Fremont’s Economy Stands to Greatly Benefit from Passing of CHIPS Act
Chip-making is currently a much talked about topic, and no, we don’t mean brands like Cheetos or Frito-Lay.
Colloquially known as chips, semiconductors are an essential component of modern life. Powering everything from household appliances to super computers, chips are behind major advances in countless industries, including computing, healthcare, transportation, clean energy, and more.
In 1990, the United States had nearly 40% of the global market share of semiconductor manufacturing, but today that total is just over 10%, according to VentureBeat. For decades, the decline in U.S. semiconductor manufacturing wasn’t a pressing issue — after all, U.S.-based companies boast a stellar 54% of global chip sales, including 68% of the global fabless market where chip companies own their designs but outsource all their manufacturing to third parties.
But the arrival of the COVID-19 pandemic, during which the U.S. experienced a severe shortage of semiconductors, put U.S. policymakers on alert. The global chip shortage brought about idle plants, bottlenecked supply chains, and spurred inflation, highlighting the risks of the U.S.’ reliance on a supply chain that was overconcentrated in Asia. To U.S. policymakers, this catalyzed the need to manufacture domestically and re-shore some of this critical supply chain.
With sights to bring semiconductor manufacturing back home, the Biden-Harris Administration signed the CHIPS and Science Act of 2022 (CHIPS Act) in August, an investment of $52.7 billion aimed at fulfilling semiconductor research, development, manufacturing, and workforce development as well as reducing oversea disruptions, increasing competitiveness, and creating good paying and highly skilled jobs, preventing manufacturing sabotage, and securing additional private investment.
Of the investment, $39 billion is targeted for manufacturing incentives, including $2 billion for the legacy chips used in automobiles and defense applications; $13.2 billion for R&D and workforce development; and $500 million to provide for international information communications technology security and semiconductor supply chain activities. The bill also provides a 25% investment tax credit for capital expenses such as manufacturing semiconductors and related equipment.
And we see this bill as a major boost to Fremont.
You see, Fremont has a long-standing history in the chips industry. In fact, we’re currently home to some of the most well-known semiconductor equipment manufacturers as well as a collection of semiconductor foundries and wafer fabs:
- Manufacturers of semiconductor equipment: Lam Research, Applied Materials, Mattson Design, Genmark Automation, Brooks Automation, Ichor Systems, Incal Systems, Owens Design, Semicat, and Essai, among others
- Semiconductor foundries and wafer fabs: Western Digital, Seagate, Raxium, Rigetti Quantum Computing, Golden Altos, BluGlass, Coherent, and SLD Laser
Engineering the latest manufacturing equipment requires running it in a 24/7 production environment, which is possible for Fremont-based companies like Lam Research and Applied Materials.
As such, while states like Arizona, New York, Texas, and Ohio are seen as big winners from the CHIPS Act because of their new fab locations, much semiconductor and equipment manufacturing will still be done in conjunction with a top engineering workforce — giving Fremont the upper hand.
In fact, the ripple effects of the CHIPS Act can already be seen through various developments in Fremont:
- Fremont-based Lam Research, a leader in semiconductor fabrication equipment with approximately 20 locations and 3,000 employees in the City, recently received $18 million in incentive funding from the Governor’s Office of Business and Economic Development (GO-BIZ) to support its $750 million investment to expand its Fremont manufacturing and R&D operations. The grant can also complement more significant CHIPS Act funding.
- Applied Materials, who competes in several markets with Lam Research, is building a 314,000-square-foot wafer processing lab in Fremont. The project received $30 million in funding from GO-BIZ, also supplemental to potential CHIPS funding, and the company remains committed to investing nearly $2 billion locally to develop next-generation semiconductor manufacturing equipment.
As one of the few remaining cities in Silicon Valley that still has strong ties to the region’s silicon (or shall we say semiconductor) legacy, Fremont stands to benefit disproportionately from the CHIPS Act and the reshoring of critical supply chains.
While out-of-state fabs will grab national headlines, Fremont will quietly continue to play a critical role in maintaining the balance, and our contributions in advancing state and national industry priorities are critical in establishing a thriving ecosystem for American semiconductor manufacturing.