U.S. officials have earmarked close to $30 billion in subsidies for advanced semiconductor manufacturing, aiming to bring cutting-edge artificial-intelligence chip development and manufacturing to American soil.
But with money set to start flowing in the next few weeks,
accomplishing that goal is far from certain, industry experts say. The Biden
administration must weigh how much taxpayer money to allocate among Taiwan
Semiconductor Manufacturing (2330.TW), opens new tab, a powerful foreign
leader, and Intel (INTC.O), opens new tab, a beleaguered homegrown company
whose turnaround efforts remain promising but untested.
Betting on AI chips is also challenging in the rapidly
evolving industry. Handing out subsidies today to the likes of Intel, TSMC or
Samsung Electronics (005930.KS), opens new tab, which is also vying for federal
dollars and is the only other firm in the world that can make advanced chips,
does not guarantee security in the AI landscape of the future.
"AI itself is moving so quickly, if you focus on
today's AI chips, maybe two years from now it's a whole different thing,"
said Jay Goldberg, chief executive of D2D Advisory, a finance and strategy
consulting firm. "As opposed to the (general) road map of advanced
chipmaking which we know pretty clearly for the next decade."
The money will come from the U.S. CHIPS Act, which passed in
2022. Intel, TSMC and Samsung are all building factories in the U.S. and are
all likely to receive some degree of U.S. subsidies. The main question is how
U.S. officials allocate the money to meet the goal of bolstering AI chip
production.
"We don’t manufacture or package any of the
leading-edge AI chips needed to fuel the innovation ecosystem and power our
most critical defense systems," U.S. Commerce Secretary Gina Raimondo said
in a speech last month. "We cannot build the next generation of
technological leadership on such a shaky foundation."
MADE IN TAIWAN
TSMC, the global leader in making AI chips, has yet to
commit to bringing its most advanced technology to the United States.
At the moment, TSMC manufactures chips for Nvidia (NVDA.O),
opens new tab, Advanced Micro Devices (AMD.O), opens new tab, Microsoft
(MSFT.O), opens new tab and Alphabet's (GOOGL.O), opens new tab Google in
Taiwan. The company is not expected to bring its advanced 3-nanometer
manufacturing, which is already used to make iPhone 15 Pro chips, to Arizona
until at 2027 or 2028, despite starting mass production in Taiwan last year. It
has not disclosed any plans to bring 2-nanometer technology, which will start production
next year in Taiwan, to the U.S.
A TSMC spokesperson said the company has made "steady
progress in productive ongoing discussions with the U.S. government on
inventive funding" and its first factory in the U.S. "will enable the
leadership in the 5G and artificial intelligence era for decades."
TSMC rival Samsung has a factory in Taylor, Texas, under
construction that is expected to deploy the company's most advanced
manufacturing technology. But according to analysts and industry sources,
Samsung has long struggled to manufacture enough functional chips on each
silicon wafer to make high- volume manufacturing profitable.
In an emailed statement, Samsung referred Reuters to its
fourth-quarter earnings call, where executives said its advanced manufacturing
processes are mass-producing chips, and that orders for its AI accelerator
chips are increasing.
That leaves Intel (INTC.O), opens new tab, which has said it
will carry out its most cutting-edge manufacturing processes - called
"18A" and "14A" - in the U.S. But it has not publicly
disclosed any major customers who plan to use the technology to make AI chips.
Allocating a large chunk of CHIPS Act funding to Intel,
which many analysts expect the U.S. government to do, is essentially a bet on
Intel's turnaround plan that CEO Pat Gelsinger announced in early 2021 after
taking over.
Intel offers some advantages. AI chips are increasingly made
up of smaller "chiplets" that must be packaged together, and Intel
says it can combine chips made in its own factories with others fabricated by
rivals such as TSMC.
"Their bias is that they're going to be the
(manufacturer) of choice for these crazy complex systems of chips. And they're
going to do that in the United States," said Ben Bajarin, chief executive
of analyst firm Creative Strategies.
But to become an AI chip powerhouse, Intel has the difficult
task of retaking the manufacturing lead from TSMC. Then it must transform its
business to a service-oriented contract manufacturer for outside customers.
While recently unveiled Intel manufacturing technology looks
promising on paper, the reality is that almost every advanced AI chip currently
on the market is made by TSMC.
"The biggest issue they have is to execute," Dan
Hutcheson, vice chair at analyst firm TechInsights, said of Intel. "The
whole foundry business is a good year or two away before they either make it or
break it."
An Intel spokesperson said in a statement that the company
is on track with its "18A" process, which it expects to be
"manufacturing-ready" in the second half of the year.
Reuters
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