The rollout of the Biden administration’s CHIPS Act award money has so far focused on providing major awards for major companies, with just four leading-edge semiconductor manufacturers receiving the lion’s share of the $33 billion that has been allocated to this point.
Now, with $6 billion remaining, the focus is shifting to sending smaller awards to smaller companies—dozens of them, up and down the supply chain.
The goal, government officials and industry experts say, is to leverage the remaining grant money to lure in as much private investment as possible, while boosting supply chain resilience and economic security by funding U.S.-based facilities in areas like materials and packaging.
“We are really focused on investing across the semiconductor ecosystem,” Michael Schmidt, director of the CHIPS Program Office at the Commerce Department, told CNBC.
That means funneling investments to both upstream suppliers – companies providing materials and equipment, for example – and downstream players, such as those involved in the advanced packaging that takes place after a semiconductor is produced. Schmidt said some current mature technologies, also known as legacy chipmakers, will likely be in line for a piece of the remaining funds as well.
“Once we begin to rebuild that ecosystem in this country, once we begin to rebuild the scale that we expect to see in this country, I think that will create ongoing investments, investment dynamics and continue to make it attractive for companies to invest in the future,” he said.
The question of where the remaining CHIPS Act award money will be headed is looming large now that the Commerce Department has announced recipients for nearly 85% of its grant money and has committed to allocating the remaining funding by the end of the calendar year.
Hundreds of companies are still vying for a piece of the money that remains: More than 600 initially submitted statements of interest, Commerce Secretary Gina Raimondo said in February, but only nine have received awards so far.
Intel, Taiwan Semiconductor, Samsung and Micron combined will receive nearly $28 billion, while GlobalFoundries received $1.5 billion and four smaller companies – BAE Systems, Microchip, Polar Semiconductor and Absolics – received a combined $392 million. Another $3.5 billion has been set aside for the “secure enclave” program, which will produce semiconductors for military use.
A general view of the Samsung Austin Semiconductor plant on April 16, 2024 in Taylor, Texas.
Brandon Bell | Getty Images
The set of awards announced so far highlights how the focus at the Commerce Department has been on what’s known in the industry as “front-end manufacturing,” or the production of wafers themselves, said Paul Triolo, technology policy lead at the Albright Stonebridge Group.
Triolo attributed that focus to both “the highly political nature of the awards,” and a need to show progress in the near-term on advanced manufacturing capacity, he wrote in an email to CNBC.
But Raimondo has pledged to build out the U.S. chip supply chain from end to end by 2030. Achieving that “will require considerable juggling of awards to upstream and downstream players in the supply chain,” Triolo wrote.
Schmidt emphasized that the Commerce Department’s focus is already on getting funding to all of those players, and that there will be “significant investment” throughout the supply chain.
Plus, given that the awards announced so far have already prompted pledges from private companies to invest more than $300 billion in leading-edge production, Schmidt said he expects “an enormous amount of secondary investment” to soon benefit the smaller suppliers.
Commerce has also set aside $500 million in award money specifically for the companies whose projects will total $300 million or less in capital investment.
“We’ll really be seeing those benefits across the industry,” Schmidt said. “And I still think we’re going to be making very significant investments in the upstream supply chain and really building out an overall portfolio that is advancing economic and national security interests.”
US President Joe Biden gives a speech at Intel Ocotillo Campus on March 20, 2024 in Chandler, Arizona. Biden announced $8.5 billion in federal funding from the CHIPS Act for Intel Corp. to manufacture semiconductors in Arizona.
Rebecca Noble | Getty Images
One such supplier in talks with Commerce for a CHIPS award is IQE, a U.K.-based company that produces compound semiconductor wafers for major companies like Apple.
IQE chief executive Americo Lemos told CNBC that while he understands the interest in funding leading-edge chip manufacturing in order to build out artificial intelligence systems, funding smaller companies that play support roles is just as crucial to ensuring the U.S. chip supply chain is both secure and resilient.
“We need to make sure that we continuously look at the supply chain as a whole, in an environment where geopolitics aren’t easy to deal with,” Lemos said in an interview.
“Of course the industry is focused on AI, GenAI and its benefits and applications, but it’s not enough to build high performance chips,” he continued. “There’s no AI without compound semiconductors—very simple.”
With the remaining grant money dwindling, forthcoming awards will be smaller than the multi-billion-dollar packages that have been doled out so far, Schmidt said. But for small companies, even a modest award could have significant impact.
“There’s a lot that a smaller amount of money can do for those upstream projects,” said Jimmy Goodrich, senior advisor for technology analysis with the RAND Corporation. “There’s a lot of runway left.”