WASHINGTON — In early January, a New York public relations firm sent out an email warning about what it said was a threat to the federal government. revival program US semiconductor industry.
Messages received by The New York Times accuse Intel, the Silicon Valley chip giant, of trying to win grants under the Science Act and CHIPS for new factories in Ohio and Arizona that will be vacant. Intel said on a recent earnings call that it will build its facilities with the expensive machinery needed to make semiconductors as demand for its chips grows.
The email said the question is whether officials will fund companies that have outfitted their factories right from the leap “or whether they will provide the bulk of CHIPS funding to companies like Intel”.
The company declined to name its customers. But it has previously been successful for Advanced Micro Devices, Intel’s longtime rival, which has raised similar concerns about whether federal funding should go to companies planning to build hollow cases. or not. An AMD spokesperson said it has not reviewed the email or approved the public relations company’s attempt to lobby for or against any particular company that received the funding.
“We fully support the Science Act and CHIPS and the efforts of the Biden administration to promote semiconductor research and manufacturing in the country,” a spokesperson said.
Rival semiconductor suppliers and their customers teamed up last year as they lobbied Congress to help shore up U.S. chipmaking and minimize critical supply chain vulnerabilities. important. The impulse led lawmakers to pass the CHIPS Act, including 52 billion USD grants to companies and research institutions as well as a tax credit of $24 billion or more — one of the largest subsidies for an industry in decades.
But that unity is beginning to crack. As the Biden administration prepares to begin handing out the money, executives, lobbyists and lawmakers have begun jostling to make their case for the funding, in public and behind closed doors.
In meetings with government officials and in a public filing, Intel questioned how much tax dollars should go to competitors based abroad, arguing that the innovations of the United States and other intellectual property may be transferred abroad.
“Our IP is here, and that’s not a big deal,” said Allen Thompson, Intel’s vice president of US government relations. “We are the US champions.”
The global race for computer chips
States, cities and universities has also embarked on action, hoping to attract the subsidies and jobs expected to be created by new manufacturing sites and research and development.
Chip vendors, their vendors, and the trade associations that represent them collectively spent $59 million on lobbying last year, according to OpenSecrets tracking, up from $46 million. dollars in 2021 and $36 million in 2020, as they try to ensure that Congress approved their funding.
Some of that activity has now shifted to making sure companies get the biggest share.
“Everybody wants their piece of the pie,” said Willy Shih, a professor of management at Harvard Business School who tracks semiconductor affairs. It’s not surprising, he said, that companies raise tough questions about competitors, which can be helpful for the Commerce Department in setting policies.
“We haven’t done something of this scale in the US in a long time,” he said. “There are so many things at stake.”
How the Biden administration distributes funding in the coming months could shape the future of an industry that is increasingly seen as a driver of both economic prosperity and national security. It could also affect how vulnerable the United States is to foreign threats — especially the possibility of a Chinese invasion of Taiwan, which produces more than 90% of the world’s advanced chips.
Since American researchers invented the integrated circuit in the late 1950s, the US manufacturing market share has dropped to about 12%. Most American chip companies, including AMD, focus on designing cutting-edge products while outsourcing costly manufacturing to overseas foundries, most of which are in Asia. .
Taiwan Semiconductor Manufacturing Company developed the foundry concept in the 1980s and dominated that market, followed by Samsung Electronics. Intel, which both designs and manufactures its own chips, lags behind TSMC and Samsung in terms of manufacturing technology but swore to catch up and built his own foundry business to produce chips for customers.
The industry’s concentration has made it particularly vulnerable to supply chain disruptions. During the pandemic, shortages of lower-end “older” chips used in cars forced automakers to repeatedly close factories, sending prices skyrocketing.
The CHIPS Act aims to remedy some of these shortfalls by allocating $39 billion in funding for new or expanded U.S. factories. The Commerce Department has indicated that about two-thirds of the money will go to leading semiconductor manufacturers, a category that includes TSMC, Samsung and Intel. All three companies have disrupted the massive expansion of their facilities in the United States.
