America’s largest semiconductor consignment manufacturing company
“We will create 10,500 jobs over 10 years”
The pace of subsidies to domestic companies ahead of the presidential election
Payment announcement may be delayed for overseas companies
The U.S. Joe Biden administration decided on the 19th (local time) to pay $1.5 billion (about 2 trillion won) in subsidies to U.S. semiconductor company Global Foundries. Ahead of the US presidential election in November, the government is accelerating its support for subsidies to domestic companies through the Semiconductor Act. Major foreign semiconductor companies that have invested in the United States, such as Samsung Electronics and Taiwan’s TSMC, are engaged in a tug-of-war with the U.S. Department of Commerce over toxic provisions of the Semiconductor Act.
The U.S. Department of Commerce said on this day, “The Department of Commerce and Global Foundries have signed a preliminary, non-binding memorandum of understanding to provide approximately $1.5 billion in direct subsidies under the Semiconductor Act,” adding, “This project will create 1,500 manufacturing jobs and 9,000 jobs over the next 10 years.” “It will create dozens of construction jobs,” he said. Global Foundries is the largest semiconductor consignment manufacturing (foundry) company in the United States.
Global Foundries is the third time that the Biden administration has announced subsidy payments under the Semiconductor Act passed in 2022. However, the amount of subsidies previously received was $35 million from BAE Systems of the UK and $162 million from Microchip Technologies of the United States. Taking this into account, some say that with this announcement, subsidies for large-scale investments have begun in earnest.
Accordingly, there are speculations that there will be a series of announcements of subsidies for major U.S. semiconductor companies, including Intel, ahead of President Biden’s State of the Union address to be held on the 5th of next month. The state of Ohio, where Intel is spending $20 billion to build a new semiconductor factory, is one of the key regions of the ‘Rust Belt’ (declined industrial zone), a battleground that will decide the outcome of the US presidential election in November.
However, there is also speculation that the announcement of subsidies may be delayed for Samsung Electronics and TSMC, which are building a foundry factory by investing about 17 billion dollars (about 22.7 trillion won) in Taylor, Texas. While the opposition Republican Party is criticizing the subsidy support policy as a “waste of the budget,” it could be a political burden for the Biden administration if large-scale subsidies to foreign companies are announced first before American companies.
Additionally, it has been reported that negotiations between major semiconductor companies such as Samsung Electronics and TSMC and the U.S. Department of Commerce have not reached a conclusion due to toxic provisions of the Semiconductor Act. The Semiconductor Act, which provides a total of $52.7 billion (approximately 75.5 trillion won) in support to semiconductor companies invested in the United States, requires companies that receive subsidies of more than $150 million to return profits greater than expected to the U.S. government. They are demanding a ‘excess profit sharing system’.
The problem is that, unlike during the pandemic when the Semiconductor Act was promoted, demand for semiconductors is slowing and even companies that have already announced investments are delaying their investment plans due to a shortage of professional manpower in the United States. In fact, TSMC delayed mass production at its first plant in Arizona, originally scheduled for this year, to 2025, and for its second plant from 2026 to 2028. Instead, with subsidies from the Japanese government, the Kumamoto plant in Japan, whose completion ceremony was held on the 24th of this month, was put into operation early.
James Goodrich, a senior researcher at the Center for Strategic and International Studies (CSIS) and former vice president of the U.S. Semiconductor Industry Association, told the New York Times, “The longer the U.S. government delays distribution of subsidies, the more other regions will jump into these investments and the more high-tech investments will be made in East Asia.” “It will come true,” he said.
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.