Applied Materials CFO Brice Hill Dismisses US Chipmaking Incentives as Marginally Effective

A top executive at a key chip equipment maker has downplayed the impact of US government incentives. Applied Materials CFO Brice Hill called the subsidies for domestic semiconductor production only marginally important. He made the remarks at a recent financial conference. The comments offer a starkly different view from official government optimism.

The US has committed billions to reshore critical chip manufacturing. This includes the CHIPS and Science Act. Hill’s perspective suggests the financial push may not create new demand.

Subsidies Shift Location But Not Overall Semiconductor Demand

Hill provided a clear rationale for his skepticism. He stated that subsidies do not create new demand for chips. Demand is driven by end products like smartphones and data centers.

The incentives merely change where factories are built. A fab planned for Taiwan might instead be built in Arizona. According to Reuters, this geographic shift matters little for total equipment sales. It is a zero-sum game for tool manufacturers like Applied Materials.

Despite this view, the company continues to invest domestically. Applied Materials plans to spend $200 million in Arizona. This builds on over $400 million in previous US investments.

US Stakes and China Challenges Compound the Landscape

The US government is also taking a more direct investment role. It recently acquired an $8.9 billion stake in Intel. This move converts federal grants into direct equity.

The government also secured a warrant for more Intel shares. This complex deal aims to keep Intel’s foundry business under US control. Similar structures for other chip firms are reportedly under consideration.

Meanwhile, Applied Materials faces headwinds in China. Hill confirmed the company lost market share there due to US export controls. An order backlog worth $400 million is stuck with entities on a US restriction list.

Info at your fingertips

Who is Brice Hill?

Brice Hill is the Chief Financial Officer of Applied Materials. He is a senior executive responsible for the company’s financial strategy and operations.

What is the CHIPS Act?

The CHIPS Act is a US law providing billions in subsidies and tax credits. Its goal is to boost domestic semiconductor research and manufacturing.

How much is Applied Materials investing in the US?

The company is investing $200 million in new Arizona facilities. This is in addition to over $400 million in prior US manufacturing investments.

What was the impact of US export controls on Applied Materials?

Applied Materials cited a $400 million order backlog from customers on the US Entity List. This resulted in a direct loss of market share in China for the company.

What is the US government’s stake in Intel?

The government took a stake worth nearly $9 billion by converting grants into equity. It also secured a warrant to purchase more shares if Intel sells a majority of its foundry business.

Sources: Reuters, Associated Press, The Wall Street Journal.