GlobalFoundries and Intel may have to delay deployment of new fabs if the U.S. Senate fails to pass government semiconductor production subsidy bill in the coming weeks. While the buildings themselves will likely be constructed, they will not be equipped with manufacturing tools without subsidies from the U.S.
"To do it sooner rather than later, we would need government co-investment with us," Thomas Caulfield, chief executive of GlobalFoundries, said in an interview with Reuters this week. "We have good free cash flow generation, but we'd have to build up the balance sheet to go make those investments."
Meanwhile the CHIPS act has passed the first procedural barrier in the U.S. Senate on Tuesday, which cleared the road for its broader discussion and eventual approval, reports SeekingAlpha.
GlobalFoundries last year allocated $1 billion on expanding production capacity of its Fab 8 in Malta, New York. The company said it would build a brand new fab in the state, in a bid to further enhance its manufacturing capability. However, to build that fab, GlobalFoundries needs subsidies from the government to quickly construct and equip the facility. Without support, the foundry that builds chips used by the military and other organizations crucial for the U.S. national security and economy, will have to slowdown the project.
Thomas Caulfield is not the first U.S. semiconductor company CEO to warn the U.S. legislators about possible delays of new fab projects because the CHIPS act proposed in early 2021 has still not become the law. About a week ago Pat Gelsinger, chief executive of Intel, said that his company might build a new mega site in Europe instead of Ohio if the U.S. fails to pass appropriate semiconductor production subsidy legislations.
In a bid to be competitive with South Korea and Taiwan-based producers of chips, companies like Intel and GlobalFoundries have to gain capacity in the U.S. But building fabs in the USA is expensive, so they badly need funding from the government, but the latter cannot act before legislators pass the appropriate laws.
Under the CHIPS act, the U.S. will provide $52 billion in subsidies, grants, tax credits, and various incentives to chipmakers that produce microelectronics in the USA. For the U.S., it is important to produce more chips locally as it can boost the economy and is a matter of national security since modern high-tech weapons use a variety of microelectronics components.
For companies like Intel, GlobalFoundries, TSMC, and Samsung Foundry the U.S. government subsidies are crucial to build their new fabs in the country rather sooner than later. Without support from federal and local authorities, the said companies will not be able to fund the projects as quickly as they would hope. Modern advanced fabs cost well over $10 billion dollars even for one phase. Meanwhile, Intel has said that its mega site in Ohio — which is set to house both semiconductor fabs and advanced packaging facilities — will require investments of $100 billion to be fully built up.
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