Chipmakers turn cutthroat in fight for share of federal money
In early January, a New York public relations firm sent an email warning about what it characterized as a threat to the federal government’s program to revitalize the U.S. semiconductor industry.
The message, received by The New York Times, accused Intel, the Silicon Valley chip titan, of angling to win subsidies under the CHIPS and Science Act for new factories in Ohio and Arizona that would sit empty. Intel had said in a recent earnings call that it would build out its facilities with the expensive machinery needed to make semiconductors when demand for its chips increased.
The question, the email said, was whether officials would give funding to companies that outfitted their factories from the jump “or if they will give the majority of CHIPS funding to companies like Intel.”
The firm declined to name its client. But it has done work
in the past for Advanced Micro Devices, Intel’s longtime rival, which has raised similar concerns about whether federal funding should go to companies that plan to build empty shells. A spokesperson for AMD said it had not reviewed the email or approved the public rela
tions firm’s efforts to lobby for or against any specific company receiving funding.
“We fully support the CHIPS and Science Act and the efforts of the Biden administration to boost domestic semiconductor research and manufacturing,” the spokesperson said.
Rival semiconductor suppliers and their customers pulled together last year as they lobbied Congress to help shore up U. S. chip manufacturing and reduce vulnerabilities in the crucial supply chain. The push led lawmakers to approve the CHIPS Act, including $52 billion in subsidies to companies and research institutions as well as $24 billion or more in tax credits — one of the biggest infusions into a single industry in decades.
But that unity is beginning to crack. As the Biden administration prepares to begin handing out the money, CEOS, lobbyists and lawmakers have begun jostling to make their case for funding, in public and behind closed doors.
In meetings with government officials and in a public filing, Intel has called into question how much taxpayer money should go to its competitors that have offshore headquarters, arguing that U.S. innovations and other intellectual property could be funneled out of the country.
“Our IP is here, and that’s not insignificant,” said Allen Thompson, Intel’s vice president of U. S. government relations. “We are the U.S. champion.”
States, cities and universities also have gotten into the act, hoping to lure subsidies and jobs expected to be generated by manufacturing sites and new research and development.
Purveyors of chips, their suppliers and the trade associations that represent them together spent $59 million on lobbying last year, according to tracking from Opensecrets, up from $46 million in 2021 and $36 million in 2020, as they tried to ensure that Congress approved their funding.
Some of those activities have now shifted to making sure companies snag the biggest portion.
“Everybody wants their piece of the pie,” said Willy Shih, a management professor at Harvard Business School who follows semiconductor issues. He said it wasn’t surprising that companies would be raising tough questions about competitors, which could be helpful for the Commerce Department in setting policies.
“We haven’t done something of this scale in the U.S. in a long time,” he said. “There is a lot at stake.”
How the Biden administration distributes the funding in coming months could shape the future of an industry that is increasingly seen as a driver of economic prosperity and national security. It also may influence how vulnerable the United States remains to foreign threats — particularly, the possibility of a Chinese invasion of Taiwan, where more than 90% of the world’s advanced chips are made.
Since American researchers invented the integrated circuit in the late 1950s, the U.S. manufacturing share has dwindled to about 12%. Most U. S. chip companies, including AMD, focus on designing cuttingedge products while outsourcing the costly manufacturing to overseas foundries, most of which are in Asia.
Taiwan Semiconductor Manufacturing Co. developed the foundry concept in the 1980s and dominates that market, followed by Samsung Electronics. Intel, which designs and makes its own chips, fell behind TSMC and Samsung in manufacturing technology but has vowed to catch up and build its own foundry business to make chips for customers.
The industry’s concentration has left it particularly vulnerable to supply chain disruptions. During the pandemic, shortages of lower- end “legacy” chips that are used in cars forced automakers to close factories repeatedly, sending prices soaring.
The CHIPS Act aims to rectify some of these shortcomings by allocating $39 billion in grants for new or expanded U. S. factories. The Commerce Department has indicated that about two-thirds of the money will be steered toward makers of leading- edge semiconductors, a category that includes TSMC, Samsung and Intel. All three companies have broken ground on major expansions of their U.S. facilities.