Navigating the CHIPS Act

At the start of the month, GSA organized a webinar Navigating the CHIPS Act with Laura O'Neill, who is Director of Public Engagement at the US Department of Commerce. As Jodi Shelton, the CEO of GSA put it in her introduction, GSA is not a political or lobbying organization, but small and medium-sized companies without their own government organizations would appreciate being educated on US legislation. She also said that GSA hopes to do something similar with the EU, who have their own CHIPS Act. For some background color, see my blog post China, US, Europe: Everybody's Got a CHIPS Act.

I think this is interesting for a couple of reasons. First, $52B is a lot of money, especially in any area of semiconductors outside of the capital investment to build a state-of-the-art fab. But, perhaps even more importantly, people in government are discovering what semiconductors are and how important they are in the modern economy. As Oscar Wilde said, "There's only one thing worse than being talked about and that's not being talked about."

Laura O'Neill

Laura started by pointing out that this legislation has been in progress for some time. The legislative conversation started in the Senate which produced a bipartisan bill that sought to invest $52B in the US semiconductor ecosystem. This was over a year ago. It then traveled over to the House, and all through 2021 everyone watched to see where the legislation would go on the House side. That $52B is, in many ways, a starter investment and we would expect matching investments by private companies too. Investments would likely go to building out the ecosystem around hubs that already exist, like upstate New York or Arizona, but also around other places and states.

We want to bring a new era of investing in the area in the United States.

At the end of 2021 and early 2022, the House introduced their version of USICA, the US Innovation and Competition Act, taking a lot of what the Senate bill contained and adding more content. There were more provision added but the Senate bill was recreated as America Competes. This is the typical way things work on the hill where there is a Senate version of the bill and a House version. Some things are the same, but other provisions are added to provide more funding for other things and so on.

The America Competes legislation did pass. We have passed the Senate version with bipartisan support. So now it moves to reconciliation as to how to get the two bills together and get it across the finish line. So the next step is a formal announcement that reconciliation is starting, and deciding which provisions in the two bills should stay. CHIPS act funding remains unchanged between the two bills, so that is not one of the points of contention, it is not in dispute. Reconciliation will take several weeks, but the important thing is to get started. There is broad bipartisan support to include what is known as the CHIPS act. Once reconciliation is done then $52B will be allocated and Commerce will administer those funds. Unfortunately, this is theoretical right now since the funds have not yet been allocated.

The Secretary and Deputy Secretary of Commerce are 100% behind passing the CHIPS act. Other stuff is to look at critical supply chain funding, and create a mechanism in government to help address supply chain issues. Semiconductors, of course, are top of mind. Today, there is no function in the Federal Government to address supply chain challenges. But during the pandemic we all saw that perhaps there should be, and so we need to decide what useful government work would be, knowing that supply chains reside in the private sector.

In the fall, Commerce administered what we call a Request for Information via the Bureau of Industry Statistics (BIS). The semiconductor industry writ large was asked about challenges being seen in the supply chain. Everyone is dealing with this since customer demand is high, electronics products are using semiconductors in ways that they didn't before, and there are new products coming out every day.

But other things we wanted to get a grip on and give folks up and down the supply chain visibility and what we can do to get out of the current situation. We heard from 160 companies. All major chip manufacturers participated, which helps inform our datasets in a big way. Got a better understanding of what the problem nodes were. Able to get a clearer picture of which nanometer nodes are in the greatest shortage. Companies are making investments right now as we move into 2022.

Laura said she would give GSA links to all the public documentation on this survey (GSA said they will post).

We are looking for industry input now in the anticipation that the CHIPS act funding gets across the finish line. What do you think would be the most useful use of these funds? We are not necessarily giving money directly to companies, what investments could we be making that are “smart “ and would help unlock industrial investment and help small and mid-size companies grow, which is hard to do in such a capital-intensive industry. We will be sending out another survey that I want you all to fill out.

There is also engagement with the White House and there have already been several meetings. There is a lot of focus on this issue throughout the entire administration all the way up to the President. In the SOTU, semiconductors were front and center in a way that has never happened before.

