Paul van Gerven
11 April

It’s hard to see how foreign firms building fabs in the US could ever completely soothe American national security jitters over semiconductor supply.

Intel is set to receive almost 8.5 billion dollars in grants (plus additional loans) from the US government, propping up efforts to orchestrate a turnaround for its ailing business. It won’t be enough, apparently. Even before the incentives were announced last month, Secretary of Commerce Gina Raimondo acknowledged that a second Chips Act will be required for the US to “lead the world” in semiconductors.

Even though Intel isn’t the only horse the US government is betting on – both Samsung and TSMC have each been awarded 6-7 billion dollars in grants for their US fabs – it’s the only Chips Act beneficiary operating at the leading edge with its roots firmly planted in US soil. This begs the question: if push comes to shove, how far will the US government be willing to go to keep its national assets afloat?

Supercharging

After Intel’s recent webinar discussing the company’s new structure of two separate but interdependent manufacturing and product business units, we have a more clear picture of the uphill battle the firm faces. No need to go into the financial details, suffice it to say that things won’t get easier from here, with new nodes requiring ever-higher investments and hence ever-larger production volumes to make them profitable. At the same time, it’s hard to see what distinct advantages Intel has to offer over Samsung and TSMC.

Except for one, that is: being a US firm. From a business perspective, the US is home to the world’s biggest fabless and the world’s biggest chip-buying companies. As geopolitical tensions are mounting, these companies are increasingly concerned about security of supply. The US government shares this concern and additionally seeks semiconductor leadership as a matter of national security. As such, Intel’s position within the military-industrial complex has been entrenched.

Bits&Chips event sponsor registration

“Entrenched” is the right word here, because the semiconductor industry – and, more generally, Silicon Valley as a whole – have always been intertwined with the military. “High tech’s value has long been in producing war-making technology for the federal government; in turn, Washington has consistently given back to the Valley’s defense contractors, universities and blue-chip engineering firms,” writes Harvard and Bard College historian Jeannette Estruth.

For a long time, government funding helped lubricate the mighty US innovation machine enough to remain the top dog, while free markets guaranteed security of supply. Today, US policymakers have apparently concluded that it can’t out-innovate the rest of the world anymore. Supercharging industrial policies with trade restrictions and tariffs along with incentives, decades of championing international free trade now are proving to have been conditional on serving US national interests.

Price tag

With this in mind, it’s hard to see how Intel’s manufacturing arm would ever be allowed to fail. As the grants demonstrate, Washington believes in the strength of Samsung and TSMC and is perfectly happy to include them in organizing supply security for the many industries that depend on semiconductors to flourish. But these firms are ultimately under foreign control and only a rock-solid US firm will be able to soothe American national security jitters. Even if that comes with a hefty price tag.

Main picture credit: Intel