Another Day, Another Dollar Not Given to CHIPS Act Fund

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Nov. 2, 2021

The process of building a competitive, domestic semiconductor manufacturing industry is long. The process of passing and funding legislation to support and incentivize the build-up of the semiconductor industry is also proving lengthy.

The CHIPS Act (Creating Helpful Incentives to Produce Semiconductors for America Act, H.R. 7178, 116th), passed as a part of the National Defense Authorization Act for fiscal year 2021, which became law on Jan. 1. The CHIPS Act provides for research and development programs as well as grant programs directed to the semiconductor manufacturing industry. However, those programs are only helpful to the extent that they are funded, and as of Nov. 1, 2021, Congress has failed to direct any dollars to the CHIPS Act provisions.

In early summer, by a 68-32 vote, the Senate passed the U.S. Innovation and Competition Act (USICA), which included funding for the chip legislation, and which was aimed at increasing competition with China. Despite urges from industry advocates and lawmakers to secure the funding for domestic chip manufacturing, however, the USICA has been hung up in the House for several months.

While the congressional delay is not due to the USICA's chip legislation, it does threaten the viability of the bipartisan bill, which many in the industry say is crucial to building up the U.S. domestic manufacturing capabilities. It is also likely that further delay will perpetuate collateral disruptions in industries where chips are crucial, like the automotive industry. Consultants have calculated that the shortage has cost the auto industry some 7.7 million vehicles in lost production and $210 billion in revenue, for this year alone. The sizeable damage to the auto industry informed the Senate's decision in June to direct $2 billion of the $52 billion in emergency funding guaranteed under the USICA to automotive manufacturers.

Thus, lawmakers from automotive-manufacturing states, along with other industry advocates, recently directed a letter to the House urging for the chip manufacturing programs and the USICA's support provisions to be funded. Similarly, Commerce Secretary Gina Raimondo, implored the House to approve the funding to get the ball rolling on U.S. efforts to shore up chip manufacturing.

There is no doubt about the need to boost domestic chip production and innovation. The fear is that the U.S. will be incapable of competing with other strong chip-manufacturing countries like China, without government subsidies. Chip-making companies strongly support the government's ideas of incentivizing the industry. At the end of October, chip manufacturers, including Intel, IBM, Qualcomm, GlobalFoundries and their advocacy groups, met virtually with the offices of more than 100 lawmakers to push for legislative efforts to boost production. Intel has plans for a multibillion-dollar investment in a new U.S. semiconductor plant, but the congressional delay of the CHIPS Act has stalled the chip-making company's plans.

It is not a good time for legislation stalled in Congress. There is a packed year-end agenda and party divisions loom large. However, the process of on shoring production of semiconductors is expensive, demanding, and will take time. Leaders at Intel reported that every year Congress delays providing support could mean an additional three-year delay in "bringing a plant online."

If you have questions relating to the consequences of re-or-nearshoring articles do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.