munchen The United States’ race to catch up in semiconductor production is gaining momentum: Micron will set up factories in the United States for $40 billion by the end of the decade, the US manufacturer announced Tuesday. The state-of-the-art memory chip factories will be built in several phases.
The group is relying on subsidies from the biggest aid package the US chip industry has received so far. US President Joe Biden on Tuesday paved the way for the so-called “Chips and Science Act”, which aims to bring in $52 billion to the industry. In addition, manufacturers can expect a tax break if they expand into the United States.
It’s not the only investment Biden can claim as a success. US contract manufacturer GlobalFoundries on Monday announced that it is expanding its plant in the US state of New York. It’s part of a deal with California-based mobile phone chip specialist Qualcomm, which wants to produce even more at GlobalFoundries than ever before.
America takes action, Europe argues
America is one step ahead of Europe. The EU has been discussing its own “chips act” for months, but a decision is not expected before the end of the year. With the legislation, the EU Commission seeks to enable state support of a good 40 billion euros.
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Micron CEO Sanjay Mehrotra said the US Chips Act is “an important step in consolidating America’s leadership position in the semiconductor industry.” The legislation enables his company to increase domestic memory chip production from less than two percent to ten percent of the world market over the next ten years. This would make the United States “the home of the most advanced memory chip manufacturing and research and development in the world.”
Micron doesn’t spend more money than it plans. The group announced last year that it would spend $150 billion on plants and research over a decade. But the money is going to America instead of going to Asia. To date, Micron has mainly produced in Japan, Taiwan and Singapore. According to Micron, the new building will create 40,000 jobs in the United States — 5,000 of them directly at the factory.
Micron doesn’t want plants in Europe
The Micron boss recently ruled out investments in European plants in talks with Handelsblatt. Additional factories will be built in Asia and the Americas, where the group is already represented. Because it is important to use economies of scale to produce as cost-efficiently as possible.
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Given the supply constraints of the past two years, both the US and Europe have resolved to become less dependent on Asia. So far, USA is doing better. The world’s biggest chip makers, Samsung and Intel, are building advanced factories in the country. Taiwan’s leading global contract manufacturer TSMC is also investing there.
The largest investment in Europe is planned for two Intel plants in Magdeburg. They should be worth 17 billion euros. In addition, GlobalFoundries and STMicroelectronics are planning a joint factory in France. Meanwhile, TSMC is reluctant to make a commitment. And Munich chip maker Infineon decided to manufacture in Malaysia in the spring.
When it comes to memory chips, it seems that Europe will depend on foreign suppliers in the future. Micron is the number three manufacturer. South Korea’s Samsung and SK Hynix are the leaders in the business. In 2009, Kimonda, the last German provider, went bankrupt.
Bad prospects for Micron
“We are the only manufacturer of memory and data storage in the Western Hemisphere,” Mehrotra told Handelsblatt. In the past, managers have repeatedly requested subsidies from the US government to be able to invest in the US. Because the cost in America is up to 45 percent higher than in Asia.
Now the head of the company receives a grant, but laying the foundation stone may take time. Because business is not doing well. The group may miss the low end of its own forecast in the current quarter, Micron announced on Tuesday. The fourth quarter of the financial year runs till the end of August. Sales and margins will drop significantly in the next quarter.
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