Chip Subsidy Race Heats Up Among US, EU, and Japan

The fierce global competition in the semiconductor industry has reached unprecedented levels, as major economic powers like the United States, European Union, Japan, and South Korea have significantly increased their investments to boost local chip productionThis surge in funding and strategic plans reflects the rising importance of semiconductors, which are at the heart of technological innovation and economic growthCountries are not just rivaling each other in terms of financial investments; they are also engaged in a comprehensive battle for technological supremacy and self-sufficiency in the critical area of chip manufacturing.

South Korea has made headlines with its substantial commitment to the semiconductor sectorOn May 23, 2023, the South Korean government announced a robust support package amounting to 26 trillion won (approximately $19 billion) aimed at bolstering its semiconductor industry

This initiative focuses on providing massive financial backing, enhancing semiconductor industrial parks, and investing in essential infrastructure and talent developmentThis strategic vision involves an ensemble of stakeholders, including chip manufacturers, raw material suppliers, and design companies, all of which are crucial to integrating the entire supply chain and advancing local capabilities.

The cornerstone of this support program is a financing initiative spearheaded by the Korea Development Bank, designed to mobilize 17 trillion won (about $12.4 billion) for infrastructure investments specifically within the semiconductor sectorAdditionally, tax breaks for chip investments will be extended, ensuring these ambitious plans are adequately funded and executedGiven that semiconductors are a pivotal growth driver in South Korea's economy, this proactive stance underscores the nation's determination to strengthen its technological sovereignty amidst global uncertainties.

In a more ambitious move, earlier this year, South Korea unveiled a grand proposal for establishing the world's largest semiconductor super-cluster

The plan entails an enormous investment of 622 trillion won (about $454 billion) until 2047, with the ambition of constructing 16 new facilities, including research and development centers, across key semiconductor cities in Gyeonggi ProvinceThis super-cluster aims to elevate the nation’s semiconductor production capacity significantly, anticipating a monthly output of up to 7.7 million wafer starts by 2030. This initiative not only marks South Korea's strategic significance in the semiconductor landscape but also serves as a blueprint for other nations to follow in enhancing local production capabilities.

Turning to Europe, a European Union official highlighted recent developments regarding the European Chips Act, which is expected to attract over 100 billion euros (approximately $108 billion) in funding for the continent's semiconductor sector by 2030. This ambitious legislative framework aims to strengthen the EU's position in the global semiconductor market, which currently stands at only 10% of the total market share

The act, which came into effect in September 2023, promises to mobilize a substantial 43 billion euros (around $46.4 billion) in subsidies, with 11 billion euros (about $11.8 billion) earmarked for advanced chip technologies.

Germany, as one of the leading nations in Europe’s semiconductor initiatives, has proposed an investment injection of $20 billion, significantly focused on boosting chip productionNotably, major players like Intel and TSMC are set to benefit substantially from this fundingIntel's ambitious plans to construct a semiconductor manufacturing facility in Magdeburg is anticipated to receive nearly $11 billion in government subsidies to support its development, while TSMC aims to build its first European plant, similarly supported by government funding initiatives.

Meanwhile, Japan, known for its historical prowess in technology and innovation, is once again rallying to reclaim its position in the semiconductor industry

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By offering various incentives totaling approximately 253 billion dollars since developing its semiconductor and digital industry strategy, Japan aims to attract foreign investment and enhance domestic manufacturing capabilitiesTaiwan Semiconductor Manufacturing Company (TSMC) has made noteworthy strides by opening its Kumamoto plant, the first in Japan, with a projected output of 40,000 to 50,000 wafers per month, primarily focusing on 22/28nm technologies.

Japan's proactive measures also include a substantial subsidy of up to $3.9 billion for the domestic company Rapidus, which aims to lead the charge for producing 2nm chips by 2027. Furthermore, with ambitions to develop the NAND flash memory sector, the Ministry of Economy, Trade and Industry has announced $15.46 billion to support advanced NAND chip fabrications, essential for meeting the demands of AI and big data applications

These concerted efforts indicate Japan's unwavering commitment to rejuvenating its semiconductor landscape and fostering sustainable growth in the future.

In the United States, the CHIPS and Science Act unveiled in August 2022 laid out a transformative approach to reinvigorate its domestic semiconductor industry, launching an extensive program with a funding allocation of $52.7 billionThis comprehensive strategy not only aims to bolster research and development but also includes significant tax incentives designed to promote capital expenditure for semiconductor manufacturersReports indicate that since December 2023, the U.Sgovernment has disbursed around $29 billion in subsidies to key players like Samsung, TSMC, and Intel, all while these companies commit roughly $300 billion toward enhancing their manufacturing capabilities in the U.S.

In summary, the race for semiconductor supremacy is intensifying globally, with major economies striking out in a bid to secure their technological futures