- President Biden's $2T American Jobs Plan unveiled today asks Congress to approve a $50B investment in domestic semiconductor manufacturing and research.
- Last September, a study from lobbying group Semiconductor Industry Association and Boston Consulting Group said that the United States needed to spend $50B on semi manufacturing to increase its global market share above the current 12%. SIA said federal incentives of that level could fund 19 new chip fabs and create 70,000 high-paying jobs over the next decade.
- Biden's request comes during a global semiconductor shortage that is hitting the automotive industry the hardest. Last month, Biden signed an executive order for a 100-day review of critical product supply chains in the country, which included semiconductors.
- Last week, Intel (INTC +0.8%) announced a $20B investment in two domestic chip fabs in Arizona in a push to become a global foundry player.
- Foundry giant TSMC (TSM +2.5%) is building its own chip fab in Arizona, which is expected to come online in 2024. But at a recent event, TSMC chairman Mark Liu said it would be "economically unrealistic" for the U.S. and Europe to expand fab capacity to meet their own supply needs.
- Liu notes that the current shortage is unusual and existing foundry capacity can more than cover demand in normal times. U.S. and Europe making foundry pushes would create large amounts of "non-profitable capacity," says Liu.
- The Philadelphia Semiconductor Index is currently up 2.8% compared to the 1.7% gain for the broader tech sector (NYSEARCA:XLK). Leading the components are semiconductor equipment names and auto chip suppliers. Top gainers include Applied Materials (AMAT +6.1%), Cree (CREE +5.5%), Teradyne (TER +5.0%), Lattice Semiconductor (LSCC +4.6%), ON Semiconductor (ON +4.6%), KLA (KLAC +4.4%), and Lam Research (LRCX +4.1%).
- Post updated to remove incorrect Lam earnings date.
- Related: Earlier today, research firm IHS Markit said the prolonged chip shortage could cost automakers 1.3M production units during the second quarter.