Chipmakers turn cutthroat for federal money
Companies, once allies for congressional bill, now aim sights on each other
WASHINGTON >> 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 relations 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 have also 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 both economic prosperity and national security. It may also 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 around 12%. Most U.S. chip companies, including AMD, focus on designing cutting-edge 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 both 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 repeatedly close factories, 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 leadingedge semiconductors, a category that includes TSMC, Samsung and Intel. All three companies have already broken ground on major expansions of their U.S. facilities.
The remaining third is expected to go toward legacy chips, which are heavily used in cars, appliances and military equipment.
Another $11 billion of funding is expected to go toward building a handful of chip research centers around the country. Government and academic institutions in Texas, Arizona, Georgia, Indiana, Florida and Ohio have filed documents describing why they should be considered for funding. Even tiny Guam has raised its hand.