Tech Companies Protest Sector Partiality Under US Chips Act: Bloomberg

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  • Groups representing some of the global technology companies wrote a warning letter to the congressional leaders of both parties and White House officials, against sector preference under the Chips for America Act and objecting to automakers’ plea for production ramp-up of basic chips, Bloomberg reports.
  • The technology companies represented included Advanced Micro Devices Inc AMDIntel Corp INTCQualcomm Inc QCOMTexas Instruments Inc TXNTaiwan Semiconductor Manufacturing Co Ltd TSMSamsung Electronics Co Ltd SSNLFAlphabet Inc’s GOOG (NASDAQ; GOOGL) Google, Twitter Inc TWTRAT&T Inc TVerizon Communications Inc VZToyota Motor Corp TM and Raytheon Technologies Corp RTX.
  • The letter was signed by ten groups, including the Alliance for Digital Innovation, CTIA, the Information Technology Industry Council, the Security Industry Association, the Software and Information Industry Association, U.S. Telecom, and the Associated General Contractors of America.
  • Chip manufacturers’ preference for high margin and sophisticated chip requirement for smartphones and other consumer electronic devices, further accelerated by pandemic-induced remote activities, led to a severe crisis for the low margin auto business leading to production cutdowns. As a result, the supply chains for the high-end chips were less affected by the crisis than the vehicle companies.
  • “The market-distorting effect of ‘setting aside’ a portion of new capacity for legacy chips for any single, private sector would squeeze the remaining chip-consuming industries into the remaining new manufacturing capacity, artificially constraining supply,” the letter reads.
  • The U.S. automakers have sought reservation for vehicle-grade chips to tackle a possible 1.3 million production shortfall.
  • The technology groups backed President Joe Biden’s request for a $50 billion allotment to chip financing out of the $2.3 trillion infrastructure spending. They also sought the upholding of the chip manufacturers’ entitlement to grants and credits.
  • Recently, Intel announced a $20 billion investment for two Arizona chip-making plants, TSM had allocated $12 billion for an Arizona chip plant, and Samsung earmarked around $10 billion for a Texas chip plant.
  • Price action: INTC shares traded higher by 0.23% at $65.37 in the premarket session on the last check Wednesday.
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