State of the Union

In case you didn't watch the SOTU, here is the main section on semiconductors:

That’s why it is so important to pass the Bipartisan Innovation Act sitting in Congress that will make record investments in emerging technologies and American manufacturing. Let me give you one example of why it’s so important to pass it.

If you travel 20 miles east of Columbus, Ohio, you’ll find 1,000 empty acres of land. It won’t look like much, but if you stop and look closely, you’ll see a “Field of dreams,” the ground on which America’s future will be built. This is where Intel, the American company that helped build Silicon Valley, is going to build its $20 billion semiconductor “mega site”. Up to eight state-of-the-art factories in one place. 10,000 new good-paying jobs.

Some of the most sophisticated manufacturing in the world to make computer chips the size of a fingertip that power the world and our everyday lives. Smartphones. The Internet. Technology we have yet to invent. But that’s just the beginning.

Intel’s CEO, Pat Gelsinger, who is here tonight, told me they are ready to increase their investment from $20 billion to $100 billion. That would be one of the biggest investments in manufacturing in American history. And all they’re waiting for is for you to pass this bill.

So let’s not wait any longer. Send it to my desk. I’ll sign it.

Q&A

Q: You talked about the supply chain, we have several questions around it. One is given the current world situation, how do we balance out current concerns?

A: Last week the President announced historic sanctions and export controls. The strongest sanctions package ever implemented. We will have to see how that plays out over time. When you hear “export controls” that is administered by the department of commerce. There are export controls on some semiconductors. Expect to see the impact of these develop over time, not so much a day #1 impact. It will be several weeks.

Q: How will the funds be disbursed to different segments: manufacturing, supply chain, education, and so on.

A: As I said earlier, I can't answer that until we have funds.

Q: Any thoughts on the timeframe on when you would be disbursing funds?

A: A little uncertain since it is unclear how long it will be until funds are allocated to the department. The timetables would develop from there.

Q: You mentioned there might be more like a second CHIPS act. Any color on that?

A: If we get this package over the finish line, would there be a second one? $52B is a massive fund but we understand it is just a starting point in an industry that requires so much funding. All focus today is on getting the first one over the finish line.

Q: What would the impact be on the skilled labor market?

A: Our hope is that this funding can help unlock more private capital to invest, encourage more development of the semiconductor ecosystem, and we can help support that. Attention alone on “what is the semiconductor industry?” is good. I'm not sure that before many people would have known what the semiconductor industry is, or what it means to have or not have one. The silver lining is that there is a robust and redoubled focus in folks trying to address how to use this moment to build back better and invest to make our US-based ecosystem stronger coming out of the pandemic. In universities, there is a focus on how we can train students and build a more robust employment pipeline, and how semiconductor is the leading edge of R&D in many areas. Not enough colleges and universities are baking these programs into their core offerings. For example, in Ohio Intel announced fabs, partially because of Ohio State University educating students for jobs in Ohio. How do we better advertise that these opportunities exist? It is imperative upon the industry that we be thinking about how we can use the knowledge that folks now have to make it clear what a career in the semiconductor industry could mean for them.

Q: Will partnership between industry and universities be bolstered by CHIPS act or something in parallel?

A: What I do know and what I can share, is that there will be a strong focus on workforce pipelines. It won’t help if all the investment goes to a couple of companies and we do nothing to address the workforce gap that exists. That will be an upfront consideration on investment: “How are you going to hire and train the workforce?”

Q: Does Commerce plan to collaborate with other regions such as Europe and Japan to prevent duplication?

A: We are already doing some of this. I mentioned the survey we did in the fall, and we worked directly with foreign governments on this, and we asked many foreign companies that have a significant footprint in the US. We expect this to continue. After all, this does not sit entirely in the US. We want to grow the industry locally but this is inherently an international supply chain.

Q: Are foreign companies (based on where their HQ is) eligible?

A: We are working with foreign companies, yes

Q: Will foreign companies be eligible for funding?

A: My understanding is that they will be eligible.

Q: There are lots of questions on the allocation of funds, but you’ve said you can’t answer that.

A: Hopefully we can do this again in a couple of months once the funds are in place.

On-Demand

The webinar should be available on-demand on the GSA website.

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