Semiconductor makers push Congress for new funding

WASHINGTON — Major chip makers are pressing Congress to quickly pass a measure that would save more than $52 billion for companies building semiconductor plants in the United States, privately warning lawmakers that failure to do so could prompt them to move their plants elsewhere.

The bill, known as the CHIPS Act, would provide the semiconductor giants with an impressive injection of government support to build America’s manufacturing and technological advancement amid a global shortage of critical technology. But despite broad bipartisan support for the measure on Capitol Hill, it has languished for nearly a year after lawmakers chose to include it in sprawling legislation aimed at boosting the United States’ competitiveness with China, which faltered amid a variety of policy disagreements.

As House and Senate lawmakers spent months compromising more than a thousand other items in that larger package, chip executives became increasingly concerned about whether and when their incentives would materialize. And they have become increasingly vocal in warning lawmakers that the United States risks falling behind other countries, which have moved more quickly to pass similar incentives to lure chip manufacturers to their shores.

The lobbying effort has prompted lawmakers to consider passing the chip bill as part of a narrower measure, repealing other parts of the legislation that remain 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 are unfolding as the United States struggles to ease China’s restrictions on the semiconductor supply chain amid a global shortage of critical technology that has led to shortages in cars and electronics and fueled inflation. Among the proponents of quick action is the Biden administration, which views the measure as crucial to its efforts to create American jobs.

The urgency is also political. The Democrats, eyeing bleak political ground ahead of the midterm elections, are eager to pass competition legislation and bolster their efforts to fix supply chain problems and create jobs during the election campaign.

“The risks couldn’t be greater because companies are making their decisions now and in the coming months about where they will make their next big rounds of capital investment,” Gina Raimondo, the Commerce Secretary, said in an interview. There are other countries out there now doing deals. And if Congress continues to waver, that indecision will send the message that the United States is not serious, and we will lose these once-in-a-generation investments and all the jobs and national security benefits that come with them. . “

India, Japan and South Korea have recently issued tax breaks, subsidies and other incentives amounting to tens of billions of dollars to the industry, and the European Union may soon finish its own chip law with $30 billion to $50 billion in funding. China has also expanded tax and tariff breaks and other measures aimed at developing the chip industry and reducing its dependence on foreign countries.

“Other countries around the world have imitated our legislation and are making significant investments in innovation and chip production,” said Senator Chuck Schumer, Democrat of New York and majority leader, who has personally advocated for competitiveness legislation. “If we don’t act quickly, we could lose tens of thousands of well-paid jobs in Europe.”

Manish Bhatia, Executive Vice President of Global Operations at Micron, said in an interview that his company, the second largest semiconductor manufacturer in the United States, was in the process of planning to build through 2030 and evaluating several locations across the United States where it could expand its local footprint. But he said it would be difficult to make those investments domestically without quick action from Congress.

“The cost differential we see today between the United States and other locations around the world makes it difficult to expand memory manufacturing,” said Mr. Bhatia. “We would really like to see Chips Law And pass the investment tax credits in the near term—in the next few weeks or before the summer holidays—so we can make manufacturing decisions with confidence. “

Publicly and behind the scenes, Pat Gelsinger, Intel CEO, has emerged as one of the most vocal advocates of passing the legislation quickly. Earlier this year Intel announced a $20 billion investment to build two new chip factories in Ohio known as “Mega Manufacturers”.

Mr. Gelsinger testified to Congress that investment in Ohio could grow to eight such plants — a $100 billion investment, he said — but only if the Competitiveness Act was passed. “We’re putting our chips on the table,” Mr. Gelsinger said at a White House event earlier this year. “But this project will be bigger and faster with CHIPS.”

John Neuffer, chief executive of the Semiconductor Industry Association, said the industry was under “extreme pressure” to build new manufacturing facilities to respond to the explosion in chip demand.

Mr. Neuffer said building facilities is often 25 to 50 percent cheaper in foreign countries than in the United States, largely due to manufacturing incentives offered by foreign countries. He added that some US state governments provide funding to court chip makers, but the federal government is “not in the game.”

According to SIA tracking, four projects to build and expand semiconductor plants have been 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 providing chipmakers with such massive subsidies, with exceptions including Senator Bernie Sanders, who is independent of Vermont. But Scott Linkecum, director of trade policy studies at the Cato Institute, a liberal think tank, described the companies’ lobbying efforts as “blackmail,” an international version of companies shopping for the largest government support as they choose where to move their headquarters.

“If I had been at their location, I would have done the same,” said Mr. Linkecum. “But that doesn’t mean we as taxpayers have to pay for it.”

But adding pressure on lawmakers to act is the fact that nearly every major industry relies on semiconductors, including automakers and the defense industry. Big defense contractors, such as Lockheed Martin and Raytheon, are increasingly talking about the national security implications of establishing a flexible domestic supply of chips after Russia’s invasion of Ukraine.

The chip companies “are not at the breaking glass point, but they have kind of set out for us — which is perfectly consistent with my legislative timeline — a glass-breaking timeline for some of these investment announcements,” Senator Todd Young, Republican of Indiana and original sponsor of the primary legislation, said in an interview.

However, Mr. Young expressed confidence that lawmakers would be able to resolve their differences and broker a compromise. That could mean scrapping items that House and Senate lawmakers cannot approve.

A congressional document that breaks down each clause in both House and Senate bills shows more than 1,100 separate actions that require reconciling. Nearly all of the pending provisions that cause delays have little or nothing to do with chips or a manufacturing component. Several sticking points focus on trade, such as a clause that would give the government oversight over US companies looking to invest in countries abroad.

In a series of meetings between congressional leaders, lawmakers and administration officials this week, the sentiment was, “Let’s negotiate what we can negotiate, let’s be pragmatic, move quickly and get it done.”