Computer Chip

Why new money is chasing older chips

Taiwan’s TSMC makes most of the world’s most advanced semiconrductors, but most U.S. federal CHIPS grant money has focused on older technology. The Biden administration kicked off the week by revealing its first billion-dollar award from the CHIPS and Science Act’s incentives, and the beneficiary was … a little bit old-school.

The 2022 law, one of America’s biggest pieces of industrial policy in decades, was wreathed in rhetoric about cutting-edge technology, promising to develop the “workforce of the future” and to help America “win the race for the 21st century.”

So it might come as a bit of a surprise to see the first three preliminary awards from its $39 billion in manufacturing grants share one common thread: They all support “legacy chips,” a term for microchips created with older production processes.

The first grant of $35 million went to a defense contractor for quadrupling its chipmaking for satellites and fighter jets. Then an Arizona company got $162 million to triple the output of fabs that supply products from consumer electronics to weapons systems; and on Monday came the big one: a whopping proposed $1.5 billion for GlobalFoundries, an upstate New York company that decided years ago it would specialize in established manufacturing technologies rather than chasing the next-generation’s processes.

What about the world’s super-advanced chips? Taiwan manufacturer TSMC makes more than 90 percent of them, with ultra-precise Dutch equipment. So far, none of the federal CHIPS grant money has gone toward bringing that kind of production to the U.S.

TSMC and other leading-edge chipmakers including Micron and Samsung — whose products are used for emerging technologies like AI and quantum computing — are still waiting for the administration to unveil awards for their American expansion plans.

From the outset of CHIPS, officials have repeated a key statistic: while America invented the semiconductor, it now produces less than 10 percent of the global supply, and none of the most advanced chips. And it’s clear why the U.S. would want that to change. Nuclear simulations, hypersonic missiles and unicorn tech startups all demand tremendous computing power that only the most cutting-edge chips can meet.

“If I were to pick one, I would want to own the advanced chips,” Rakesh Kumar, a computer engineering professor at the University of Illinois, told DFD. “The West must have ownership of the most advanced chips because that already dictates and will certainly dictate the speed of a society’s advancement.”

So, why would a law like CHIPS aimed at boosting American tech superiority launch with support for legacy chips? One reason is straightforward: CHIPS is also a jobs program, and many of the thousands of jobs promised across the U.S. are in plants manufacturing the older technology.

But Kumar and others, including leaders of the House China Committee, have made the case that legacy chips actually matter quite a lot to securing the future as well. Part of this is because they’re woven into so many technologies. In fact, these older semiconductors were mainly the ones behind the pandemic’s global chip shortage that wreaked havoc on supply chains and pushed Congress to pass the CHIPS Act in the first place.

U.S. firms like GlobalFoundries still make some of these chips, but not enough to keep up with domestic manufacturers of other high-tech goods that largely rely on the less-expensive semiconductors: cars, medical devices, consumer electronics, home appliances, and even most military equipment.

“A server chip today costs as much as a car,” said Kumar. “We clearly can’t use that technology in a car because it will shoot up the price of my car, so it’s much better for me to use that 65 nanometer chip because then it will cost a cent or 50 cents or $1.”

There’s also a new threat coming from China, where generous state subsidies have allowed chipmakers to aggressively ramp up production to the point of oversupply, warns Chris Miller, author of the book “Chip War.” After U.S.-led restrictions on advanced chips and the equipment to print them, Commerce Secretary Gina Raimondo and others predict a glut of Chinese legacy chips that could undercut U.S. chipmakers.

In the U.S., with its higher labor costs and stricter regulations, the government will inevitably have to throw money at companies if they want more American-made legacy chips, said Kumar. “It’s like selling knickknacks,” he explained. The margins are slim (these chips cost 50 cents apiece on average), so only firms making a massive volume can turn a profit. It’s often easier to shut down older fabs than replace aging equipment.

I asked Caitlin Legacki, a former senior advisor to Raimondo, what’s with the early trend toward legacy chipmaking. (Of course, a sample size of three isn’t the whole story — Raimondo expects about a dozen funding awards this year, in total.) The pool of applicants likely reflects that the U.S. has more legacy chip facilities that can easily be converted or upgraded, Legacki said, though “the goal was always to make a generational investment so the U.S. can compete when it comes to making the most advanced chips.”

It’s also just harder to offer grants for more complex technologies. Before the CHIPS Program Office can even greenlight a company for a preliminary grant, they have to get through negotiations — and those with major applicants have been “intense,” a senior administration official recently told reporters. Micron, TSMC, and Samsung are among those.

Legacki said the market for legacy chips is “more stable and predictable” in an industry known for its volatility. That ends up shaping which announcements the administration can lean on. “The technological requirements for leading edge are so precise/specific for customer needs, that I think it will take a bit longer to kick the tires on those financials,” Legacki said.

Future-proofing your texts

Quantum computing might not be fully here yet — but as a marketing pitch, it’s already very much with us. Apple is touting its latest iMessage security upgrade as quantum-hacker proof. The company shared today that the upcoming iOS 17.4 will bring the most significant security upgrade in iMessage history — a cryptographic protocol that improves defenses against future threats, including “highly sophisticated” attacks that may arrive in the era of quantum computing.

If you’re wondering how to build a defense against yet-to-be built future weapons — well, Apple has thousands of words explaining it. But the heart of it is to prevent the use of a technique called “Harvest Now, Decrypt Later,” in which hackers would collect today’s encrypted messages — that currently appear as indecipherable gibberish — and then crack the code in the future with quantum computers.

Apple’s solution is a window into how engineers try to pre-solve a problem they don’t truly face yet — as well as how a company promising cryptographic security tackles a technology that could, someday, wipe it out.

Lifeline for Europe’s telecoms

Europe’s telecoms industry, long struggling to expand, has finally caught the European Commission’s attention. The Commission laid out its ideas to enhance digital infrastructure in a new white paper that’s paving the way for potential legislation, fewer rules, greater investment, and more deal-making, POLITICO Europe’s Mathieu Pollet reported this morning.

“The current financial situation of the EU electronic communications sector raises concerns for its capacity to find funding for the substantial investments that are needed to catch up with the technological shift,” the Commission wrote. Telecom operators have been lamenting that the market’s fragmentation and stringent competition rules keep them from profiting enough to invest in networks. Despite fiber linking 56 percent of households and 5G reaching 81 percent of the population, concerns persist over the quality of 5G performance and inadequate rural coverage.

Source: Politico
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