Thematic Spotlight: World Splashes Billions in Fight Over Chips

The global battle for high tech computer chip dominance is heating up with China recently announcing its largest ever semiconductor investment fund.1 China’s new program, pragmatically named “Big Fund III”, will be funded by a combination of state-owned banks and enterprises, seeking to inject US$47.5 billion toward the country’s top chipmaking plants.2 SMIC, the country’s largest home-grown chip fabricator, rallied 7% on the news.3

China aside, the semiconductor industry is experiencing a tornado of investment tailwinds. Massive government-driven funding for semiconductor development is happening all around the world. Japan, for example, earmarked US$25 billion in 2021 to develop its domestic chip industry, of which US$16.7 billion has been allocated to the construction of TSMC fabricators in Kumamoto and Hokkaido.4 In the US, President Joe Biden has promised US$39 billion in grants and US$75 billion in further loans and guarantees as part of the CHIPS act in hopes of reducing the country’s exposure to foreign supply chains.5 Intel corp., the country’s largest chip foundry, has received almost US$20 billion in funding – US$8.5 billion in grants and US$11 billion in government backed loans.6

According to Bloomberg, roughly US$81 billion has been siphoned by governments worldwide toward the chips industry thus far.7 As current global initiatives become fully realised over the next few years, up to US$380 billion in total will be vested to semiconductor firms worldwide.8 As countries fight for technological supremacy in computer chips, industry leaders, such as TSMC, Samsung, and Intel, are in prime positions to benefit. At the very least, they won’t have to look far for funds when they next look to snatch up a billion-dollar ASML machine.

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