The Biden administration announced a plan to allocate up to$1.6 billion to advance technology for packaging computer chips, a crucial step to maintain the US edge over China in fields like AI. The funding, authorised under the 2022 CHIPS Act, aims to innovate faster data transfer methods between chips and manage their heat generation. Laurie Locascio, an under-secretary in the Commerce Department, announced the initiative at an industry conference, signalling companies to apply for grants up to$150 million each.

The CHIPS Act, which received bipartisan support, allocates$52 billion to bolster domestic chip production, mainly focusing on factories that transform silicon wafers into chips. The US currently contributes about 10% to this industry, with much of the activity outsourced to Asia. Packaging, an essential process that attaches finished chips to substrates, is primarily done in Taiwan, Malaysia, South Korea, the Philippines, Vietnam, and China. The US handles only about 3% of advanced chip packaging.

Why does it matter?

Federal funding will target the next stages of chip production, ensuring chips made in the US can be sent to somewhere other than Asia for packaging to reduce dependence on foreign companies. The shift aligns with the industry's push for perfecting computing performance by combining multiple chips. Companies like Nvidia and Intel are already making strides in this area, with federal support helping to keep US firms at the forefront of technology. The new grants are part of a$3 billion initiative under the National Advanced Packaging Manufacturing Program, aiming to foster innovation and self-sufficiency in the semiconductor sector.