Applied Materials, which makes the high-end gear used to build nearly every modern processor, has thrown cold water on the idea that these incentives will do much to shift global manufacturing patterns.
Speaking during a recent conference call, Applied Materials CFO Brice Hill said: "At the highest level, demand is driven by PCs, data centers, smartphones, and all that those incentives do is have a customer. Instead of building in Taiwan, they're going to build in the US. So the view was it mattered a little bit at the margin, but it didn't matter in total.”
That’s a long-winded way of saying Washington's multi-billion dollar charm offensive might not move the needle.
This scepticism is particularly noteworthy given Applied Materials' critical role in the supply chain. About 80 per cent of the components in a typical iPhone are processed using the company’s tools.
Despite its CFO’s views, Applied Materials is still throwing some money at the US market. It plans to plough $200 million into Arizona on top of the $400 million it has already spent domestically to ramp up manufacturing.
The Trump administration dangled a carrot and a stick. On the carrot side it recently converted promised federal grants into an $8.9 billion equity stake in troubled Chipzilla. On the stick side it is threatening tariffs on chipmakers that do not set up shop on US soil.
The government has also wangled a five-year warrant giving it the right to buy an extra five per cent of Intel stock at $20 a share, assuming the company tries to flog more than 49 per cent of its foundry division.
Apparently, that is not the end of it either. Word is the administration is eyeing similar deals with other major chip players.
Meanwhile, Applied Materials is feeling the sting of US-China tensions. Hill admitted the company has about $400 million worth of kit stuck in limbo because the intended buyers are on the US Department of Commerce’s Entities List.
Still, the company is not hurting. It reported a tidy eight per cent jump in net revenue for fiscal Q3, bringing in $7.3 billion, proof perhaps that business is booming no matter where the fabs get built.