Chip makers warn Congress’ delay could threaten U.S. expansion
Congress' delay on passing key funding for chips could jeopardize a big opportunity to keep one of America's few tech manufacturing industries.
Why it matters: It's expensive to build semiconductors — a vital input for wide swaths of the economy — and other countries have already outpaced the U.S. in incentivizing manufacturing on their shores.
Driving the news: News broke Thursday that Intel is delaying its groundbreaking ceremony for its planned $20 billion chip site in Ohio, citing in part uncertainty around chips legislation, as reported by The Wall Street Journal.
- Intel says it still plans to build the site and has not pushed back the construction start date, but warned that the scope and pace of "our expansion in Ohio will depend heavily on funding" from Congress.
- Intel's announcement in January that it would build a leading-edge semiconductor manufacturing plant was cheered by the White House at the time as a sign of progress in the administration's efforts to increase domestic manufacturing.
State of play: The Senate passed the bipartisan U.S. Innovation and Competition Act, which includes $52 billion in funding for chips, last summer. The House passed its version of the bill in February, but the two chambers have yet to agree on a compromise bill.
Yes, but: The scope of Intel's plans — and that of other companies in the semiconductor industry — have hinged on whether or not Congress can inject $52 billion in funding to support manufacturing.
- GlobalFoundries, which is exploring expanding a manufacturing site in New York, told the Washington Post that the funding would affect the rate and past it invests in increasing U.S. manufacturing capacity.
- “Congress has both a historical and critically urgent opportunity to restore American leadership in the semiconductor industry by funding the CHIPS Act and enacting the Investment Tax Credit," Sanjay Mehrotra, Micron’s president and CEO, told Axios in a statement.
What they're saying: "Unfortunately, CHIPS Act funding has moved more slowly than we expected and we still don’t know when it will get done," an Intel spokesperson said in a statement.
- "It is time for Congress to act so we can move forward at the speed and scale we have long envisioned for Ohio and our other projects to help restore U.S. semiconductor manufacturing leadership and build a more resilient semiconductor supply chain."
Between the lines: Chip industry sources told Axios they are still optimistic that the money will eventually come through — which is in large part why companies have moved forward with new projects.
- TSMC, Intel and Micron "all acted with some degree of faith this is going to move forward," said a source at one large chipmaker.
- However, the worry now is that partisan politics could push a bill past an August recess and into an unpredictable lame-duck session in December.
- "One wonders what the consequences would be if Congress drops the ball and all these companies were left hanging," said the source.
The intrigue: A source at another major chipmaker says the issue remains vital to national security given that the U.S. is increasingly reliant on manufacturing from Asia, especially Taiwan.
- "Commerce Secretary Raimondo calls it a crisis and she is right," the source said. "If you want to ensure U.S. national security, you need to manufacture the best chips here. That won’t happen if the (funding) doesn't pass."
Meanwhile: Other countries are pouncing on the opportunity. "Europe moved with some vigor to put their incentives out," noted the first source. "Other regions are being serious."
The big picture: Unlike some areas of manufacturing that would be practically impossible to do here, such as building an iPhone, domestic chipmaking is doable—and already done.
- But it is more expensive in the U.S., and the majority of the most advanced chips come from Taiwan, raising concerns of what could happen if that supply is jeopardized.
What's next: Lawmakers are working toward a compromise on House and Senate versions of the legislation as the August recess looms.
- After a meeting Tuesday to discuss the bipartisan legislation's path forward, Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-Calif.) said in a joint statement that Democrats believe "there is no reason that we should not pass this bill through Congress in July."