Chipmakers are seeking more than $70 billion in federal subsidies

Companies producing the most advanced semiconductors have applied for more than $70 billion in federal grants, about double the amount of available funding, Commerce Secretary Gina Raimondo said Monday.

In an effort to revive domestic semiconductor manufacturing, the federal government is distributing $39 billion in subsidies as an incentive for companies to produce more of the tiny chips that power everything from smartphones to cars and fighter jets. The funding is intended to strengthen the U.S. supply chain and reduce the country’s dependence on foreign chip suppliers. Currently, only 12 percent of chips are made in the United States.

The subsidies have so far proven popular among companies. Speaking at the Center for Strategic and International Studies on Monday, Ms Raimondo said her department had received more than 600 expressions of interest.

Federal officials have had to “be tough on companies,” Ms. Raimondo said, adding that she has pushed business leaders to “do more for less.” She added that the level of interest also meant that officials would have to “say no to excellent companies.”

Ms. Raimondo emphasized the need to strengthen domestic production of the most technologically advanced chips, which are largely made in Taiwan.

Federal officials plan to award about $28 billion of the grants to companies that make such advanced chips, Ms. Raimondo said. These semiconductors – produced by companies such as the Taiwan Semiconductor Manufacturing Company, Intel and Samsung – are used in artificial intelligence, smartphones, supercomputers and the most sensitive military hardware.

“It’s very difficult, but our job is to stretch the money as far as we can,” Ms. Raimondo said in an interview Monday.

She said the new federal investments would put the United States on track to produce about 20 percent of the world’s most advanced types of logic chips by the end of the decade — currently producing zero, Ms. Raimondo said.

While companies may receive only part of the amount they originally requested, Ms. Raimondo said she was “very confident” that companies would still “do what they said they would do” with the money, in part because the government will distribute funding. as certain milestones are achieved.

Ms. Raimondo emphasized that manufacturers can benefit from other types of financial assistance in addition to federal subsidies. The Department of Commerce can support up to $75 billion in loans and loan guarantees to move projects forward. Companies can do that too receive tax credits compensating them for 25 percent of the project construction.

“It’s a significant amount of money that any company will receive,” she said.

Interest in the program was so great that federal officials, who originally addressed to help create at least two new large-scale manufacturing clusters to produce industry-leading logic chips, now expects to exceed that goal, Ms. Raimondo said.

At the event, Ms. Raimondo said the need for more chip production in the United States was heightened by the rise of artificial intelligence.

“AI will be the defining technology of our generation,” she said. “You can’t lead in AI if you don’t lead in making advanced chips. And so our work in implementing the CHIPS Act has become much more important.”

Federal officials have so far awarded three grants under the new program to companies that produce older chips, which are made with older manufacturing processes but are still used in a variety of products such as cars and dishwashers. This month, the Biden administration awarded $1.5 billion to New York chipmaker GlobalFoundries, which officials said would help secure a steady supply of chips for key auto suppliers and manufacturers.

Projects that will be completed by 2030 will be prioritized for awarding, Ms. Raimondo said.

Private companies have announced $200 billion in investments in semiconductor manufacturing since President Biden signed the CHIPS Act in 2022 and before federal officials have spent “a single dollar,” Ms. Raimondo said.

While investment has increased, some chip makers have encountered obstacles in their efforts to expand their manufacturing footprint in the United States. TSMC, Intel, Microchip Technology and others have adjusted their production schedules as a slump in sales of many types of chips has put pressure on companies to manage their spending on new projects.

While most of the money is set aside to build new and expanded manufacturing facilities, the CHIPS Act also includes $11 billion to support research into new chip technologies.

Biden administration officials are already facing questions about the potential for a new round of subsidies for chip makers. Ms. Raimondo said officials could achieve the program’s goals with the funding already available, but more money may be needed to further strengthen domestic semiconductor production.