Biden Administration Releases New Plans to Invest in Chips

TThe Commerce Department announced Tuesday that $39 billion will be distributed to companies interested in building semiconductor plants in America. This is a further step in the Commerce Department’s efforts to boost chip manufacturing.

This funding was authorized by President Joe Biden in August. It is one of the most significant federal programs ever created to support a single industry. CHIPS and Science Act is $52.7 million and aims at building up the local semiconductor industry and countering the national security consequences of relying upon chips made in Taiwan and China.

Semiconductors make up a large part of nearly every technological device in today’s world, including cars and video games as well as defense missiles. They used to be a relatively inexpensive component, one that cost as little as two cents to manufacture in the 1970s, but these tiny electronic switches are now part of the country’s supply chain woes and leading to higher prices for just about every device.

The total funding will amount to more than half, or $28 billion. This money is used for loans and grants that help finance the construction of facilities that can manufacture, assemble and package logic and memory chip that has been out of stock for at least two years. A further $10 billion is being used to increase manufacturing capacity of older chips, which are commonly found in automobiles and other medical devices. An additional $11 billion goes towards research and investment.

Many semiconductor companies, including Micron and Intel, have announced that they will be making major investments in America. These plans could qualify for funding from the government.

Gina Raimondo (Commerce Secretary) stated Tuesday at a White House Press Briefing that companies could receive funding as soon as next spring for small-scale projects. These smaller projects will not require new funding, but to improve existing facilities.

Commerce Department provided details on how companies can apply and what information they need. The Commerce Department will require companies to show that their factories are economically sustainable over the long term and that they provide jobs for the community in which they operate. Funds will prioritize economic disadvantaged persons, small businesses owned by women and veterans, as well as rural companies.

Foreign and domestic companies may both apply. Raimondo stated Tuesday however that they will not allow recipients to use the money for new high-tech investments or construction of advanced technology facilities within China. This ban is effective for 10 years.

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

The GlobalFoundries semiconductor manufacturing site in Malta (N.Y.) on Tuesday March 16, 2021

Adam Glanzman—Bloomberg via Getty Images

While the Federal spending increase will spur domestic chip production growth as soon as next spring, consumers may not see these effects until they are ready to shop for their new electronic gadgets. It can take five years for larger facilities to be built, while many components and supplies required to make chips are in limited supply.

“I can’t answer how quickly, exactly, a specific chip is going to come,” Raimondo said.

The Commerce Department also released a report saying that the U.S. had lost its edge in producing the world’s most advanced semiconductors to China and Taiwan. The majority of chip manufacturing happens in Asia. There, companies can benefit from tax-breaks that make it economically more lucrative to work there. Nvidia, Qualcomm and Apple continue to develop chips in America while manufacturing the final product in Asia.

“We are overly dependent on other countries for chips,” Raimondo told TIME in an interview in July. “It’s everything from silicon wafers, substrate, chemicals. This stuff is not made in the United States, and it’s shocking.”

The Biden Administration believes that the funding boom will encourage semiconductor companies to relocate to the U.S. and help their suppliers.

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