Can the US compete with Taiwan in semiconductor manufacture? Taiwan became a centrepiece for US economic tensions with China this year, leading US President Biden to announce his moonshot …with ‘CHiPS’. The freshly inked CHIPS and Science Act 2022 lays the highway to restore the US’ former ‘scientific and technological edge’ that took Apollo to the moon, by injecting US$200 billion into their once booming manufacturing sector, as they hope to dial up chip production Stateside. 🚀
And it seems to be working, with Taiwan Semiconductor Manufacturing Co. (TSM) the latest to open the first of two Arizona semiconductor plants last week. 🏭 Taiwan makes more than half the planet’s semiconductors, and Buffett’s favourite chipmaker TSMC makes 90% of global super advanced chips that are used to power your phone and divisive beach beats. 🔊 They also supply gadget makers, from Apple (AAPL), Intel (INTC), AMD (AMD), Amazon (AMZN) to Nvidia (NVDA).
The Taiwanese multinational has also agreed to abide by new US rules that are attempting to ‘degrade China’s military capabilities’ by blocking US chip exports used in advanced computing and artificial intelligence applications. 🛑
Other chipmakers are also backing Biden’s bill. Micron Technology (MU) is committing to a US$40 billion investment in the sector, promising 40,000 jobs. Intel broke ground in their Ohio chip factory in September. 🚜 And Qualcomm (QCOM) is expanding chip manufacturing in GlobalFoundries facilities, throwing US$4.2 billion into the chippery.
Bank of America last week said the semiconductor industry could potentially benefit from the global EV boom. 🚘 Electric vehicles need twice as many chips as their gas-guzzling cuzzies, and according to the investment bank, STMicroelectronics NV (STM) could rise as much as 75%. But the challenge for both chipmakers and investors is the industry’s supply and demand is ‘highly cyclical’. And a tonne of R&D and upskilling of the US workforce is required to build technology that ultimately may not be the smallest, fastest, cheapest first. Nano nono. 🖖