Chipmakers Seek More Than $70 Billion in Federal Subsidies

Chipmakers Seek More Than $70 Billion in Federal Subsidies

Companies that produce the most advanced semiconductors have requested more than $70 billion in federal subsidies, roughly twice the amount of funding that is available, Commerce Secretary Gina Raimondo said on Monday.

In an effort to revitalize domestic manufacturing of semiconductors, the federal government is distributing $39 billion in subsidies as an incentive for companies to produce more of the tiny chips that power everything from smartphones to cars and fighter jets. The funding is meant to strengthen the U.S. supply chain and reduce the country’s reliance on foreign sources of chips. Currently, just 12 percent of chips are made in the United States.

The grants have so far proven popular among companies. In a speech on Monday at the Center for Strategic and International Studies, Ms. Raimondo said her department had received more than 600 statements of interest.

Federal officials have had to be “tough with companies,” Ms. Raimondo said, adding that she has pushed company executives to “do more for less.” She added that the level of interest also meant that officials would “have to say no to excellent companies.”

Ms. Raimondo emphasized the need to bolster domestic production of the most technologically advanced chips, which are made largely in Taiwan.

Federal officials plan to award about $28 billion of the grants to firms that make such leading-edge chips, Ms. Raimondo said. Those semiconductors — which are produced by companies including the Taiwan Semiconductor Manufacturing Company, Intel and Samsung — are used in artificial intelligence, smartphones, supercomputers and the most sensitive military hardware.

“It’s very hard, but it’s our job to stretch the money as far as possible,” Ms. Raimondo said in an interview on Monday.

She said the new federal investments would put the United States on track to produce roughly 20 percent of the world’s most advanced types of logic chips by the end of the decade — currently, it produces zero, Ms. Raimondo said.

While companies might receive only a portion of the amount they originally requested, Ms. Raimondo said she was “very confident” that companies would still “do what they said they would do” with the money, in part because the government will hand out funding as certain milestones are met.

Ms. Raimondo emphasized that manufacturers could also benefit from other types of financial support besides the federal grants. The Commerce Department is able to support up to $75 billion in loans and loan guarantees to advance projects. Firms can also receive tax credits reimbursing them for 25 percent of project construction.

“It is a significant amount of money that each company will be receiving,” she said.

Interest in the program has been so robust that federal officials, who originally aimed to help create at least two new large-scale manufacturing clusters to produce leading-edge logic chips, now expect to exceed that goal, Ms. Raimondo said.

During the event, Ms. Raimondo said the need for more chip production in the United States was heightened by the rise of artificial intelligence.

“A.I. will be the defining technology of our generation,” she said. “You can’t lead in A.I. if you don’t lead in making leading-edge chips. And so our work in implementing the CHIPS Act just got a whole lot more important.”

Federal officials have so far made three grant awards under the new program to companies that produce legacy chips, which are created with older production processes but continue to be used in a variety of products like cars and dishwashers. This month, the Biden administration awarded $1.5 billion to the New York chipmaker GlobalFoundries, which officials said would help secure a stable supply of chips for key auto suppliers and manufacturers.

Projects that will be completed by 2030 are receiving priority for awards, Ms. Raimondo said.

Private companies have announced $200 billion in semiconductor manufacturing investments since President Biden signed the CHIPS Act in 2022 and before federal officials have “put a single dollar out,” Ms. Raimondo said.

Although there has been an uptick in investments, some chipmakers have run into obstacles while trying to expand their manufacturing footprint in the United States. TSMC, Intel, Microchip Technology and others have adjusted their production schedules as a sales slump in many types of chips has put pressure on the firms to manage their spending on new projects.

While the bulk of the money is set aside to cover the construction of new and expanded manufacturing facilities, the CHIPS Act also includes $11 billion to support research into new chip technologies.

Biden administration officials are already facing questions about the potential for another round of subsidies for chip manufacturers. Ms. Raimondo said officials could accomplish the goals of the program with the funding that was already available, but more money may be needed to further strengthen domestic semiconductor manufacturing.

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Kyle C. Garrison

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