WASHINGTON, July 31, 2023 – Commerce Secretary Gina Raimondo said Wednesday that the U.S. should invest in the semiconductor manufacturing facilities of allied countries and impose restrictions on the export of those chips to China to combat the Communist nation’s influence.
Under the Chips and Science Act, Congress appropriated funding for the domestic manufacturing of microchips in America, setting aside about $39 billion for grants and subsidies for chip makers and their suppliers, plus another $11 billion to set up research centers on chip design. To handle the task, the Commerce Department last year launched the new CHIPS office, which also would provide loan guarantees for as much as $75 billion.
The CHIPS office already has received more than 400 statements of interest from semiconductor manufacturers keen to get a share of the federal dollars. Preliminary applications for grants and subsidies will be accepted beginning in September, with final applications starting Oct. 23, according to the Commerce Department.
Speaking on a panel hosted by the American Enterprise Institute alongside Sen. Todd Young, R-Indiana, Raimondo added that, on top of domestic manufacturing incentives, there is a need for future export controls against China and investing in allied semiconductor facilities to bolster national security.
Proposals to work more on technology with allies
Raimondo proposed that the government lean into the resources offered by their allies, such as R&D in Japan, and raw materials in Ukraine to create their own supply chain. By investing in industries linked to the supply chain in allied countries, she said that America would benefit overall.
Conditions would not be so broad “that you deny American companies revenue and China can get the product elsewhere, or China can get the product from other countries,” Raimondo said. Incoming rules “will deny some revenue to American companies, but we think it’s worth it.”
Raimondo said the administration is meeting with companies “to get to the right place so we don’t damage American business but quite frankly protect American national security.”
The United States needs to invest in its capacity to produce high-end chips, Raimondo said, while preventing the most advanced technology from reaching China. She highlighted concerns about China’s substantial subsidies in the semiconductor sector, which could lead to an excess of mature and legacy chips.
“The amount of money that China is pouring into subsidizing what will be an excess capacity of mature chips and legacy chips, that’s a problem that we need to be thinking about and working with our allies to get ahead of,” Raimondo said.
This comes after U.S. chip company executives met with top Biden administration officials, including Raimondo, to discuss China policy at the Allen and Co. conference earlier in July.
With semiconductor companies poised to benefit from $52 billion in direct subsidies, these funds are meant to address the dual challenge of manufacturing both low-end and high-end chips, according to Young.
Young brought up how supply chain issues for less advanced chips can cause delays in car manufacturing, referencing the industry in his state of Indiana – while the US needs to enhance its ability to produce advanced chips for specialized applications, such as those used in nuclear-armed submarines.
Furthermore, Young talked about how the proposed subsidies will coincide with incentives provided by the Biden administration to promote the clean energy, electric vehicle, and battery industries.
These sectors are considered critical for the economy and environment, and the government’s initiatives represent the largest industrial policy effort since World War II, said Young, with significant implications for the manufacturing sector.
