A lively debate has already begun about whether the U.S. semiconductor sector will need a second wave of support from Washington in the coming years, and what that might look like.
Intel (INTC) CEO Pat Gelsinger, one of the big beneficiaries of the 2022 CHIPS and Science Act, announced earlier this month the company's $8.5 billion in government grants for a series of new chip projects. , mentioned this topic.
“I don't think CHIPS 1 is the end of what we have to do to rebuild the industry,” he said.
He is never alone. Comments abound from business circles, the Biden Cabinet, think tank roundtables, on Capitol Hill and elsewhere as various participants express interest as well as elements they would like to see in a potential second round. are doing.
Sen. Mark Kelly, a Democrat from Arizona, helped negotiate the original bill. First, he wants to help chipmakers cut through red tape when building new projects. Then he becomes more open.
“We need to do something to strengthen our supply chain, so we're going to assess what the situation is and see what else we need to do,” he recently told Yahoo Finance. .
This chatter occurred at a time when the current law was just beginning to take effect. But some say this needs to happen soon, as most key provisions are scheduled to expire within a few years and Washington is not known for moving quickly.
“In my opinion, if they wait three to five years to start talking about it, it will be too late,” says Caitlin Regacki. She is a former senior adviser to Commerce Secretary Gina Raimondo and points out that demand for subsidies far exceeds the $50 billion already available.
More than 18 months passed between the time the CHIPs and Science Act was first introduced and President Biden signed it into law. And it took another year and a half after the law was enacted on the books for the subsidies to start rolling out in earnest.
Raimondo recently joked, “It seems like yesterday when I was in government.”
In addition to Intel, three small manufacturing awards were announced: BAE Systems (BAESY), Microchip Technology, and GlobalFoundries (GFS).
Major companies such as Taiwan Semiconductor Manufacturing Company (TSMC) and Micron (MU) are still waiting, but are expected to formally present government awards in the coming weeks.
Debate over what the second round will look like
The current law covers a wide range of areas, with $39 billion set aside for subsidies to manufacturers and $11 billion for research and development.
There are also significant new capital improvement tax credits that could add billions of dollars to companies' bottom lines. Other provisions include funding for workforce training initiatives, scientific research, and more.
There is a high possibility that Commissioner Count Raimondo will also participate in the second round of support. Gelsinger posed this question to her at a recent Intel Foundry event. “Whether we call it CHIPs 2 or something else, I think it will require continued investment,” she responded.
Raimondo and others' case is that the U.S. has had a decades-long slump in its semiconductor manufacturing sector and will need more than a few years of government support to fully restart those efforts.
Additional legislation, which is not expected to be formally negotiated until 2025 at the earliest, is unlikely to be easily renewed.
Separate support for the chip sector could also be separate from a parallel effort underway on Capitol Hill to pass the China Competition Act 2.0, which focuses on confronting China more generally. Highly sexual.
In recent comments, Mr. Gelsinger indicated that he is interested in extending the law's tax credits, saying that he wants the next bill to be “aligned with a long-term fiscal structure around sustainable investment, capital investment, and appropriate long-term taxes.” , I hope that perhaps that will change as well.” Restructuring policies and ecosystems. ”
And he returned to the topic frequently, telling Yahoo Finance later this week: “It's going to have some of the characteristics of CHIPS 1, but it needs to be more focused on supply chain.”
This focus on the supply chain is echoed by other companies. Even if the Biden administration achieves its ambitious immediate goal of producing 20% of the world's most advanced semiconductors in the United States by the end of this decade, semiconductor manufacturing will remain a global process.
Sen. Todd Young, Republican of Indiana, was a co-author of the 2022 bill. Along with Sen. Kelly and others, he is also pushing for efforts to make it easier to navigate bureaucracy on new projects.
At a recent Washington Post Live event, he also nodded to the potential need for another round of direct aid, but also pointed to some of the political headwinds it could face.
“If we want to take more risk out of the supply chain, we could invest more money into this chip project,” he said, but immediately said he wasn't completely convinced yet. “It took a lot of work.'' Last time, it was to get Republicans on board.
“When we look at version 2.0, we need to be more targeted and more specific,” said Regacchi, who left the administration and co-founded a consulting firm called Four Corners Public Affairs. .
In the second round, policymakers will be able to see more clearly “where the holes are and exactly how much money is needed to fill them,” she added. Ta.
Ben Werschkul is Yahoo Finance's Washington correspondent.
Click here for business and money-related political news
Read the latest financial and business news from Yahoo Finance