The Commerce Department issued guidelines for companies that are seeking federal funds aimed at strengthening the industry of semiconductors in the US.
WASHINGTON – The Department of Commerce on Tuesday revealed its plan to distribute $50 billion to build the U.S. semiconductor industry and fight China in what is likely to be the largest U.S. government effort in decades to establish a strategy for the industry.
Around $28 billion from the known CHIPS for America Fund is likely to be used for loans and grants to help construct facilities for making, packaging, and assembling some of the world’s most sophisticated chips.
A further $10 billion will go to expanding manufacturing of older versions of technology that are used in communications and automobiles as well as other special technologies and other industry suppliers. The remaining $11 billion will go to research and development projects in the field.
The department plans to start soliciting requests for company funding by February and could start paying out the money in the spring of next year, Gina Raimondo, the secretary of commerce, told during an interview.
The fund is one of the funds that is accepted through Congress during July and was set up to promote U.S. manufacturing of semiconductors that are strategically important as well as to encourage research and development for the future generation of chip technology. The Biden administration has said that the investments will help reduce dependence on a global supply chain, which is now a major security threat to our security.
“This is a once-in-a-lifetime opportunity, a once-in-a-generation opportunity, to secure our national security and revitalize American manufacturing and revitalize American innovation and research and development,” Ms. Raimondo stated. “So, although we’re working with urgency, we have to get it right, and that’s why we are laying out the strategy now.”
The experts in the field of trade have described this fund as the largest investment in the field of industrial policies has been made by the United States has made in at least 50 years.
It will occur at an important moment in the sector of semiconductors.
The tensions between the United States and China are increasing about Taiwan which is a self-governing island that has been responsible for the production of over two-thirds of most modern semiconductors. The shortage of semiconductors has also caused inflation in the world through the increase in delivery times and the cost of electronics as well as appliances and automobiles.
Semiconductors are essential components in pacemakers, mobile phones, and coffee makers. They are also key to the latest technologies, such as quantum computing, and artificial Intelligence, as well as drones that aren’t controlled.
With the midterm elections coming up and midterm elections coming up, the Biden administration must demonstrate that it can use this money wisely and draw manufacturing investment back to the United States. It is the Commerce Department is responsible for deciding which businesses will get the funds and evaluating their investment.
In its document on strategy in its strategy paper, in its strategy paper, the Commerce Department said that the United States remained the global leading chip manufacturer however, it had lost its lead in manufacturing the most advanced semiconductors in the world. Over the last couple of years, China accounts for a significant proportion of manufacturing that is being built in the report.
The cost of building complex semiconductor factories called fabs has forced companies to separate their design facilities as well as those for manufacturing chips. Numerous top companies, such as Qualcomm, Nvidia, and Apple create chips within their facilities in the United States, but they contract their manufacturing to foundries in Asia specifically in Taiwan. This creates an unstable source of dependency on the chip industry according to the White House says.
The department explained that the money was intended to help reduce the cost of operating and building factories in the United States compared with other countries and to help encourage firms to construct the larger fabs in the United States that are now more prevalent in Asia. Foreign and domestic companies can apply for funding if they are investing in construction projects within the United States, though the legislation prohibits the provision of funds for the “foreign entity of concern,” which includes all businesses that originate from Russia or China.
To be eligible for the loan the companies must prove the viability of the long-term business of their venture in addition to “spillover benefits” for the communities they are operating within, for example, the investment in infrastructure or the development of workers or their capacity to attract customers and suppliers according to the department.
Projects that are involving economically challenged people and companies that are owned by veterans, minorities as well as women located in rural regions will be given priority according to the department. These are initiatives that help to make your supply chain safer, by offering, for instance, an additional production facility for the latest chips manufactured in Taiwan. Businesses are encouraged to show that they can access additional sources of financing, such as private capital, and local and state investment.
The Commerce Department is setting up two new offices under the National Institute of Standards and Technology to establish the programs.
A department’s greatest issue is ensuring that the funds from the government add to, and not take away chips that chip manufacturing companies had already planned to invest. Companies such as GlobalFoundries, Micron, Qualcomm, and Intel have announced plans to make significant commitments to U.S. facilities that may be eligible for government funds.
The chip bill stipulates that firms who accept funding can’t invest in new high-tech ventures in China or any other “countries of concern” for at least a decade except if they produce lower-tech “legacy chips” destined to only serve the local market.
The Commerce Department said it would examine and audit businesses that receive funds, and seek to recover the funds of any company which violates its regulations. The guidelines also prohibit recipients from taking part in stock buybacks so the money from taxpayers doesn’t be used to pay back a company’s shareholders.
In a speech at the White House on Tuesday, Ms. Raimondo said that the department was in the process of hiring around 50 people to look over the applications. They also were planning to bargain to get “every nickel” of taxpayer money.
She added that companies will need to prove that the money is “necessary” to make their investment. “This isn’t money to make them more profitable or pad their bottom line,” she explained.
In addition to the latest restrictions regarding making investments in manufacturing plants for chips in China Officials in the Biden, the administration has agreed that the White House should take executive measures to monitor outbound investment in other sectors as well Mrs. Raimondo said.
She also said that her administration is looking into the specifics of how to put a policy into place.
The earlier versions of the bill also included the idea of establishing an overall system for reviewing the investments U.S. companies make abroad to stop certain technologies of strategic importance not being made available to U.S. adversaries. This provision, which could apply to the latest technologies that go beyond the chips industry but was removed from the bill. However, officials from the Biden administration are currently considering an executive order to create a similar review procedure.
The United States indeed has a review procedure for investments that foreign firms invest in the United States, but not in reverse.
Biden administration has also taken steps to limit the export of advanced semiconductors. Biden Administration has taken measures to limit the kinds of semiconductors, advanced equipment, and other equipment that are allowed to be exported from within the United States.
In statements made last week Nvidia as well as Advanced Micro Devices both located within Silicon Valley, said they had been informed by their U.S. government that exports to China and Russia of specific high-end chips that they develop for artificial intelligence and supercomputers were being limited. These chips help to power supercomputers utilized in weapons development as well as intelligence gathering, which includes massive surveillance.
Ms. Raimondo has not been able to discuss the export control issue in greater detail, but she did say that she was “constantly evaluating” its efforts and strategies, such as how to cooperate with allies to block China the tools, equipment and other tools used by the country to expand its semiconductor manufacturing.
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