Intel Corp. last week pulled the plug on the groundbreaking for its own Ohio factory to protest Congress’s slow passage of a bill that would provide $52 billion of incentives to chipmakers, the company told Bloomberg News, and CNBC, and the Wall Street Journal, and the Washington Post. And just about anybody who’d listen.
The Creating Helpful Incentives to Produce Semiconductors for America Act — the CHIPS Act — was passed as part of a national defense bill 18 months ago, but didn’t actually include funding. Separate bills — the Senate’s USICA and the House’s Competes Act — would appropriate funds for the measures outlined in CHIPS. But these two bills don’t match up, so lawmakers are trying to hash out a compromise that would get the money flowing.
“I am just baffled, frustrated, anxious, to see this come across the line,” Intel Chief Executive Officer Pat Gelsinger told CNBC last week, explaining his decision to nix the Ohio ceremony. “In absence of certainty of getting that across the line, it just didn’t seem prudent for us to be barreling as aggressively ahead, and to send a clear message to Congress: We. Need. This. Done.”
Gelsinger returned to take the helm at Intel in February 2021, and has spent significant time lobbying for financial aid.(1) America’s biggest chip company dropped the ball on technology development during his absence, trailing Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co., and now he wants US taxpayers to help foot the bill to catch up. Fortunately for the semiconductor sector, there’s bipartisan support for writing fat checks if it can make American chipmaking great again — and keep the US ahead of China.
Intel isn’t alone in basing its investment plans on promised governmental largesse. TSMC is currently building a factory in Arizona that’s predicated on US incentives. The Hsinchu, Taiwan-based company — the world’s largest custom chipmaker — has remained tight-lipped on whether it’ll use all the land it has available to make as many as four more fabs. Samsung last year announced it would spend up to $17 billion on a new facility in Texas.
Yet one of the most significant developments so far is news that Taiwan’s GlobalWafers Co. will build a $5 billion plant in Texas for the silicon wafers upon which semiconductors are made, the first such new facility on US soil in more than 20 years.
But GlobalWafers, too, has indicated that its plans only work when those welfare checks roll in. “If the Chips Act is not passed, we have to pivot to South Korea,” President Mark England told the Wall Street Journal last week.
South Korea, home to Samsung and memory-chip player SK Hynix Inc., is much cheaper than the US, England noted. In fact, almost any other nation in the world is more economically viable then the US. TSMC has already found that its Arizona expansion will be more expensive than originally expected. Which is why they all need government funding to make the numbers add up.
But right now, the numbers that matter most are votes in Congress, with lawmakers holding America’s semiconductor revival hostage to politics. To be sure, the budget isn’t the only point of friction. The House and Senate versions of the bill which would fund the CHIPS Act have numerous points of difference that go beyond support for the semiconductor industry — ranging from immigration to federal funding for research and development.Republican Senate leader Mitch McConnell doesn’t like Democrat’s budget plans, which include drug price cuts and tax hikes on corporations and the rich, so he’s using the USICA bill as leverage.
“There will be no bipartisan USICA as long as Democrats are pursuing a partisan reconciliation bill,” the 80-year old from Alabama tweeted. While Republicans and Democrats are tied 50 seats apiece in the Senate, 60 votes are needed to get past any filibuster.
And with Congress going into recess in August and then facing elections three months later, there’s incentive for some lawmakers, especially Republicans, to wind the clock down. That means the whole process could start again if Republicans flip the House in November.
What makes this game of chicken particularly stupid is that both sides of the political aisle, along with local and foreign chipmakers, are all in agreement on pushing for an expensive package of funding that makes no economic sense but which everyone wants. Yet, they still can’t make up their minds and get it done.
If you want to understand why America is on the cusp of slipping even further behind in the chipmaking race, then you need only look at the long and winding path to funding the CHIPS Act. Everyone in the US wants the nation to be a semiconductor powerhouse. But no one actually wants to pay for it.
More From Bloomberg Opinion:
• Dear Rivals, TSMC Can and Will Outspend You All: Tim Culpan
• Manufacturers Find There’s No Place Like Home: Brooke Sutherland
• Samsung’s Great Chips Aren’t All It Makes in Texas: Tim Culpan
(1) Gelsinger worked at Intel for more than 20 years, before leaving in 2009 to become President of EMC.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.
More stories like this are available on bloomberg.com/opinion
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