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Semiconductor Companies Love Biden's CHIPS Law. But Will Taxpayer Money End Up In China?

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Date: 2022-08-11 23:54:32

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An Intel R&D lab in Chengdu, China. Intel has billions invested in China. The CHIPS Act should help ... [+] the company invest in the U.S. But will the science component compel them to use taxpayer funds to hire Chinese researchers...in China? (Photo by China Photos/Getty Images)

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Semiconductor manufacturers love President Biden's recently signed CHIPS and Science Act. It’s not just Wednesday’s lower inflation print helping these companies. It’s the $50 billion that’s coming their way to build semiconductor fabrication plants, or fabs. Free money for localizing supply chains in a key, global industry. What’s not to love?

“If I’m an investor right now, I am buying all of the stocks that are going to be helped out by Washington,” Vladimir Signorelli of Bretton Woods Research said last week in an interview.

Advanced Micron Devices, Global Foundries, Intel INTC and Micron Technology are all trading higher and could finally catch up to the S&P 500 as the market weighs these new tax incentives and other benefits of the CHIPS Act.

“We’ve wanted to build a mega-fab in the U.S. for a long time,” Micron’s senior vice president and General Counsel, Rob Beard, told a hometown business publication in Idaho on Aug. 8. Beard neither confirmed nor denied rumors that Micron would build one in Idaho. “Now that this legislation is in place, we are able to make some investment decisions. We are looking at several different places and it’s a competitive process,” Beard reportedly said.

The grant money has to go to building a fab in the U.S. It can be for manufacturing any type of chip, though the primary focus is for the high-end, advanced chips and the machines that make those chips. As it is now, the U.S. designs the machines and the chips, and lives off the intellectual property, outsourcing their manufacture to Taiwan, South Korea, Japan and – increasingly – to China.