There are some causes for the drop in stock markets around the world, but in the U.S. stock market, two causes stand out: first, the problems of companies that manufacture integrated circuit/semiconductor chips, and second, the myth that America’s stock market “reflects reality.”
To reportedly improve the capacity of American microchip makers to manufacture chips, the U.S. Congress passed the CHIPS and Science Act on Aug. 9, that President Biden signed into law. The act includes $39 billion in subsidies for chip manufacturing on U.S. soil (even if the manufacturing plant is built by a foreign company) along with 25% investment tax credits for costs of manufacturing equipment, and $13 billion for semiconductor research and workforce training, for a grand total of $52.7 billion.
The difficulty has been the manufacturing of the semiconductor/microchip factories. Taiwan Semiconductor Manufacturing Company, which produces about 50% of the world’s chips, is supposed to build two factories in the state of Arizona, but for reasons that EIR has discussed elsewhere, one factory won’t be completed until 2025, and the second plant, which was to go into operation in 2026, won’t be producing until 2027 or 2028. Aside from the important issue of the skill of the American workforce to build the plant, TSMC is partly holding out to see how much in subsidies it will get from the U.S. Department of Commerce. Another company, Microchip Technology, based in Arizona, was planning to upgrade its factories in Oregon and Colorado, which are set to receive CHIPS Act grants, but as the Wall Street Journal reported in early February, Microchip Technology’s ordering of machines to build new chip manufacturing plants will have to wait until business conditions improve. And so on.
As well, Intel, which makes computer chips, announced a 15% cut in its workforce of 119,000.
Companies that produce the smallest microchips, of the 2-nanometer variety, put 50 billion transistors, each the size of roughly five atoms, on a space no bigger than your fingernail. These chips can be used in computers, defense applications, smart phones, etc.
