In August 2022, the CHIPs Act injected over $35 billion in investments for the semiconductor industry. The total federal subsidies is $52.7 billion. Investors have many ways to invest in companies that benefit from the Act.
The government provided Microchip Technology (MCHP) with $162 million in January. This funded the company’s plant improvements. MCHP stock did not benefit by much. It traded at around $90 and is down by around $10 since then. The assistance accounts for around 10% of the cost of a plant expansion. Although this is small, Microchip will need to post stronger gross profits and better revenue to attract investors.
In April, the CHIPs Act rewarded Micron Technology (MU) with over $6 billion in direct funding. Micron is constructing two fabs. Once they open, Micron will close down its related manufacturing activities in China (“onshoring”). In addition, it will help the company develop a high-volume manufacturing fab in Idaho.
Texas Instruments (TXN) is another recipient of the Act worth up to $1.6 billion. The firm is building three 300mm wafer fabs in Texas and Utah.
Your Takeaway
Corporations offset high capital expenditure costs with government assistance. When they are online, chip companies will generate revenue growth and higher operating margins.