The US is reportedly close to announcing massive chip grants as part of its Chips and Science Act

Recent reports indicate that much-anticipated chip grants might be officially revealed in the US soon.

The US is reportedly close to announcing massive chip grants as part of its Chips and Science Act
U.S. House Speaker Nancy Pelosi (D-CA) is embraced by U.S. Rep. Eddie Bernice Johnson (D-TX) as she signs the "Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act of 2022," following House passage of the legislation to subsidize the domestic semiconductor industry as it competes with companies in China and other countries, during a bill enrollment ceremony on Capitol Hill in Washington, U.S., July 29, 2022. REUTERS/Jonathan Ernst/File Photo

The backstory: In the ongoing technology competition between the US and China, one major focus has been on advanced chips. In 2022, the US tightened tech exports of advanced semiconductors and the machines used to make them to Chinese companies. China hit back by launching an investigation into US chip giant Micron and placing export restrictions on materials crucial for producing electronics, like germanium and gallium.

To boost its semiconductor industry, the US introduced the CHIPS and Science Act in 2022, which set aside a little over US$52 billion for investing in domestic research, development, manufacturing and workforce development. Major players like Intel, TSMC and Samsung were expected to benefit, but the grants came with conditions, including restrictions on expanding semiconductor manufacturing in certain foreign countries like Russia and China.

More recently: In December, the US gave out its first semiconductor grant under the CHIPS Act. US$35 million went to the US subsidiary of British aerospace firm BAE Systems, aiming to enhance military-grade chip production. Commerce Secretary Gina Raimondo hinted that around 10-12 more awards could be announced in 2024.

The development: Recent reports indicate that the much-anticipated chip grants might be officially revealed before US President Joe Biden's State of the Union address on March 7. According to people speaking with Bloomberg, these funds are set to make a significant difference for industry giants like Intel and TSMC, influencing their plans to build multi-billion-dollar chip facilities.

Intel's CEO Pat Gelsinger backs the funding, seeing it as vital for Intel's competitiveness. The funds would help jumpstart the construction of major facilities, such as Intel's massive project in Ohio, which is planned to be potentially the world's largest semiconductor facility. 

Key comments:

"China has hit the American trade restrictions where it hurts," said Peter Arkell, chairman of the Global Mining Association of China, to Reuters about the gallium and germanium export curbs.

"The Biden administration, and like the Trump administration before them, is justifying these controls on the basis of national security," said Nick Marro, the lead analyst for global trade at the Economist Intelligence Unit, to SCMP, saying that US chip firms are facing an "uphill battle." He added, "That rationale will always be tricky for companies to argue against, particularly these days, as US concerns around trade, technology and Taiwan increasingly characterize the downward trajectory in US-China relations."

"US actions against China regarding export control, investment screening and unilateral sanctions seriously hurt China's legitimate interests," Chinese President Xi Jinping has reportedly said. "Suppressing China's science and technology is curbing China's high-quality development and depriving the Chinese people of their right to development."