How does CHIPS Act affect $KLAC and other semi companies?
CHIPS Act is a $52 billion package which aims to boost / support semiconductor manufacturing in US so as to tackle the chip shortage (unlikely to be the solution in the near term) and strengthen one of the country’s most critical industries. As it can be seen from the below graph the semiconductor manufacturing share of US declined from 37% in 1990 to around 12%.
Source: Semiconductor Industry Association, 2021 State of the U.S. Semiconductor Industry
As we are long $KLAC (KLA Corporation), we run a quick check on the recent earnings/conference calls of Semi companies to get a sense on their view and expected impact from CHIPS Act and to better understand $KLAC position. Relevant quotes are provided on our substack post.
From our analysis, it can be interpreted that CHIPS Act could be beneficial to U.S. companies, with $INTC expected to be the clear beneficiary of this stimulus and obviously the most sensitive to it. It is no coincidence that a month ago $INTC announced a delay for its Ohio chip plant. On the other hand, $KLAC management seems to place the CHIPS Act second in priority, which for us, adds confidence to the people at the wheel.
Despite the opposing views that we identified in our analysis from T.J. Rodgers Former CYPRESS Semiconductor CEO and Sen. Bernie Sanders, we concluded the following, a) CHIPS Act is great for $INTC but it is a red flag to depend on the Government to fight competition and b) $KLAC's Management comments about CHIPS Act is a positive signal about their mindset and the way they run the business.
Disclaimer: Not a financial advice.
Great way to break down the quick thoughts of management across these companies, thanks for sharing this :)