US President Biden signs order on $52b chips law implementation
US President Joe Biden signed an executive order on implementation of the $52.7 billion semiconductor chips manufacturing subsidy and research law, the White House said.
Earlier this month, Biden signed the bill to boost efforts to make the United States more competitive with China’s science and technology efforts. By subsidizing US chip manufacturing and expanding research funding, the law aims to alleviate a persistent shortage that has affected everything from cars and weapons to washing machines and video games.
The “Chips and Science” law also includes an investment tax credit for chip plants estimated to be worth $24 billion. The White House said the Commerce Department launched CHIPS.gov. The department will make funding awards for chips production.
Commerce Secretary Gina Raimondo said the department has been preparing for months for the program.
“We are committed to a process that is transparent and fair,” Raimondo said. “We will move as swiftly as possible to deploy these funds, while also ensuring the time needed to perform due diligence.”
Biden’s order sets six primary priorities to guide implementation and establishes a 16-member interagency CHIPS implementation council to be co-chaired by National Economic Director Brian Deese, National Security Advisor Jake Sullivan, and Acting Office of Science and Technology Policy Director Alondra Nelson. The council will include the secretaries of Defense, State, Commerce, Treasury, Labor and Energy.
It is still not clear when Commerce will formally make available semiconductor chips funding for prospective applications or how long it will take to make awards.
The White House said the chips program “will include rigorous review of applications along with robust compliance and accountability requirements to ensure taxpayer funds are protected and spent wisely.”
Progressives argued the bill is a giveaway to profitable chips companies that previously closed US plants, but Biden argued earlier “this law is not handing out blank checks to companies.”
Investors are growing increasingly skittish the notoriously cyclical industry is hurtling toward a prolonged slump after years of widespread shortages that led to heavy investments in capacity.
“We continue to believe we are entering the worst semiconductor downturn in at least a decade, and possibly since 2001 given the expectation of a recession and inventory build,” Christopher Danely, a Citigroup Inc. analyst, said in a report. “We expect every company in our coverage universe and every end market to experience a correction.”
The warning from Micron came after disappointing results from Nvidia Corp., Intel Corp., and Advanced Micro Devices Inc.
Highlighting the speed with which demand is evaporating, Micron said orders have deteriorated since the company last gave an update just over a month ago. While the personal computer market had already been in a slump, the weakness in demand is now spreading widely.
“Compared to our last earnings call, we see further weakening in demand because of adjustments broadening outside of just consumers to other parts of the market including data centers, industrial and automotive,” Chief Executive Officer Sanjay Mehrotra said in an interview with Bloomberg Television.
Semiconductor stocks surged at the start of July, driven in part by expectations that endemic shortages will prop up demand even in the midst of an economic slowdown. But they became a major drag on the broader Nasdaq 100 Stock Index after a string of disappointing financial results and forecasts from chipmakers including Nvidia. The benchmark rallied nearly 20 percent from a June low before memory and hard disk drive maker Western Digital Corp. helped fuel a selloff in the wake of a weak sales forecast on August 5. The Nasdaq 100 has fallen for three straight days since.
“It appears to be a challenging market for everyone after both Nvidia and Micron had to slash their outlooks,” said Edward Moya, senior market analyst with Oanda.