Chipmakers and Congress are playing a $52 billion game of chicken
Last week, Intel Corp. ended the grand opening of its own Ohio factory to protest Congress’ slow passage of a bill that would offer $52 billion in incentives to chipmakers, the company said. company to Bloomberg News, CNBC and the Wall Street Journal, and the Washington Post. And just about anyone who would listen.
The Creating Useful Incentives to Produce Semiconductors for America Act – the CHIPS Act – was passed as part of a national defense bill 18 months ago, but hasn’t did not include funding. Separate bills — the Senate’s USICA and the House Competition Act — would allocate funds to measures outlined in CHIPS. But these two bills don’t match, so lawmakers are trying to find a compromise that would keep the money flowing.
“I’m just baffled, frustrated, anxious to see this cross the line,” Intel CEO Pat Gelsinger told CNBC last week, explaining his decision to cancel the Ohio ceremony. “With no certainty to cross the line, it just didn’t seem prudent to move forward so aggressively and send a clear message to Congress: We. Need. This. Done. “
Gelsinger returned to lead Intel in February 2021 and spent a lot of time lobbying for financial relief. (1) America’s biggest chip company dropped tech development in its absence, behind Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., and now it wants American taxpayers to help foot the bill to catch up. Fortunately for the semiconductor industry, there is bipartisan support for writing big checks if it can make US chipmaking great again — and keep the US ahead of China.
Moves are also underway to cut tariffs on China under President Donald Trump, with incumbent Joe Biden possibly announcing a reduction in duties as early as this week in a bid to fight inflation, Bloomberg News reported. Monday. The decision may be made by Beijing, but it is not certain. Semiconductors, electric vehicles and various electronic products are among the items that could be affected.
Intel is not alone in basing its investment plans on promised government largesse. TSMC is currently building a factory in Arizona based on US incentives. The Hsinchu, Taiwan-based company — the world’s largest custom chipmaker — has remained mum on using all the land it has to manufacture up to four additional factories. Last year, Samsung announced it would spend up to $17 billion on a new facility in Texas.
Yet one of the most significant developments to date is the news that Taiwan’s GlobalWafers Co. will build a $5 billion factory in Texas for the silicon wafers on which semiconductors are made, the first news installation of this type on American soil for more than 20 years.
But GlobalWafers also said its plans only work when those welfare checks arrive. “If the flea law doesn’t pass, we have to look to South Korea,” Chairman Mark England told The Wall Street Journal last week.
South Korea, home to Samsung and memory chip reader SK Hynix Inc., is much cheaper than the United States, England noted. In fact, almost every other nation in the world is more economically viable than the United States. TSMC has already found that its expansion into Arizona will be more expensive than originally expected. That’s why they all need government funding to make the numbers add up.
But right now, the numbers that matter most are votes in Congress, with lawmakers holding America’s semiconductor renaissance hostage. Of course, the budget is not the only sticking point. The House and Senate versions of the bill that would fund CHIPS have many points of difference that go beyond support for the semiconductor industry – ranging from immigration to federal research funding. and development. Republican Senate Leader Mitch McConnell doesn’t like the Democrats’ budget plans, which include drug price cuts and tax hikes on corporations and the wealthy, so he’s using the USICA bill as leverage .
“There will be no bipartisan USICA as long as Democrats pursue a partisan reconciliation bill,” tweeted the 80-year-old from Alabama, who represents the state of Kentucky. With Republicans and Democrats tied for 50 seats each in the Senate, 60 votes are needed to override any filibusters.
And with Congress going into recess in August and facing an election three months later, some lawmakers, especially Republicans, have an incentive to slow down time. That means the whole process could start all over again if Republicans flip the House in November.
What makes this game of chicken particularly dumb is that both sides of the political aisle, as well as local and foreign chipmakers, are all in agreement to push for expensive funding that has no economic sense but that everyone wants. Yet they still can’t make up their minds and do it.
If you want to understand why America is about to fall even further behind in the race to manufacture chips, just look at the long and winding road to funding the CHIPS Act. Everyone in the United States wants the nation to be a semiconductor powerhouse. But no one really wants to pay for it.
More from Bloomberg Opinion:
• Dear rivals, TSMC can and will spend you all: Tim Culpan
• Makers find there’s no place like home: Brooke Sutherland
• Samsung’s excellent chips aren’t all made in Texas: Tim Culpan
(Updates with details of Biden’s tariff cut and clarifies that McConnell is representing Kentucky in 6th and 13th paragraphs.)
(1) Gelsinger worked at Intel for more than 20 years, before leaving in 2009 to become president of EMC.
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.
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