With all the hoopla — and uncertainty — surrounding the latest round of EV tax credits signed off on by President Joe Biden, many forgot he also put his stamp of approval on the CHIPS Act of 2022, which ponies up $50 billion to resurrect the nation’s moribund semiconductor industry.
A lack of chips — another unpleasant byproduct of the COVID-19 pandemic — has plagued auto production for the better part of the last two years as automakers need the chips for everything from seat heaters to navigation systems and more.
Worse, many in the industry believe the issue will continue into next year. However, the new funding package is designed to ease the burden in the near term and prevent it from happening again down the road.
When the act was passed, how the $50 billion would be used specifically wasn’t entire clear, but Commerce Secretary Gina Raimondo changed that today, laying out how the billions would be divided up.
“Rebuilding America’s leadership in the semiconductor industry is a down payment on our future as a global leader,” said U.S. Secretary of Commerce Gina Raimondo, in a statement.
“CHIPS for America, will ensure continued US leadership in the industries that underpin our national security and economic competitiveness. Under President Biden’s leadership, we are once again making things in America, revitalizing our manufacturing industry after decades of disinvestment and making the investments we need to lead the world in technology and innovation.”
Four goals
The program is designed to address four goals, including:
- Establish and expand domestic production of leading edge semiconductors in the U.S., of which the U.S. currently makes 0% of the world’s supply
- Build a sufficient and stable supply of mature node semiconductors
- Invest in R&D to ensure the next generation semiconductor technology is developed and produced in the U.S.
- Create tens of thousands of good-paying manufacturing jobs and more than hundred thousand construction jobs. This effort will ensure the pipeline for these jobs expands to include people who have historically not had a chance to participate in this industry, including women, people of color, veterans and people who live in rural areas.
Within these for targets, the auto industry should expect to find some relief for the problem. However, there is $10 billion carved out in the program to increase the production of a variety of semiconductors in the U.S., specifically chips used in “critical commercial sectors,” like the auto industry as well as information and communications and medical devices.
“For this initiative, the Department expects dozens of awards with the total value expected to be at least a quarter of the available CHIPS incentives funding, or approximately $10 billion,” the agency noted. “Those amounts may be available for grants or cooperative agreements, or to subsidize loans or loan guarantees.”
More money, more money
Additionally, the program offers $28 billion — the largest chunk of the funding — to stimulate the domestic development and production of logic and memory chips. These semiconductors are the most difficult to produce due to the intricate nature of the production process.
The money may come in the form of grants, cooperative agreements, loans or loan guarantees. The Commerce Department is “still assessing” how other incentives to help with chip manufacturing will impact the redevelopment of the industry.
The last $11 billion is directed to create a National Semiconductor Technology Center, a National Advanced Packaging Manufacturing Program, up to three new Manufacturing USA Institutes, and in NIST metrology research and development programs.
Those new enterprises are intended to create a new network of innovation for the semiconductor ecosystem in the United States, the officials noted. The new groups will work with academics, industries and even other governments to drive innovation in the sector. They’ll also see additional investment in the years ahead.
Not just waiting around
While Biden has banged the drum about this kind of concerted, government-backed effort to ensure the U.S. — and its businesses — are left by the wayside in the event of another pandemic. This program’s the government’s effort to prevent another situation where chip production across Southeast Asia is crippled and American manufacturing is left without needed technology, crimping the economy.
However, several companies are already moving dirt in the U.S., looking to expand chip production — now. Intel Corp. is building a new chip fabrication plant near Columbus, Ohio.
The location puts the new plant within easy reach of vehicle assembly plants in Michigan, Ohio, Indiana, Illinois and Kentucky down into Tennessee, Georgia, Alabama and Mississippi. General Motors, Ford, Stellantis, Subaru, Honda, Toyota, Nissan, Volkswagen, Kia, Hyundai, Mercedes-Benz and Mazda all operate plants in area, stretching from the Midwest into the Southeast.
Intel, according to the new reports from Ohio, is looking to invest $20 billion in the new plant, which could employ upwards of 3,000 people in what could be the largest economic development project in the state’s history.
Last summer, responding to the pressure, Intel, which also has new plants already under construction in Arizona, announced plans to spend as much as $100 billion on additional new plants in the United States for fabricating chips.