US Takes Security-First Focus in Doling Out $39 Billion Chip Aid

As President Joe Biden’s administration prepares to accept requests for $39 billion in funding to jumpstart US production of microchips, his commerce chief emphasized the program’s focus is strengthening national security rather than boosting struggling chipmakers.

The US next Tuesday will unveil applications for the manufacturing part of the funding under the Chips and Science Act passed last year and will be “crystal clear” in its selection criteria, Commerce Secretary Gina Raimondo said.

“I expect there will be many disappointed companies who feel that they should have a certain amount of money. The reality is the return on our investment here is the achievement of our national-security goal,” Raimondo told reporters.

She spoke ahead of a speech in Washington on Thursday where she laid out the broad vision for the program through 2030. The plan is to try to return manufacturing to the US by building at least two new clusters of leading-edge logic-chip manufacturing, with a supplier ecosystem and research and development facilities, employing thousands of workers.

US defense capabilities — from hypersonic weapons, drones and satellites — depend on the supply of chips that currently aren’t produced in the US, she said in the speech. The US share of global chip manufacturing is down to 12% from 37% in 1990, Raimondo said.

“America needs to design and produce the world’s most advanced chips right here in America,” she said.

Congress passed the law last year after pandemic lockdowns and supply-chain disruption laid bare US reliance on chips from Asia and particularly Taiwan, the target of frequent threats from China. The shift arose over decades of companies focusing on peak efficiency, making the US reliant on other countries for chips used in everything from cars to military equipment.

Many chipmakers are suffering steep drops in revenue and profit as computer and phone producers in particular cut orders to work through large stockpiles of unused parts. Most aren’t forecasting a rebound until the second half of the year, at the earliest. Many have already mapped out for investors the improvements to their balance sheet they expect from public money grants and tax relief.

“The purpose of this legislation isn’t to subsidize companies because they’re struggling in a cyclical downturn,” said Raimondo. “It isn’t to help companies necessarily become more profitable in America.”

Raimondo’s assertion may also heighten the competition among chipmakers as they try to persuade the government that they’re the most worthy recipients of grants that will help them build and equip new factories, facilities that can come with a bill of more than $20 billion each.