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Why $52b chip subsidies are being held up – and what the White House is doing about it

Bill bloat blamed, countdown continues, Intel irritable, negotiations necessary

The Biden administration has had enough of Congressional delays in authorizing $52 billion in chip manufacturing subsidies, and is bringing the heat to Capitol Hill with the clear goal of seeing the funding unlocked before lawmakers leave for August recess. 

The Creating Helpful Incentives to Produce Semiconductors for America Act, known colloquially as the CHIPS Act, was passed in early 2021, and allows the use of taxpayer dollars to subsidize the building of factories to boost the United States' output of semiconductors and reduce its reliance on other nations. These are the subsidies Intel and others have been clamoring for.

However, subsequent legislation is required to actually unlock these billions, and that has stalled. The Senate passed the US Innovation and Competition Act in the middle of last year, funding the CHIPS Act, and the House of Reps passed its version of the law bill – the America COMPETES Act – in February this year.

Crucially, the House and Senate need to reconcile their versions into one law for the president to sign, and so far no agreement on the final text has been reached. The legislation is wide ranging and does more than just provide funds for the CHIPS Act.

Secretary of Commerce Gina Raimondo spent Wednesday this week in a classified meeting with senators, telling CNN after the confab that the message from the White House was simple: time is up. This situation needs to be resolved.

It turns out Senate Majority Leader Chuck Schumer (D-NY) tried to add drug price reductions and tax increases on high earners to the legislative package, and Minority Leader Mitch McConnell (R-KY) refused to pass the bill if these Democrat proposals were included. 

As part of her pitch to lawmakers, Raimondo reportedly suggested removing the CHIPS Act funding from the broader reconciliation package so it can be passed independently.

Raimondo will be speaking to the House of Representatives on the same topic Thursday.

The delay in funding the CHIPS Act has already endangered some fab investments in the US, Raimondo warned Congress in a letter penned jointly with Secretary of Defense Lloyd Austin.

"If these funds are not appropriated in the coming weeks, the United States will miss out on the current wave of semiconductor investment … If we do not act, they will expand in countries that are already aggressively offering incentives, rather than here in the United States," the pair wrote.

The letter, dated July 13, comes one day after Intel CEO Pat Gelsinger spoke at a Washington Post Live event about the path forward for chip manufacturing in the US. Intel has been vocal about its support for the CHIPS Act, having announced plans to build two fabs on American soil, one of which is already under construction in Ohio, using the subsidies.

That Ohio fab became a centerpiece in the CHIPS Act delay late last month when Intel delayed a groundbreaking ceremony for the project because funding had stalled. Some media headlines gave the impression Intel had stopped construction entirely, or not started at all, though The Register confirmed building work was unceremoniously underway.

Still, Gelsinger said that if the CHIPS Act didn't pass he would personally make a call to delay construction in Ohio, if not look beyond the US for places to fabricate microprocessors. "We've made super clear to McConnell, to the Democrats, to the Republicans that if this doesn't pass, I will change my plans," Gelsinger said. 

As to where he would consider going next, Gelsinger said Europe has been aggressive with its incentives, and was ready to hand out Euros. "It's embarrassing that the US started this process a full year before Europe, and the complex 27-member state has moved forward more rapidly," Gelsinger told the Post. 

According to Gelsinger, Intel's two fabs, and three non-Intel fabs planned for the US, are depending on CHIPS Act funding to get them over the line. "Do we want five fabs built in the US … or do we just want everything being pushed out to either Europe or Asia and further delayed?" ®

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