For more than two months, the U.S. Science and Chips Act (hereinafter referred to as the "CHIPS Act") has played a three-pronged axe.
At the end of November 2023, Biden** announced the allocation of $3 billion for the independent advanced packaging project, which will be managed by the National Institute of Standards and Technology (NIST) under the Department of Commerce.
At the start of the new year, two more subsidies were made, the first $35 million went to BAE Systems, a military chip contractor, to modernize the company's Microelectronics Center (MEC) in NASHUA, New Hampshire, with the goal of quadrupling production of chips used in F-15 and F-35 fighter jets, as well as satellites and other defense systems.
The second tranche was allocated to Microchip Technology (hereinafter referred to as Microchip), totaling 1$6.2 billion, including $90 million for a further expansion of a facility in Colorado and $72 million for an expansion of the Gresham, Oregon facility, with the goal of tripling production at both Microchip facilities.
BAE cheered loudly on the official **, in contrast, Microchip did not comment for the time being.
Combined with the tone set by Biden half a year ago to commemorate the first anniversary of the promulgation of the "Chips Act", there are many unexpected aspects of this "three-board axe", such as the allocation amount is very small, and the two subsidies to enterprises are only about 200 million yuan in total, and they have not flowed to large chip giants.
NIST's leadership of the lab side of the $3 billion Lab-to-FAB initiative can basically be seen as an academy research grant for basic research on chips focused on advanced packaging. In the other two, U.S. Secretary of Commerce Raimondo said that starting small and growing from small to big is an intentional strategy of the United States.
Chris Miller pointed out in an interview with Aijiwei that the fixed process for the implementation of the "Chips Act" funds has not yet been formed.
Chris Miller, the author of "Chip Wars", questioned the process of chip subsidies in the United States, such as whether the chip bill is strictly in accordance with a certain batch of appropriations, and whether it is possible for companies that have already received money to add itThe U.S. Department of Commerce did not elaborate further on such issues.
BAE, military strength + connections
BAE Systems is a relatively unrenowned company in the semiconductor industry, and the most typical explanation for this is that you can't even find BAE's name on the map of the semiconductor R&D, design, and foundry industry in the United States drawn by the American Semiconductor Industry Association (SIA) last year.
SIA's U.S. chip map with no BAE in New Hampshire
But BAE is well-known in the military fan circle. Although the company is headquartered in the United Kingdom, it has long been one of the top six contractors of the U.S. Department of Defense, and has also ranked among the top in European military and aerospace electronics foundries, and even occupied the first place for a long time. The company's gallium arsenide and gallium nitride monolithic microwave integrated circuits (MMICs) are key components of defense RF electronic systems.
The biggest feature of BAE's NASHUA foundry in New Hampshire is a 6-inch gallium arsenide wafer production line, which has higher product yields and lower manufacturing costs compared to the industry standard 4-inch line. Last year, the plant's 140 nm gallium nitride MMIC technology was mass-produced, making it the only 6-inch domestic production line at this technology node by the U.S. Department of Defense.
The application of electronic warfare in the electromagnetic spectrum related to high-frequency power amplifiers is the key layout of the United States' leading semiconductors. We can deduce that the RF system on the F15, F35 fighters that are currently engaged in massive Israeli bombing of the Gaza Strip should come from BAE. The emphasis on the military and national defense security chain, as well as BAE's unique position in the military industry chain, are the core factors for it to get the subsidy of the chip bill, but I am afraid there are other reasons for it to get the "first blood".
After BAE received the subsidy, the official ** immediately published a congratulatory letter from U.S. Senator Jenanne Shaheen, chairman of the U.S. Senate Appropriations Subcommittee: "This critical funding from the CHIPS and Science Act will help BAE Systems' microelectronics center in Nashua modernize its facilities and ensure that the military continues to have access to U.S.-made semiconductor technology." These modernization efforts will strengthen New Hampshire's indispensable position in defense manufacturing for years to come. ”
Jenne Shaheen, who has been in the US political circles for a long time, is an important handler of the "CHIPS Act" funding flow, and her personal energy should play a very key role in the small flow of funds. She herself has served as a senior senator for New Hampshire since January 2009. A member of the Democratic Party, she also served as the 78th governor of New Hampshire from 1997 to 2003, the first woman in U.S. history to be elected to both governor and senator.
Although she is a woman, Jeanne Shaheen's style in the United States is aggressive and often murderous in public. Not only did he vote firmly in favor of the decision to use force against Iraq in 2003, vowing to overthrow Saddam's regime, but he also strongly opposed Biden's withdrawal from Afghanistan two years ago.
From this, we can summarize some of the background and behavior characteristics of this "CHIPS Act" fund steward: she has been in charge of New Hampshire for a long time, and she likes to use military force. U.S. senators often play the role of a federal and state political resource puller, and it is not difficult to understand when she returns to the semiconductor companies where she originated, choosing BAE as a "primer" to throw $35 million in the name of strengthening the military semiconductor chain.
Microchip and the washing machine have to tell the story
Like BAE, Microchip can become the first batch of funding for the "CHIPS Act" in the United States, which is also the result of the combined effect of internal and external forces.
