The Senate will be making another attempt to vote on the CHIPS Act in order to subsidize companies that produce computer chips in the United States. Daniel Newman, a founding partner and principal analyst at Futurum Research, joined Cheddar News to break down what this means for semiconductor production in the U.S. "It comes down to technology leadership. It comes down to supply chain resiliency. And then, of course, it comes down to being able to compete and secure international security level," he said.

Closing Bell

Congress Tackles CHIPS Act to Help U.S. Compete With China

Welcome back to closing bell here on cheddar news Now, Congress could begin voting on a key piece of legislation involving semiconductors today. The $52 billion chips act would give subsidies to companies who plan to produce microchips here in the U. S. So the idea is that these incentives will help the US become less reliant on rivals like china for chips and perhaps less than supply chain issues too in the midst of a global semiconductor shortage. So joining us now is Daniel Newman, founding partner and principal analyst at future Research and Advisory from focus on digital innovation and market disrupting tech. So daniel break down what this legislation would mean for us, semiconductor manufacturing and the economy. Overall, I think there's really three components to this deal that the world should be thinking about. And of course the US and our lawmakers, I think we're all a little bit sitting on the edge of our chair saying, hey, this thing needs to pass, will it pass? But it comes down to technology leadership, It comes down to supply chain resiliency. And then of course it comes down to, you know, being able to compete and secure uh international international security level. We have So much of our dependency now going overseas, almost 100% of our leading edge and the vast majority of all semiconductors. The risk and the stakes are just too high. So there's a lot at stake here. This bill has passed its bipartisan the fact that we haven't actually been able to reconcile and get it through is so much more of an indication of our problems in our policy maker and in our legislative, you know, divide that. It has anything to do with the goals to bring together our abilities to make more chips here. And of course to stay ahead against china and working with those eastern nations as well. I'm gonna ask what kind of support does the bill have in Washington? Well, I mean, it passed in both, in both chambers, it passed in the house, it passed in the Senate, but it's gotten stuck in reconciliation. You know, I just tweeted something about this, I said effectively there's pork that's been loaded into this bill, you know, without maybe using more formal words and and the bottom line is the 52 billion has largely been agreed upon in both chambers. Everyone realizes we need to manufacture more, we need to support R and D innovation, the protection of intellectual property. We need to make sure that our supply chain is more resilient so that we don't have incomplete manufacturing of everything from vehicles to pcs and smartphones and of course we need to, you know, consider the risk. What happens if China and Taiwan do have a conflict? I know we like to think it could never happen, but with almost all of our leading edge chips being manufactured in Taiwan, we have to consider that. So I think the technology leadership and national security need to be a bigger thing at stake. And remember this is going to take multiple years from the time that we actually passed this bill before the manufacturing capacity is meaningfully improved here in the United States. Now. Intel has been pretty vocal about this. They're essentially saying no plan, no plant that comes to the plant in Ohio. In fact they say they'll move things over to europe. So how important is this for intel and the economy overall? Well intel has definitely been the most active in manufacturing projects now. You know we have manufacturing expansion here with TSMC with Samsung, with Intel so there are a number of different semiconductor makers that are looking to manufacture more here. But intel with its foundry services with its you know manufacturing expansion has been vocal and aggressive in realizing both for its own chip designs as well as the chip designs of other fabulous NVIDIA Qualcomm, M. D. And others that they want to produce more chips and produce more here in the U. S. So that big project in Ohio is probably one of the biggest earmarked and the company has moved forward. They did procure and purchased the land but I believe they're expecting that the government's gonna step up and support this and that's where it goes back to what I said about national security, that's what goes back to technology leadership Right now. I believe China has something like 40 manufacturing projects for semiconductors. Taiwan has around 20 in the United States only has five China spending more on its tooling while the US is spending less or it's actually declining its investment in tooling for semiconductors. And after what we've been through the last couple of years with the supply chain, you know we like to talk a lot about what's caused our economic challenges right now. But if we could open up supply chains that more vehicles were available, if more Gpus for graphics cards were available, would pricing have gone as far out of control as it has? And I think fixing that supply chain should be more of a priority than it seems to be right now. So my other question is that the bill has some restrictions on investing in china for companies that receive subsidies. How do these companies feel about this? I think companies have to balance the risk of of taking the money and utilizing it versus how you know, potentially foreign direct investment in china may work for their businesses. Of course all these semiconductor makers, both the fabulous the those that are building intellectual property, the analog, those that are involved in the substrate and of course the you know the monolithic chip designers and manufacturers all have business in china. So they're gonna have to consider the letter of the law and then make some decisions and of course I don't know that any that these laws are always written entirely in stone. But I think the idea behind the chips act is it has to be good for the United States and it has to be good for the broader supply chain to not be so dependent on semiconductors coming out of Taiwan Korea and china. Of course we want to continue to work with them and I don't see this act by any win by any means displacing the importance of the manufacturing that goes on over there. But if for some reason the conflict arose or you know, a climate event or another virus like we've had over the last few years, even having some level of resiliency is going to be critical to make sure that we can grow the, you know, the cloud, the connectivity that we depend on here in the United States. It's not just our phones and our toys and our in our cars, it's really about the data centers and the connectivity that brings our world together. So my last question for you is should investors be worried about investing in, let's say TSMC, I don't see any risk. If you look at the most recent results from TSMC demand demand is at an all time high. They've cut massive contracts with everyone, you know, Apple and Qualcomm and A. M. D and and all the fabulous and they even work with intel, I think it's about the additive capabilities. If if I was gonna put a, you know, kind of a rate on what's going on. Is that The overall demand for semiconductors is only going to continue to grow. Something like a vehicle. The bomb of a of a vehicle by 2030 is gonna be 20% semiconductors. So it's it's our cars, it's our electronics, it's are connected homes and of course it's our phones and laptops and servers. The demand is going to go up. So we need to figure out a way to expand capacity to support that demand. And we're in a we're in a super cycle for chips. It's gonna only continue to grow. All the data supports that Our desire to be connected is only going to continue to grow and the power of computing continues to grow. All of these things need chips. Daniel Newman, founding partner and principal analyst at Future Research Daniel, thank you so much for coming on the show with us.