US Chip Manufacturing Poised for a Threefold Increase Within the Decade

The push for ramping up chip manufacturing in the United States has gained solid momentum thanks to strategic legislative moves like the CHIPS Act. This act, designed to bolster the semiconductor industry within the nation, incentivizes expanding manufacturing facilities on home soil, thus mitigating reliance on foreign production, particularly from Taiwan—a country facing geopolitical tensions with China.

In a bold departure from the past decade where the growth in US production capacity was a mere 11%, forecasts by the Semiconductor Industry Association (SIA) are much more optimistic, anticipating a tripling of domestic chip production by 2032. Since the introduction of the CHIPS Act in 2020, the SIA has noted 83 initiatives, heavy investments amounting to $447 billion across 25 states, and the creation of over 50,000 jobs within the sector.

Significant advancements are underway, particularly in the manufacturing of advanced logic chips, which are crucial for AI technologies. From having negligible capacity in this segment, the US is projected to upsurge to 28% of the global capacity for advanced logic chips by 2032, as per SIA's projections.

Intel

Intel is set to be a major beneficiary through this industrial expansion. Having received an $8.5 billion grant and $11 billion in loans for projects in various states, Intel's total investment in facilities including new builds and upgrades totals about $100 billion. In tackling past setbacks and modernizing operations, Intel aims to regain its industry standing and become an AI chip powerhouse. Although currently grappling with financial challenges, including significant debt and a high forward price-to-earnings (P/E) ratio, Intel is backed by the federal government and is focused on execution to capture the burgeoning market opportunity.

Taiwan Semiconductor

Taiwan Semiconductor Manufacturing Company (TSMC) dominates the global foundry market share with over 60%. It's diversifying its operations with a strategic $65 billion investment into three new fabrication plants in Arizona, partly fueled by the CHIPS act. TSMC's robust financial performance and solid operating margins set its stocks as a promising long-term investment in semiconductors, AI, and technology growth.

Vertiv Holdings

Companies like Vertiv Holdings are positioned to capitalize on the chip manufacturing boom indirectly. With AI applications' surging demand for data centers, and in turn, data centers’ need for high-performance chips from Intel and TSMC, Vertiv's provision of power and cooling systems, infrastructure, and management software makes it a critical player. Vertiv's substantial growth in orders and an optimistic revenue outlook underline its potential amidst the industry's expansion.

chip, manufacturing, AI