Intel’s CEO shouldn’t be surprised America can’t get CHIPS Act together

Silicon supremo warns he could prioritize expansion in Europe if Congress doesn’t approve subsidies


Comment How serious is Intel about delaying the build-out of its planned $20 billion mega-fab site in Ohio?

It turns out very serious, as Intel CEO Pat Gelsinger made clear on Tuesday, less than a week after his x86 giant delayed the groundbreaking ceremony for the Ohio site to show its displeasure over Congress' inability to pass $52 billion in subsidies to fund American semiconductor manufacturing.

In comments at the Aspen Ideas Festival yesterday, Gelsinger warned Intel would prioritize building factories in Europe over the US if Congress fails to act on the long-stalled chip subsidies bill.

"The rest of the world is moving rapidly despite the inability of Congress to get this finished," he said.

But Gelsinger shouldn't be surprised that lawmakers haven't figured out a way forward.

The level of discord seems to grow in the United States by the day, creating for politicians and government officials a staggering number of issues they need to contend with, from inflation and reproductive rights to gun violence and concerns about the stability of the country's democracy. It's no wonder that creating more chips in the US may not be at the top of the legislative agenda.

Despite this, Gelsinger has pressed Congress for roughly a year now to pass the United States Innovation and Competition Act, aka the America COMPETES Act, which includes the subsidies-providing Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Fund.

For a while, there seemed to be progress as various versions of the bill moved through the Senate and House of Representatives, albeit over the course of several months.

What has become an increasing source of frustration for Gelsinger and the wider US semiconductor industry is that the Senate and House have yet to reach agreement on a final, reconciled bill that can be sent for presidential signature.

"It's such a pivotal moment if we don't act now. Please don't dither in Congress over petty partisanship," Gelsinger said in his Aspen address.

The CEO and other industry leaders have rightfully pointed out multiple times that too much of the world's semiconductor manufacturing output is concentrated in Asia now and that the US would be wise to build fabs to create a more balanced global supply chain.

But Gelsinger knows Europe is also in need of greater manufacturing capacity, and it's there that he has found a greater sense of purpose among government officials, who have approved chip subsidies faster. This includes €6.8 billion ($7.3 billion) for Intel's planned fab site in Germany.

That Intel, a company with an annual revenue of almost $80 billion and profit of $20 billion, is asking for billions more from taxpayers may seem a bit rich. But to Gelsinger, the issue is that this is simply the game governments need to play because such spending is how places like Taiwan and South Korea have created strong manufacturing bases.

In Aspen, he took one of the most direct approaches yet, saying that government subsidies for plants in Europe, India, and South Korea can range from 30 percent to 50 percent of the total project's cost. In China, that could go all the way up to 70 percent of a fab's cost.

If Congress were to approve the CHIPS fund, each $10 billion fab at the Ohio mega-site would receive up to $3 billion in subsidies, according to Gelsinger. Without such funds, the Ohio plants wouldn't be "economically viable" when other governments are waving cash around, he said.

Gelsinger has given Congress a new deadline for passing the legislation — before August — which means politicians will need to get their act together soon or else face the potential reality that a greater proportion of leading-edge chips may come from Europe, and not the US, in the future. ®

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