Billions to spur US semiconductor manufacturing comes with strings attached
The Commerce Department is preparing to dole out $39 billion in semiconductor manufacturing incentives, an initiative expected to bring more factories — and jobs — to the U.S.
In previewing how applications for the money will be rolled out, Commerce Secretary Gina Raimondo on Monday said would-be recipients must demonstrate their projects would benefit U.S. national security and produce a good return for the public.
“We are not writing blank checks to any company that asks and we’re going to make companies open their books to receive funding,” Raimondo said. “I suspect a lot of companies are going to have to work harder than they thought they would in order to receive the funding, but it’s an essential part of our work to ensure we’re protecting taxpayer funds.”
The U.S. was once responsible for more than 37% of chip production, but its share has eroded to about 12% in recent decades.
That trendline prompted bipartisan majorities in Congress last year to approve a package of scientific research funding and incentives for domestic semiconductor chip manufacturing.
Parts of Texas already had been seeing interest in new facilities, such as Samsung’s $17 billion next-generation semiconductor factory in Taylor, a small town northeast of Austin, and Texas Instruments’ $30 billion campus coming to Sherman.
“The U.S. CHIPS and Science Act will be meaningful to our manufacturing operations in the U.S.,” Ellen Fishpaw, Texas Instruments spokeswoman, said in a brief written statement Monday. “We look forward to reviewing the
grant program and will seek funding for any programs we qualify for.”
A planned $5 billion GlobalWafers facility in Sherman was reportedly contingent on passage of the legislation, along with projects in other parts of the country.
Texas Instruments, Samsung and GlobalWafers all sought property tax breaks under a Texas incentive program that expired last year.
Business leaders have pushed for a replacement or reinstatement of the so-called Chapter 313 program. They contend the state will lose its competitive advantage to attract companies, particularly large manufacturing operations requiring billions of dollars in investment.
Texas Gov. Greg Abbott has scheduled a Wednesday afternoon news conference to discuss economic development in the state.
The CHIPS Act provided $52.7 billion in federal funding to boost the domestic chip industry.
That included the $39 billion, plus $13.2 billion for research and workforce development and $500 million to bolster global supply chains.
The bill split Texas’ Republican senators with John Cornyn helping get it approved and Ted Cruz voting against it.
Cruz said the measure had a laudable goal but a faulty approach of providing direct subsidies. He said it included inadequate safeguards to ensure the money spent would stay in the United States and go toward increasing domestic chip production.
“I’m all for using the tax code to incentivize manufacturers to build semiconductors in America, but when the federal government simply gives billions of taxpayer dollars directly to massive corporations, it invites cronyism and corruption,” Cruz said at the time.
Such concerns might be in the back of administration officials’ minds as they described focusing on two goals — boosting national security and being good stewards of taxpayer dollars.
Rather than making the awards in upfront lump sums, the money will be released in increments based on certain milestones.
If companies fall short of their commitments, the department can cut off payments and even try to claw back money already provided.
The department expects companies to put significant amounts of their own cash behind projects. Officials said the total amount of awards should be 35% or less of the projects’ capital expenditures.
Applicants will face additional requirements regarding their dealings with other countries of particular concern from a national security viewpoint. And they will have to make certain promises when it comes to their workers.
That includes a unique provision under which the department will require companies applying for more than $150 million from the program to include a plan on how they will provide affordable childcare for both their facility and construction workers.