The U.S. government is launching a $1.6 billion funding competition for chip packaging R&D projects.
The Biden administration announced on Tuesday that it will allocate up to $1.6 billion for advanced packaging, involving R&D in five areas, which is an important step for the United States to maintain a leading position in the manufacturing of components required for applications such as artificial intelligence (AI). In addition to supporting research, officials also hope to fund prototype development.
Deputy Secretary of Commerce and Director of the National Institute of Standards and Technology Laurie Locascio said that the proposed funding is part of the $52 billion authorized funding under the 2022 CHIPS Act, which will help companies innovate in areas such as creating faster data transmission methods between chips and managing the heat generated by chips, with an expected total grant of up to $150 million for each company.
Locascio said, "Our R&D work in the field of advanced packaging will focus on high-demand applications such as high-performance computing (HPC) and low-power electronics, both of which are essential for achieving AI leadership."
The new plan covers five R&D areas, including devices and tools, power delivery and thermal management, connector technology (including photonics and RF), Chiplet ecosystem, and electronic design automation (EDA).
Packaging is an important part of the chip industry, with the United States accounting for only 3% of the global chip capacity, and most packaging work is done in Asia. However, companies such as Intel, SK Hynix, Amkor, and Samsung Electronics are building packaging plants in the United States.
Since most federal government funds have so far been directed to the early stages of manufacturing, the chips produced by new U.S. factories may be shipped to Asia for packaging, which may not significantly reduce dependence on foreign companies.TSMC, which manufactures the latest chips for Nvidia, also adopts advanced technology for packaging. TSMC will receive federal government subsidies for chip production in Arizona, but has not yet indicated that it will transfer any packaging services from Taiwan, China.
U.S. Chip Subsidy Program
Since the end of last year, the U.S. government has initiated the allocation of funds under the "CHIPS and Science Act".
The act provides $52.7 billion for U.S. semiconductor research and development, manufacturing, and workforce development. This includes $39 billion in manufacturing incentives, $2 billion for traditional chips used in automotive and defense systems, $13.2 billion for research and development and workforce development, and $500 million for international information and communication technology security and semiconductor supply chain activities. The plan also provides a 25% investment tax credit for capital expenditures related to semiconductor and related equipment manufacturing.
In December 2023, British defense contractor BAE Systems received the first subsidy of $35 million. In January of this year, Microchip Technology received $162 million. In February, chip manufacturer Global Foundries received $1.5 billion. On March 20, U.S. chip company Intel received up to $8.5 billion in direct funding, which is the fourth allocation under the act and the largest amount to date.
In addition to the proposed direct funding of up to $6.6 billion, the act's planning office will also provide about $5 billion in loans for the construction of TSMC's factory in Arizona. The act has prepared a total of up to $75 billion in loans, and Intel has also obtained a loan of up to $11 billion.
According to statistics from the Semiconductor Industry Association (SIA), from May 2020 to March 2024, driven by the "CHIPS and Science Act," the United States announced 82 new semiconductor ecosystem projects, including the construction of new semiconductor manufacturing facilities (wafer fabs), the expansion of existing plants, and facilities for materials and equipment used in chip manufacturing.
In addition, according to informed sources, the Biden administration also plans to announce a subsidy of more than $6 billion to Samsung in the near future. This fund will be used to build four facilities in Texas, including a $17 billion chip manufacturing plant announced by Samsung in 2021, a new factory, an advanced packaging facility, and an R&D center.
Recently, the Boston Consulting Group and the Semiconductor Industry Association released a report stating that under the impetus of U.S. incentives, the construction of domestic wafer fabs in the United States will accelerate and drive the development of the U.S. semiconductor manufacturing industry. The gradual construction of advanced process wafer fabs will differentiate the global foundry market share. Relevant statistics show that from 2024 to 2032, the capital expenditure of the U.S. semiconductor industry will exceed 28% of the global capital expenditure. It is expected that by 2032, the production capacity of U.S. wafer fabs will increase by 203%, and the share in the global wafer fab production capacity will increase to about 14%.In the semiconductor back-end industry, the strategies of friend-shoring and near-shoring are propelling the rapid development of the semiconductor packaging and testing sector in the Southeast Asian region. Relevant institutions predict that Southeast Asian countries such as Malaysia and Vietnam will play an increasingly important role in the future packaging and testing market, with their market share expected to reach about 10% by 2027.
The United States' substantial investment plan is accompanied by a rebound in the global semiconductor market. The World Semiconductor Trade Statistics (WSTS) forecasts that, after the downturn in 2023, thanks to the growth in demand for artificial intelligence chips, the global semiconductor market will grow by 13.1% in 2024, with sales reaching a record $588.36 billion.
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