Microchip has long been the number one MCU provider in the United States, with a stable global market share of between 12% and 15%, and its MCUs are widely used in the industrial, aerospace and defense, telecommunications, automotive and data center industries. Microchip's operating income is expected to grow by 7. in 2023 amid a 10% year-over-year decline in global MCU shipments (Yole's estimate).3% (latest data from Gartner). However, it is worth noting that the weakness of Microchip's business in the second half of 2023 led to an increase in inventory in China's distribution channels, which also affected the company's European business flow - after all, China is an extremely important end consumer of MCUs in the world, and Microchip is very dependent on exports to countries such as China. This resulted in an increase in the number of distributor inventory days for the business from 5 days in Q2 2023 and 6 days in Q3 2023 to 35 days in Q3. In addition, Microchip also saw weakness in the automotive and industrial sectors in the second half of the year due to rising inflation.
In 2022, Microchip accounts for about 12% of the world's top ten MCU** companies
Microchip does not compete with chip companies such as Intel, AMD, and Nvidia on the cutting-edge process track, and like BAE, it focuses on the stable performance of mature process chips, and industry and defense are important revenue and profits for Microchip. From this, we can see Microchip's position and challenges in the US domestic semiconductor ** chain: as one of the main major MCU companies in the United States, Microchip has a deep layout in the industrial and defense markets, but relies heavily on exports, especially the Chinese mainland market. For nearly three decades, the company has 16 sales and technical offices in Chinese mainland, employing approximately 440 people, working with approximately 170 strategic channel partners, and more than 1,100 sales and technical representatives in 350 locations in China, serving more than 12,000 Chinese customers.
Therefore, Microchip needs to be reasonably "taken care of" by the CHIPS Act to cooperate with the domestic reshoring plan of the U.S. semiconductor manufacturing industry. While Microchip has remained silent on the news about the funding of the bill for the time being, we can see the reason for the decision in an official statement from the U.S. Department of Commerce: "This will help Microchip triple its production at these two plants (Colorado and Oregon) and reduce the company's dependence on foreign countries." Microchip is one of the largest semiconductor manufacturers in the U.S. and part of a defense industrial base and trusted manufacturing programs for the military. ”
Many industry experts are analyzing the reasons why Microchip can get the money, and they have paid attention to the pain caused by the lack of cores in the U.S. Department of Commerce in 2021 - an MCU worth less than $1 has reduced the global GDP by 1%, but it is very likely to ignore a key example of the official document of the U.S. Department of Commerce - "washing machine". The U.S. Department of Commerce says that Microchip's MCUs can be used in washing machines, automobiles, and all kinds of military **, and this washing machine is definitely not a casual statement. In fact, in the era of extreme core shortage, washing machines, as household appliances, once had a strong sense of existence.
In the first half of 2022, when the Russian-Ukrainian war was in full swing, an authoritative American military blogger once published an article dismantling some of the ** equipment of the Russian army in Ukraine with the title of "Russia has been completely cut off from the chip chain, why military electronic equipment can still play a role", and found that many of the chips use MCU chips, IGBT modules or "magic modification" versions of a variety of sensor chips on household inverter washing machines, which makes the relevant departments of the United States realizeAt extraordinary times, civilian and military MCUs and certain power semiconductors and power management chips have the potential to be descaled and multiplexed. Broadly speaking, Microchip's MCUs can be considered a strategic commodity.
In addition to "internal forces", there is also an external factor of interstate competition. In recent years, Oregon's semiconductor ambitions have overflowed, relying on the emerging "Silicon Valley Forest" to crush the traditional technology hubs of California in the west, Texas in the southwest and New York in the eastOregon currently accounts for 15% of the U.S. semiconductor workforceIt is also home to the manufacturing and R&D bases of large semiconductor companies such as Intel and Qorvo.
In addition to Microchip, several other large chipmakers in Oregon are also looking to federal funding to accelerate their expansion there. Intel, Hewlett-Packard and Jireh Semiconductor are all waiting for a piece of the pie.
Oregon's vast semiconductor industry cluster is almost as large as California's hardware on the West Coast.
Oregon Senator Ron Wyden, one of the key participants in the initial document of the CHIPS Act, has always regarded California as an imaginary enemy of the U.S. interstate semiconductor competition, constantly digging into the corners of his southern neighbor, and like Jeanne Shaheen, using the CHIPS Act to reward his state, Microchip is an ideal choice.
The US "CHIPS Act" is taking off its kaftans and baring its fangs
To sum up, we can sort out the commonalities of the landing of bill funds other than NIST:
It does not aim at advanced process chip manufacturing, but focuses on mature process chips required by industry and defense
The amount of the first batch of grants is not large, and there is a feeling of throwing stones and asking for directions;
From the federal level to the state level, senators in New Hampshire and Oregon use their connections and political energy to return the action of their home states.
The gray line of the grass snake is thousands of miles away. Since the second half of last year, the U.S. Department of Commerce has continued to emphasize the importance of research on the industrial chain of mature process chips (28nm and above), and they have realized that the more than 50 billion US dollars have made Apple, Intel, Nvidia, and AMD share the food, which is at most the icing on the cake, but it is distributed to chip companies related to defense and industry, and are not often under the spotlight.
This also reminds the domestic semiconductor industry that the competition between China and the United States in semiconductor design and manufacturing processes not only exists in the fields of high-computing AI chips, data centers, cloud computing, mobile phone computer CPUs and advanced packaging, etc., but also in terms of mature technology, in the future, the United States still has the possibility of strengthening the control of the first chain and implementing the "small courtyard and high wall" strategy against China. (Proofread by Zhu Zhilei).