WASHINGTON — Major chipmakers are pressing Congress to quickly pass a measure providing more than $52 billion to companies building semiconductor factories in the United States, privately warning lawmakers that not doing so could encourage them to move their manufacturing plants elsewhere.
The bill, known as the CHIPS Act, would give the semiconductor giants a remarkable injection of government support to bolster America’s manufacturing and technological edge amid a global shortage of critical technology. But despite broad bipartisan support for the measure on Capitol Hill, it languished for nearly a year after lawmakers opted to accompany it with sprawling legislation aimed at bolstering U.S. competitiveness with China, which has stagnated amid various political disputes.
As House and Senate lawmakers have spent months haggling over a thousand other provisions of this larger package, chip leaders have grown increasingly apprehensive about if and when their incentives will materialize. And they have become increasingly vocal in warning lawmakers that the United States risks falling behind other nations, which have moved faster to adopt similar incentives to lure chipmakers to their shores.
Lobbying efforts have prompted lawmakers to consider passing the chip bill as part of a narrower measure, dropping other parts of the legislation that are still in dispute. They aim to finalize an agreement on the legislation by next week, according to a congressional leadership aide who discussed the private negotiations on condition of anonymity.
The talks come as the United States works to loosen China’s stranglehold on the semiconductor supply chain amid a global shortage of critical technology that has led to shortages of cars and vehicles. and fueled inflation. Among the proponents of quick action is the Biden administration, which sees the measure as essential to its efforts to create American jobs.
The urgency is also political. Democrats, who face bleak political ground ahead of the midterm elections, are eager to pass the competitiveness legislation and promote their efforts to address supply chain issues and create jobs on the campaign trail.
“The stakes couldn’t be higher because companies are making all their decisions now and in the coming months as to where to make their next big rounds of capital investments,” said Gina Raimondo, secretary at the Commerce, in an interview. “Other countries are making deals. And if Congress continues to dither, that dithering will send the message that the United States is not serious, and we will lose those once-in-a-generation investments and all the jobs and national security benefits that come with it.”
India, Japan and South Korea have all recently enacted tax credits, subsidies and other incentives worth tens of billions of dollars for industry, and the European Union may soon finalize its own chip law with $30-50 billion in funding. China has also extended tax and tariff exemptions and other measures aimed at upgrading its chip industry and reducing its dependence on foreign countries.
“Other countries around the world have emulated our legislation and are investing heavily in innovation and chip production,” said Sen. Chuck Schumer, Democrat of New York and Majority Leader, who has personally championed the competitiveness. “If we don’t act quickly, we could lose tens of thousands of well-paying jobs to Europe.”
Manish Bhatia, executive vice president of global operations at Micron, said in an interview that his company, the second-largest semiconductor maker in the United States, was planning to build to 2030 and evaluate several sites in the United States where it could expand its national footprint. But those investments, he said, would be difficult to make domestically without prompt action by Congress.
“The cost differential we see today between the United States and other places around the world makes it difficult to expand memory manufacturing,” Bhatia said. “We would really like to see the CHIPS Act and investment tax credits pass in the short term – in the next few weeks or before the summer holidays – so that we can make our manufacturing decisions with confidence.”
Both publicly and behind the scenes, Intel CEO Pat Gelsinger has become one of the most vocal proponents of the rapid passage of the legislation. Intel earlier this year announced a $20 billion investment to build two massive new chip factories in Ohio, known as “mega fabs.”
Mr. Gelsinger testified before Congress that investment in Ohio could reach eight such plants — a $100 billion investment, he said — but only if competitiveness legislation were passed. “We’re putting our chips on the table,” Gelsinger said at a White House event earlier this year. “But this project will be bigger and faster with the CHIPS law.”
John Neuffer, chief executive of the Semiconductor Industry Association, said the industry had been under “lightning pressure” to build new manufacturing facilities to meet surging demand for chips.
Neuffer said building facilities is often 25 to 50 percent cheaper in foreign countries than in the United States, largely because of manufacturing incentives offered by foreign countries. Some U.S. state governments are offering funding to forensic chip makers, but the federal government “is out of the game,” he added.
According to SIA tracking, four semiconductor fab construction and expansion projects were announced in the United States in 2021, compared to 25 projects elsewhere, including in Europe, South Korea, Japan, Taiwan and Singapore.
There is little resistance in Congress to giving chipmakers such massive subsidies, with the exception of independent Vermont Sen. Bernie Sanders. But Scott Lincicome, director of trade policy studies at the Cato Institute, a libertarian think tank, described the corporate lobbying efforts as “a shakedown,” an international version of corporations seeking the biggest state grants then. they choose where to move. their headquarters.
“If I were in their place, I would do the same,” Mr. Lincicome said. “But that doesn’t mean that as taxpayers we should pay for it.”
But the added pressure on lawmakers to act is the fact that virtually every major industry depends on semiconductors, including automakers and the defense industry. Major defense contractors such as Lockheed Martin and Raytheon have increasingly spoken out about the national security implications of establishing a resilient domestic chip supply following the invasion of Ukraine. by Russia.
The chip companies are “not at an ice-breaking point, but they’ve kind of identified for us – and that’s pretty consistent with my legislative timeline – an ice-breaking timeline for some of these announcements of investment,” Sen. Todd Young, Republican of Indiana and the original co-sponsor of the basic legislation, said in an interview.
Still, Young said he was confident lawmakers would be able to resolve their differences and broker a compromise. That may mean removing provisions that House and Senate lawmakers cannot agree on.
A congressional document breaking down all provisions of bills passed by the House and Senate showed more than 1,100 independent measures that needed to be reconciled. Almost all of the outstanding provisions causing the delay have little or nothing to do with the chips or the manufacturing component. Many of the sticking points are trade-focused, such as a provision that would give the government control over U.S. companies seeking to invest in foreign countries.
In a series of meetings between congressional leaders, lawmakers and administration officials this week, Raimondo said the prevailing sentiment was: “Let’s negotiate what we can negotiate, be practical, move fast and get through the finish line”.