The Biden administration is unveiling new details of how it will seek to get the most bang for the billions it has at its disposal to spur the semiconductor sector in the U.S.
The centerpiece of the plans which, Commerce Secretary Gina Raimondo will unveil during a speech Thursday, is the creation of at least two semiconductor manufacturing and research hubs in the U.S. These sites—she hopes—will create new U.S. manufacturing and research capabilities and supply chains that will generate momentum for the sector even after the government money runs out.
According to advance excerpts of the remarks, Raimondo will compare the effort to major moments in U.S. history and say ”the CHIPS and Science Act presents us with an opportunity to make investments that are similarly consequential for our nation’s future.”
Raimondo will speak at Georgetown University in the latest phase of her heady task of handing out about $50 billion in government funds to spur semiconductor manufacturing and research in the years ahead. The money was approved in 2022 when President Biden signed the CHIPs and Science Act into law.
The speech also comes after months of intense lobbying from semiconductor companies. Companies like Intel (INTC); Micron (MU), IBM (IBM) and even the Taiwan Semiconductor Manufacturing Company (TSMC) have already scored visits from President Biden to tout plans for new U.S. plants in the works and they appear well position to take large pieces of the coming windfall. Meanwhile, Raimondo and other officials promise that the funds will be spread across the industry among a range of companies of all sizes.
The Commerce Secretary gave reporters a preview Wednesday saying she’ll be focused on America’s national security imperatives in the speech— and what the semiconductor fabrication plants and research facilities will look like.
The ambition is for the U.S. to supplant places like Taiwan, South Korea, and China to become the “premier destination” for the sector, said Raimondo. She added that “every chip company will need to be in the United States of America long after the subsidy runs out because they will have to and want to be here because we will have built that ecosystem.”
Reversing a ‘downward spiral’
The Biden administration’s challenge: reverse what Riamondo calls a “downward spiral” for the industry in the U.S. in recent decades. American semiconductor manufacturing has fallen from nearly 40% in 1990 to only 12% in recent years, according to a recent report from the Semiconductor Industry Association.
The situation is even worse with the world’s most advanced semiconductors, 100% of which were manufactured overseas in 2019. But the recent the announcements from companies like Intel for new U.S. plants could grow U.S. manufacturing in the years ahead. Both Secretary Raimondo and President Biden have made a habit of visiting plant groundbreakings to tout American progress.
In her speech Thursday, Raimondo is also set to reach out to semiconductor companies focused on design like Advanced Micro Devices (AMD), Qualcomm (QCOM) and Nvidia (NVDA) who had been worried about being left out of the government windfall last year as the bill was being negotiated.
“Our success will be short-lived if we focus only on manufacturing,” Raimondo is set to say, adding some incentives “will bring semiconductor manufacturing back to the U.S., but a robust R&D ecosystem will keep it here.”
The new law has $39 billion earmarked for semiconductor manufacturers with an additional $11 billion to go to companies as well as universities and others for chip research and design purposes. In addition, the law includes an investment tax credit of up to 25 percent towards a manufacturer’s capital expenditures.
Return on investment? National security.
Raimondo will compare the effort to President Lincoln’s creations of the land-grant university system, nuclear security in the 1940s, and John F. Kennedy’s famous call to put a man on the moon.
She notes that the 1960s saw an explosion of PhDs in the science and engineering fields to back up Kennedy’s 1961 call—and she is hoping for something similar in the years ahead in universities and high schools to create a bigger semiconductor industry workforce.
After the speech, the next step in the administration’s unveiling will come next Tuesday when Raimondo’s department unveils the formal application that companies will need to access the money.
“It’s going to be a very comprehensive application, which will be crystal clear about the specific criteria that we’ll be looking for and the information we need from companies,” Raimondo said.
The speech will also nod to concerns that the billions, once they are signed over, could end going to things like stock buybacks. She promises that the administration will be a good steward of taxpayer dollars and will demand transparency from companies. A recent letter from prominent lawmakers like Sen. Elizabeth Warren (D-MA) called on the administration to be vigilant on the buyback issue, saying it could undermine the national security goals of the program.
Meanwhile, the race for the money remains well underway with places like Arizona making a play to be one of the manufacturing hubs. Raimondo notes: “I expect there will be many disappointed companies who feel that they should have a certain amount of money and the reality is the return on our investment here is the achievement of our national security goals, period.“
Ben Werschkul is Washington correspondent for Yahoo Finance.
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