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Chips bill aims to reduce reliance on China for semiconductors

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Yahoo Finance's Dan Howley breaks down the path ahead for U.S. semiconductor funding and the implications for the tech industry.

Video Transcript

AKIKO FUJITA: On the CHIPS Act, the legislation sets out to provide roughly $52 in subsidies to chip makers who will manufacture in the US to reduce reliance on China. Here's what Senator Mark Kelly of Arizona had to say about the bill.

MARK KELLY: This is so important for our national security. Semiconductor chips go in all of our weapons systems. But everything from your cell phone to your vacuum cleaner, the price of semiconductors have gone up, and it affects the costs for so many things for Americans. So this is going to bring down costs, secure our national security. And we're not going to have to worry so much about the actions of an adversary, meaning China, when it comes to our supply of semiconductor chips.

AKIKO FUJITA: And Senator Kelly's home state of Arizona obviously a huge beneficiary, with investments coming in from Intel as well as TSMC. Dan Howley's been following this story for us. And Dan, at the end of the day, this comes down to reducing reliance on China, but this is not a quick fix. Even if the investments come through right now, we're talking about long term until we start to see that US market share of chip manufacturing increase in a big way.

DAN HOWLEY: Yeah, this is years and years and years out. If the Senate does vote and approve the CHIPS Act for that $52 billion, it also still has to then go to the companies which will be competing for that. That includes everything from Intel to IBM to TSMC. They all say that they plan to build their own manufacturing facilities in the US. They're going to be competing for portions of that funding.

So it'll take time for that. And then once they do get that funding, it will take a large amount of time for them to actually get those facilities up and running. And this isn't like building an Amazon warehouse. This is really intricate stuff that they have to put together inside of these facilities.

We're talking ground that is, more or less, earthquake proof. Any kind of motion in these kinds of manufacturing hubs can throw off an entire chip-- kind of bulk set of chips that are being made. And then that could damage the kind of manufacturing capabilities they have for weeks.

It takes several, several weeks, by the way, to actually build chips. This isn't a stamp it out and throw it out kind of thing. It takes time for these chips to be built themselves. So we're talking years and years down the line until this actually starts to show any difference as far as the US's own capabilities and own share of global chip production.

We're far behind the likes of China and Taiwan at this point. TSMC is the largest producer in the world, the Taiwan Semiconductor. They obviously, I said, are building, or would like to build, a place here in the US.

But it's not just $52 billion for chip production. It's also $100 billion that would go to the National Science Foundation, and that would then help universities and different research organizations go ahead and patent technologies that they develop on their own time. So this would take things that they're already researching and turn them into practical goods that we could then see manufactured down the line.

AKIKO FUJITA: Well, and Dan, can you speak to that, as well, because going into the debate in the Senate, there were certainly a lot of critics who came out and said, this is kind of like picking big winners and losers. And the big winners are going to be those who are, in fact, manufacturing chips. It's not names like Nvidia who are chip designers, chip makers. They don't-- they're fab-less, right. I mean, how much of that funding that you talked about, the additional funding that is now in the legislation, is going to help some of the other names that we talk about a lot?

DAN HOWLEY: Yeah, as you said, this has been a huge kind of center of debate on are we going to be basically subsidizing Intel, to a degree, right, because they are the US's own largest manufacturer, and so they would benefit massively from this? Obviously, they have plans for that large facility out in Ohio. They kind of want to make a basically mega center for manufacturing. And so that was part of the debate was will Nvidia or AMD, which rely on other companies to manufacture their processors or graphics cards overseas, will they then not see any kind of benefit? And so they should now.

I think the other issue then, though, is how far along will we see those companies benefit next to Intel, which will have its own fab? And now we saw Intel today announce that they're actually going to be working with outside companies to be the fab for them. So MediaTek, a company that produces processors for smartphones, they're going to be working with Intel. Intel will be producing their chips.

So you know, Intel had said a few months back or so that they wanted to become a manufacturer not just for their own chips, but for third parties, and we're seeing that happen now. So could they work with Nvidia? There's been discussion of that previously. You know, we'll have to see. But if they do end up being a larger manufacturer, you can imagine that they would get an even larger slice of that $52 billion.

BRIAN CHEUNG: All right. Yahoo Finance's Dan Howley, Thanks so much for the breakdown there.