The remaining third is expected to be for older chips, which are heavily used in cars, home appliances and military equipment.
Another $11 billion in funding is expected to be used to build several chip research centers around the country. Government and academic institutions in Texas, Arizona, Georgia, Indiana, Florida and Ohio have submitted documents describing why they should be considered for funding. Even the tiny island of Guam raised its hand.
One challenge for the Commerce Department will be to distribute money widely enough across the country to create some thriving “ecosystems” that can bring together raw materials, research and manufacturing capabilities, but not undermine effort by allocating too thinly. With dozens of companies, universities and other players interested in grabbing a piece, funding can be quick.
Commerce Minister Gina Raimondo told reporters on Wednesday that the goal is to create “at least two” new clusters of production capacity for top chips, in addition to facilities that produce other types of semiconductors. . Each cluster will employ thousands of workers and support a network of businesses that provide the raw materials and services they need.
“We have very clear national security goals that we have to achieve,” Raimondo said, noting that not every chipmaker gets what they want. “I suspect many companies will be disappointed because they feel that they should have a certain amount of money, and the fact that the return on our investment here is the fruit of our national security goals. we. Stage.”
Competition is intensifying as the Biden administration prepares to roll out ground rules for applications next week. Grants, which can amount to $3 billion or more per project, could begin rolling in this spring.
Executives say massive government spending in South Korea, Taiwan, China and elsewhere has helped shape the chip industry globally. And the current U.S. policy push could once again change the market, by giving some companies advantages that allow them to outpace their competitors.
Most chip companies, when publicly discussing subsidies, have emphasized the common goal of boosting U.S. manufacturing. But clear differences between them emerged. Many are featured in more than 200 applications that companies, organizations, universities and others submitted to the Commerce Department last March.
In addition to praising the value of their own production plans, some applicants have made the point that rival projects deserve less funding or face strict limits on how how they operate, although few companies mention their competitors’ names.
Intel, along with other US-based companies such as GlobalFoundries and SkyWater Technology, expressed concerns about foreign-owned companies, including whether its factories in the United States could continue to operate. continue to operate in the event of a crisis at home.
Intel has argued that foreign investment is welcome, but their longstanding focus on chip design, research and manufacturing in the United States means they need special consideration.
But opponents argue that investing heavily in Intel could be a risky bet for the US government, and some Biden administration officials have questioned whether Intel can follow through on its plan. to catch up with competitors in terms of technology or not. The company has suffered a severe drop in sales and announced on Wednesday that it will stock dividend cut.
US officials have also stressed the need to support TSMC’s US expansion, in part because the company makes cutting-edge chips vital to the military.
TSMC, the company that broke the 40 billion dollar investment in two advanced factories in Arizona, protested in its filing that “preferential treatment based on the location of the corporate headquarters” would not be an efficient or effective use of U.S. money. AMD, one of TSMC’s largest customers, has backed the expansion in the United States.
AMD and Intel, both based in Santa Clara, California, competed fiercely for the microprocessor chip market.
In a filing filed in March, AMD expressed concern about whether some unnamed competitors could prove they could effectively function as a foundry and make top-of-the-line chips. Are not. Intel has struggled on both sides. And AMD highlights the risk that grantees won’t immediately spend the money to equip their plants.
“Any facility that receives federal assistance must be operational upon completion of construction,” AMD wrote. “A facility that is idle or stocked to meet increased demand will immediately lose any federal funds.”
Mr. Thompson of Intel declined to comment on the email. But he defends the “smart capital” strategy. expressed by Patrick GelsingerIntel executives, which emphasize building factory enclosures, then invest in equipping them to match market needs.
Mr. Thompson said Intel is continuing to execute on that strategy with construction projects in Arizona, New Mexico and Ohio to ensure that its new facilities are built “in line with the market”. But Intel has no intention of using government money for “basically just building the shell,” he said. “The goal is to make sure we have the ability to support our customers.”
Ana Swanson reports from Washington, and Don Clark from San Francisco.
