Congress’ delay in passing key funding for chips could jeopardize a great opportunity to retain one of America’s few tech manufacturing industries.
Why is this important: It’s expensive to build semiconductors – a vital input for large swaths of the economy – and other countries have already overtaken the United States in encouraging manufacturing on their shores.
Driving the news: News broke Thursday that Intel is delaying its groundbreaking ceremony for its planned $20 billion chip site in Ohio, citing in part uncertainty around chip legislation, as reported by the Wall Street Journal.
- Intel says it still plans to build the site and hasn’t pushed back the construction start date, but cautioned that the scope and pace of “our expansion into Ohio will be highly dependent on funding” from Congress.
- Intel’s January announcement to build a state-of-the-art semiconductor manufacturing plant was hailed by the White House at the time as a sign of progress in the administration’s efforts to increase domestic manufacturing. .
State of play: Last summer, the Senate passed the bipartisan US Innovation and Competition Act, which provides $52 billion in funding for chips. The House passed its version of the bill in February, but the two houses have yet to agree on a compromise bill.
Yes, but: The scope of Intel’s plans — and those of other companies in the semiconductor industry — hinges on whether Congress is able to inject $52 billion in funding to support manufacturing.
- GlobalFoundries, which plans to expand a manufacturing site in New York, told the Washington Post that the funding will affect the rate and that it is investing in expanding manufacturing capacity in the United States.
- “Congress has a historic and extremely urgent opportunity to restore American leadership in the semiconductor industry by funding the CHIPS Act and enacting the investment tax credit,” said Sanjay Mehrotra, chairman and CEO of Micron, to Axios in a statement.
What they say : “Unfortunately, funding for the CHIPS Act has progressed more slowly than expected and we still don’t know when it will happen,” an Intel spokesperson said in a statement.
- “It is time for Congress to act so that we can move forward at the speed and scale that we have long envisioned for Ohio and our other projects to help restore American leadership in semiconductor manufacturing and to building a more resilient semiconductor supply chain.”
Between the lines: Chip industry sources told Axios that they are still optimistic that the money will eventually arrive – which is a big part of why the companies have moved forward with new projects.
- TSMC, Intel and Micron “all acted with some degree of confidence in moving this forward,” a source at a major chipmaker said.
- However, the concern now is that partisan politics could push a bill past an August recess and into an unpredictably lame session in December.
- “One wonders what the consequences would be if Congress dropped the ball and all of these companies were left behind,” the source said.
The plot: A source at another major chipmaker says the issue remains vital to national security as the United States increasingly relies on manufacturing from Asia, especially Taiwan.
- “Commerce Secretary Raimondo calls it a crisis and she’s right,” the source said. “If you want to ensure the national security of the United States, you have to make the best chips here. It won’t happen if the (funding) doesn’t go through.”
Meanwhile: Other countries are jumping at the chance. “Europe has acted with some vigor to put its incentives in place,” noted the first source. “Other regions are serious.”
The big picture: Unlike some areas of manufacturing that would be nearly impossible to do here, like building an iPhone, home chip manufacturing is doable and already done.
- But it’s more expensive in the US, and the majority of the most advanced chips come from Taiwan, raising concerns about what could happen if that supply were compromised.
And after: Lawmakers are working on a compromise on House and Senate versions of the legislation as the August recess looms.
- After a meeting on Tuesday to discuss the way forward for the bipartisan legislation, Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-Calif.) this bill to Congress in July . »