The US publishes new plans in the fight to bring back chip production

TThe Commerce Department on Tuesday took another step toward boosting U.S. chip manufacturing, announcing it will begin handing out $39 billion to companies looking to build semiconductor factories in the country as soon as spring 2023.

The funding, which President Joe Biden authorized in August, is part of one of the largest federal programs the government has ever administered to boost an industry. The $52.7 billion CHIPS and Science Act aims to build the domestic semiconductor industry and counter national security implications to rely on chips made in China or Taiwan.

Semiconductors are a vital part of almost every technology in use today, from cars to video games to defensive missiles. They were a relatively cheap component, costing as little as two cents to produce in the 1970s, but these tiny electronic switches are now part of the country’s supply chain problems, driving higher prices for almost every device.

More than half of the total funding, about $28 billion, will go to grants and loans to help build facilities that manufacture, assemble and package the logic and memory chips that have been in short supply for more than two years. Another $10 billion will go to expand manufacturing capacity for older generations of chips often used in cars and medical devices, while an additional $11 billion will go toward research and development spending.

Several semiconductor companies, including GlobalFoundries, Micron, Qualcomm and Intel, have already announced plans for major investments in the US that are likely to be eligible for government funding.

Commerce Secretary Gina Raimondo said at a White House press conference on Tuesday that funding could be released to companies as early as next spring, especially for smaller projects that require funding only to expand existing facilities rather than build new ones.

The Commerce Department also outlined the most important things companies need to know and how to apply. To receive funding, companies will need to demonstrate that their factories will be economically viable in the long term and that they will provide jobs in the communities in which they operate. The funds will also prioritize economically disadvantaged individuals, minority-owned businesses, veteran-owned businesses, women-owned businesses and rural businesses.

Local and foreign companies can apply for the funds, but Raimondo said on Tuesday that recipients would not be allowed to use the money for any new high-tech investments in other countries or build advanced technology facilities in China for a period of 10 years.

“This is not a blank check for companies,” Raimondo said. She added that the Commerce Department would use its powers to recover the money if the recipients “fail to start their project on time, fail to complete their project on time, or fail to fulfill the commitments they have made.”

Inside the GlobalFoundries semiconductor manufacturing facility in Malta, New York on Tuesday, March 16, 2021.

Adam Glanzman – Bloomberg via Getty Images

An increase in federal spending as early as next spring is intended to spur growth in domestic chip manufacturing, but it may be a while before consumers see the effect when they shop for new electronics. Larger facilities can take up to five years to build, and many of the supplies and components needed to make chips are also in short supply.

“I can’t answer exactly how fast a particular chip will come,” Raimondo said.

The Commerce Department also released a report saying the U.S. has lost its lead in manufacturing the world’s most advanced semiconductors to China and Taiwan. Currently, most chip manufacturing takes place in Asia, where tax breaks make it more profitable for companies to operate. Some companies like Qualcomm, Nvidia and Apple continue to design chips in the US while doing the actual manufacturing in Asia.

“We’re too dependent on other countries for chips,” Raimondo said in an interview with TIME in July. “It’s everything from silicon wafers, substrate, chemicals. This thing is not done in the United States and it is shocking.

But the Biden administration hopes the funding blitz will spur semiconductor companies and their suppliers to move the manufacturing ecosystem to the U.S. sooner rather than later.

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Write to Nick Popley at [email protected].

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