, 2022, is designed to boost US competitiveness, innovation, and national security. The law aims to catalyze investments in domestic semiconductor manufacturing capacity. It also seeks to jump-start R&D and commercialization of leading-edge technologies, such as quantum computing, AI, clean energy, and nanotechnology, and create new regional high-tech hubs and a bigger, more inclusive science, technology, engineering, and math (STEM) workforce. Here is a breakdown of the law’s key provisions.

By the numbers: The CHIPS Act directs $280 billion in spending over the next ten years. The majority—$200 billion—is for scientific R&D and commercialization. Some $52.7 billion is for semiconductor manufacturing, R&D, and workforce development, with another $24 billion worth of tax credits for chip production. There is $3 billion slated for programs aimed at leading-edge technology and wireless supply chains.

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The chips are down: The United States makes 12 percent of the world’s semiconductors, compared with 37 percent in the 1990s, according to US government statistics.1 Many US firms are dependent on chips made abroad, and the fragility of those supply chains has been laid bare over the past 18 months. Moreover, McKinsey research estimates that worldwide demand will keep growing, with semiconductors poised to become a $1 trillion industry by the end of the decade.

Shoring up semiconductors: Shortages of semiconductors dented US economic growth by nearly a quarter-trillion dollars in 2021, according to the US Department of Commerce.1 To expand domestic manufacturing of mature and advanced semiconductors, the Department of Commerce will oversee $50 billion in investments over five years, including $11 billion for advanced semiconductor R&D and $39 billion to accelerate and drive domestic chip production ($6 billion of which can cover direct loans and loan guarantees).

ASML holds a crucial position in the industry, being the sole producer of equipment required for manufacturing advanced semiconductors. Despite sanctions by the US, China has been buying semiconductors and semiconductor-making technology

The company disclosed that order bookings for the fourth quarter reached 9.19 billion Euros or about $9.98 billion, more than tripling the 2.6 billion Euros recorded in the preceding three months. Analysts, surveyed by Bloomberg, had estimated an average of 3.6 billion Euros.

A significant portion of the orders, amounting to 5.6 billion Euros, was attributed to ASML’s cutting-edge extreme ultraviolet lithography machines. This uptick in demand suggests a positive shift in the semiconductor market.

While ASML had licenses for certain machines before the new restrictions, the company anticipates that up to 15 per cent of its China sales in 2024 will be impacted by the latest export control measures.

Although ASML is not allowed to sell its latest lithography machines to China, because of US-imposed tech sanctions, China can still buy AI hardware that is not top of the line and not recent. China has used the same tactic with NVIDIA.

Instead of acquiring NVIDIA’s top-of-the-line H200 and H100 AI GPUs, Chinese tech businesses have been going after NVIDIA RTX 4000 series GPUs, which are mainly used for gaming, but still have decent AI performance.

Semiconductors production $1 trillion industry by 2030.

The CHIPS and Science Act: Here’s what’s in it

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