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Biden official drops new details on how they will spend $50 billion on semiconductors

The Biden administration unveiled new details Thursday of how it will seek to get the most bang for the billions it has at its disposal to spur the semiconductor sector in the U.S.

The centerpiece of the plans, which Commerce Secretary Gina Raimondo laid out during a speech, is the creation of at least two semiconductor manufacturing and research hubs in the U.S. These sites—she hopes—will create new U.S. manufacturing and research capabilities and supply chains that will generate momentum for the sector even after the government money runs out.

"I want to talk about the vision," Raimondo began her speech, comparing the effort to major moments in U.S. history. "The CHIPS and Science Act presents us with an opportunity to make investments that are similarly consequential for our nation’s future.”

U.S. Secretary of Commerce Gina Raimondo speaks about semiconductor chips subsidies during a press briefing at the White House in Washington, U.S., September 6, 2022. REUTERS/Kevin Lamarque
Secretary of Commerce Gina Raimondo speaks about semiconductors at the White House in September. (REUTERS/Kevin Lamarque) (Kevin Lamarque / reuters)

Raimondo spoke at Georgetown University as she moved on to the next phase of the heady task of handing out about $50 billion in government funds to spur semiconductor manufacturing and research in the years ahead. The money was approved in 2022 when President Biden signed the CHIPs and Science Act into law.

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The speech comes after months of intense lobbying from the semiconductor sector. Companies like Intel (INTC); Micron (MU), IBM (IBM) and even the Taiwan Semiconductor Manufacturing Company (TSMC) have scored visits from President Biden to tout plans for new U.S. plants in the works— and they appear well positioned to take large pieces of the coming windfall. Meanwhile, Raimondo and other officials promise that the funds will be spread across the industry among a range of companies of all sizes.

"Everyone is going to want to know, how much money is Intel getting, how much money is Samsung getting," she said during her remarks, promising answers in the weeks ahead. The Commerce Secretary focused her remarks instead on America’s national security imperatives and what the semiconductor fabrication plants and research facilities will look like.

Intel's Vice President of U.S. Government Relations Allen Thompson praised the rollout and this week's focus on building semiconductor ecosystems in a statement to Yahoo Finance calling the law "the most significant competition policy in our generation." He also noted added that his company has already announced $43.5 billion of investments in their U.S. sites since the law's passage.

The overall ambition is for the U.S. to supplant places like Taiwan, South Korea, and China to become the “premier destination in the world” for the sector, Raimondo said. She added during a briefing with reporters that “every chip company will need to be in the United States of America long after the subsidy runs out because they will have to and want to be here because we will have built that ecosystem.”

'That's a vulnerability that's unsustainable'

The Biden administration’s challenge: reverse what expert call a downward spiral for the industry in the U.S. in recent decades. American semiconductor manufacturing has fallen from nearly 40% in 1990 to only 12% in recent years, according to a recent report from the Semiconductor Industry Association.

The situation is even worse with the world’s most advanced semiconductors, 100% of which were manufactured overseas in 2019. But the recent the announcements from companies like Intel for new U.S. plants could grow U.S. manufacturing in the years ahead.

Raimondo noted that, at the moment, the U.S. relies on Taiwan Semiconductor Manufacturing Company for 92% of our advanced chips. "That's a vulnerability that's unsustainable," she said.

WASHINGTON, DC  August 9, 2022:

US President Joe Biden signs into law the CHIPS and Science Act of 2022, on the South Lawn of the White House in Washington, Tuesday, August 9, 2022. Left to right: Founder and CEO of SparkCharge Joshua Aviv, US President Joe Biden, Speaker of the House Nancy Pelosi (D-CA) and Secretary of Commerce Gina Raimondo. 
(Photo by Demetrius Freeman/The Washington Post via Getty Images)
President Joe Biden signs into law the CHIPS and Science Act of 2022 in August. (Demetrius Freeman/The Washington Post via Getty Images) (The Washington Post via Getty Images)

Raimondo also reached out to semiconductor companies focused on chip design like Advanced Micro Devices (AMD), Qualcomm (QCOM) and Nvidia (NVDA) who had been worried about being left out of the government windfall as the bill was being negotiated.

“Our success will be short-lived" if we focus only on manufacturing Raimondo said Thursday, adding that R&D is what will make it a longer term success.

"It's one thing to get companies here, we need them to stay here," she said.

In a statement to Yahoo Finance, Dario Gil, a senior vice president at IBM, congratulated the administration on the unveiling and added "as a global leader in semiconductor research and development, IBM stands ready to work with our academic and manufacturing partners to implement new technologies and rapidly scale industrial innovation."

The new law has $39 billion earmarked for semiconductor manufacturers with an additional $11 billion to go to companies as well as universities and others for chip research and design purposes. In addition, the law includes an investment tax credit of up to 25 percent towards a manufacturer’s capital expenditures.

Return on investment? National security.

Raimondo compared the effort to President Lincoln’s creation of the land-grant university system, nuclear security in the 1940s, and John F. Kennedy’s famous call to put a man on the moon.

She noted that the 1960s saw an explosion of PhDs in the science and engineering fields to back up Kennedy’s 1961 call—and she is hoping for something similar in the years ahead in universities and high schools to create a bigger semiconductor industry workforce.

The next step in the administration’s plan will come next Tuesday when Raimondo’s department unveils the formal application that manufacturing companies will need to access the money. “It's going to be a very comprehensive application, which will be crystal clear about the specific criteria that we'll be looking for and the information we need from companies,” Raimondo told reporters.

The speech also nodded to concerns that the billions, once they are signed over, could end going to things like stock buybacks. During her speech, Raimondo promised to be a good steward of taxpayer dollars and said she would will demand transparency from companies. A recent letter from prominent lawmakers like Sen. Elizabeth Warren (D-MA) called on the administration to be vigilant on the buyback issue, saying it could undermine the national security goals of the program.

"I expect to be held accountable," Raimondo said.

Meanwhile, the race for the money remains well underway with places like Arizona making a play to be one of the manufacturing hubs.

Raimondo said she hopes the $50 billion in government funds will lead to somewhere in the neighborhood of $500 billion in private investment.

"Get in the boat, row with us to achieve this mission," she said during the speech in a comment directed towards private investors around the country. "I don't want to spend a dime that I don't have to."

This post has been updated.

Ben Werschkul is Washington correspondent for Yahoo Finance.

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