Semiconductor Trade Group Seeks Major Federal Investment

The Semiconductor Industry Association is lobbying for federal funding to the tune of $37 billion to subsidize a new chip factory among other efforts. The trade group’s lobbying effort is aimed at keeping the U.S. ahead of China and other countries that already benefit from government subsidies. Among the SIA’s other proposals are aid for states looking to draw in investments in the semiconductor industry and more funding in research. The coronavirus and growing tensions with China are motivating Congress to act.

The Wall Street Journal reports that Information Technology and Innovation Foundation president Robert Atkinson noted that the increased strain with China “has moved the dynamic toward accepting a national industrial strategy.” “In the old days, it was about protecting steel,” he said. “The consensus now is much more about helping sunrise industries,” referring to advanced technology.

Secretary of Commerce Wilbur Ross and Secretary of State Mike Pompeo are already “examining ways to help the industry.” “The Trump administration is committed to ensuring the United States has a secure, vibrant, and internationally competitive high-tech ecosystem, supported by domestic chip production,” said Ross.

Senate minority leader Chuck Schumer (D-New York) and Senator Todd Young (R-Indiana) are part of a bipartisan group in Congress proposing “a $110 billion boost in technology spending that would include semiconductor research,” and Senator Tom Cotton (R-Arkansas) is putting together a bill “that mirrors some of the SIA’s proposals.”

Cotton referred to the Chinese Communist Party when he declared that, “we can’t allow the CCP to control these critical supply chains.” Artificial intelligence and 5G in particular are the “most important commercial and defense technologies of the future.”

WSJ reports that, “federal funding for research and development, as a percentage of gross domestic product, has fallen by about half since the mid-1980s.” According to SIA, China, meanwhile, “is expected nearly to double its share of global chip production capacity to around 28 percent by 2030.” WSJ adds that, “U.S.-based companies such as Intel and GlobalFoundries are some of the largest chip makers in the world, but only 12 percent of chips are produced within the U.S.’s borders, following a subsidy-spurred shift toward Asia, Israel and Ireland.”

In its breakdown of its proposed $37 billion in federal funding, SIA recommended $5 billion for a new semiconductor factory to be run in conjunction with a private company; $15 billion to states as block grants to offer incentives for semiconductor manufacturing; and $17 billion for federal research, “including $5 billion for fundamental research, $7 billion for applied research and $5 billion for a new technology center.” Intel chief executive Bob Swan proposed that his “company work with the Pentagon to build and operate such a facility.”

“Our plan has a big number, but the cost of inaction would be far bigger to our economy, our national security and our leadership in critical technologies of the future,” said SIA president and chief executive John Neuffer. Not everyone agrees, with some arguing the plan will only benefit big players. SEMI, “a group representing chip manufacturing equipment companies and others, has for months been pushing an investment tax credit for purchases of machinery.”