President Joe Biden will sign the CHIPS and Science Act into law next week. Along with more than $200 billion to boost federal spending on research and education, the bill provides $52 billion in subsidies and tax incentives to U.S. and foreign chipmakers to expand semiconductor manufacturing within U.S. borders.
The portion of the legislation that applies to chip manufacturing is based on two fears: first, the economic threat of Chinese market power should China somehow gain control of Taiwan, and second, the threat to U.S. national security if China becomes the dominant power in chip design and manufacturing.
China and Taiwan currently combine to snag about 45% of chipmaking revenue, with China accounting for 24% and Taiwan 21%. Whether such a combination ever comes to pass is arguable, and how the combination would behave is essentially anyone’s guess.
The legislation makes clear that companies building or expanding operations in China are not eligible for subsidies. The legislation does not address allegations of intellectual property theft by the Chinese, it does not prohibit joint ventures with Chinese companies, and it does not establish new limits on U.S. exports to China or on Chinese investment in the United States.
Here are five companies that operate or plan to build manufacturing plants in the United States and stand to benefit from the CHIPS and Science Act.
New York-based GlobalFoundries Inc. (NASDAQ: GFS) is the fourth-largest contract chipmaker in the world, with a market cap of around $28.3 billion. The company manufactures a wide range of chips at 10 fabs located in Germany, Singapore (five) and the United States (four). The company announced last week that it has agreed with STMicroelectronics to build a new fab in France. GlobalFoundries already had plans to expand its fabs in New York and Vermont and can add the new federal dollars to the expansion work.
Since mid-July, the company’s shares have risen by more than 16%. GlobalFoundries does not pay a dividend.
Texas Instruments Inc. (NASDAQ: TXN) designs and manufactures its own chips. The company announced plans last November to build up to four additional fabs in Texas. TI, as it is known, has 15 manufacturing sites worldwide, including 11 wafer fabs. The company’s market cap is about $168.3 billion.
Since releasing a solid earnings report last week, the shares have added more than 15%. TI pays an annual dividend of $4.60, yielding 2.6%.
Intel Corp. (NASDAQ: INTC) designs and manufactures its own chips and has a market cap of around $146.9 billion. The company recently agreed to be a third-party supplier for MediaTek, the world’s largest designer of smartphone chips. Intel stole the business from Taiwan Semiconductor (TSMC), and MediaTek joins Amazon and Qualcomm as customers of Intel’s Foundry Services business. MediaTek has been one of TSMC’s five largest customers.
Since reporting quarterly results in late July, the company’s shares have dropped by 9.6%. The good news is that Intel’s $1.46 annual dividend generates a yield of 4.14%.
Micron Technology Inc. (NASDAQ: MU) is the world’s leading maker of memory chips and storage products, but only about 2% of global memory supply is manufactured in the United States. The company’s market cap is about $71 billion. Micron operates fabs in the United States, Singapore, Taiwan, China and Japan. Passage of the CHIPS Act reportedly has the company thinking again about building a new fab in its home country.
Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) has a market cap of around $455 billion and one wafer technology plant in Camas, Washington. TSMC recently completed construction work on a $12 billion fab in Arizona that is expected to begin operations in 2024. The company manufactures chips for Apple, Qualcomm, Nvidia, AMD and even Intel.
Since reporting quarterly results a month ago, TSMC’s stock has added almost 16.5% to its share price. The company plays a dividend of $1.94 for a yield of 2.25%.
One giant chip maker, Samsung, does not trade on a U.S. exchange or even over the counter. With a market cap of around $317 billion, the Korean company has operations in South Korea, China and the United States. Before the CHIPS Act was even passed through Congress, the company said it plans to build 11 fabs in the United States at a cost of up to $191 billion. The first plant would come online in 2034.
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