WASHINGTON — Top chip makers are pressuring Congress to swiftly pass a measure that would raise more than $52 billion for companies building semiconductor plants in the United States, personally warning lawmakers that failing to do so could lead them to to locate factories elsewhere.
The bill, known as the CHIPS Act, would provide semiconductor giants with a remarkable injection of government support to build America’s manufacturing and technology 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 chose to package it with comprehensive legislation aimed at bolstering U.S. competitiveness with China, which has stalled amid a variety of policy disputes.
While lawmakers in the House and Senate have bickered for months over more than a thousand other provisions in that larger package, chip executives have become increasingly concerned about whether and when their incentives will materialize. And they’ve grown louder in warning lawmakers that the United States is at risk of falling behind other countries, which have been quicker to pass similar incentives to lure chip makers to its shores.
The lobbying efforts have prompted lawmakers to consider the chips law as part of a narrower measure that would scrap the other pieces of legislation still under discussion. They aim to finalize an agreement on the legislation next week, according to a congressional leader who discussed the private negotiations on condition of anonymity.
The talks are taking place as the United States struggles to loosen China’s hold on the semiconductor supply chain amid a global shortage of critical technology that has led to auto and electronics shortages and fueled inflation. One of the proponents of swift action is the Biden administration, which sees the move as critical to its efforts to create American jobs.
The urgency is also political. Democrats, eyeing a grim political terrain in the run-up to the midterm elections, are eager to pass competition law and promote their efforts to solve supply chain problems and create jobs during the campaign .
“The stakes couldn’t be greater as the companies are all making their decisions now and in the coming months about where to make their next big round of capital investments,” said Gina Raimondo, the trade secretary, in an interview. “There are now other countries making deals. And if Congress continues to hesitate, that hesitation will send a message that the United States is not serious, and we will miss out on these one-off investments and all the jobs and national security benefits that come with it. ”
India, Japan and South Korea have all recently approved tax credits, subsidies and other incentives in the tens of billions of dollars for the industry, and the European Union may soon finalize its own chips bill with $30 billion to $50 billion in funding. China has also expanded tax and tariff exemptions and other measures to upgrade its chip industry and reduce its dependence on foreign countries.
“Other countries around the world have mimicked our laws and are making major investments in innovation and chip manufacturing,” said New York Senator Chuck Schumer, a New York Democrat and majority leader who has personally championed competition law. “If we don’t act quickly, we could lose tens of thousands of high-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 manufacturer in the United States, was planning construction through 2030 and evaluating several sites in the United States. United States where it could expand its domestic footprint. But those investments, he said, would be difficult to make domestically without prompt 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 production,” said Mr. Bhatia. “We would like to see the CHIPS Act and the short-term investment rebates passed – in the coming weeks or before the summer recess – so that we can make our manufacturing decisions with confidence.”
Both publicly and behind the scenes, Intel’s chief executive officer, Pat Gelsinger, has emerged as one of the most vocal proponents of rapid adoption of the legislation. Intel earlier this year announced a $20 billion investment to build two massive new chip plants in Ohio known as “megafabs.”
Mr. Gelsinger testified before Congress that Ohio investment could grow to eight such plants — a $100 billion investment, he said — but only if competition law is passed. “We put our chips on the table,” said Mr. Gelsinger at an event at the White House earlier this year. “But this project will be bigger and faster with the CHIPS law.”
John Neuffer, the chief executive of the Semiconductor Industry Association, said the industry was under “destructive pressure” to build new manufacturing facilities to respond to the explosion in demand for chips.
Mr. Neuffer said construction facilities abroad were often 25 to 50 percent cheaper than in the United States, largely because of the manufacturing incentives offered abroad. Some US state governments do provide funding to chip makers, but the federal government “isn’t getting involved,” he added.
According to SIA’s tracking, four semiconductor plant 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 provide chip makers with such massive subsidies, with the exception of Vermont independent Senator Bernie Sanders. But Scott Lincicome, the director of trade policy studies at the Cato Institute, a libertarian think tank, described the companies’ lobbying efforts as “a shakedown,” an international version of companies seeking the biggest state subsidies as they choose where to locate. establish their headquarters.
“If I were in their position I would do the same,” said Mr. Lincicome. “But that doesn’t mean we as taxpayers have to pay for it.”
But what puts even more pressure on lawmakers to act is the fact that virtually every major industry relies on semiconductors, including automakers and the defense industry. Major defense contractors, such as Lockheed Martin and Raytheon, spoke increasingly about the national security implications of establishing a resilient domestic supply of chips after Russia’s invasion of Ukraine.
Chip companies “are not at a breaking point, but they kind of identified for us — and it’s pretty consistent with my legislative timeline — a breaking glass timeline for some of these investment announcements,” Senator Todd Young, Republican from Indiana and the original co. sponsor of the core legislation, said in an interview.
Still, Mr. Young expressed confidence that lawmakers would be able to resolve their differences and reach a compromise. That could mean scrapping provisions that lawmakers in the House and Senate can’t agree on.
A congressional paper that breaks down every provision in both the House and Senate bills passed showed more than 1,100 independent measures that needed to be reconciled. Nearly all outstanding features that cause the delay have little or nothing to do with the chips or manufacturing part. Many of the bottlenecks are trade-oriented, such as a provision that would make government oversight on US companies looking to invest in overseas countries.
At a series of meetings of congressional leaders, lawmakers and government officials this week, Ms. Raimondo said, the overwhelming feeling was, “Let’s negotiate what we can negotiate, let’s be practical, act fast and make it across the finish line.”