The White House has announced that it will be granting subsidies to multinationals that manufacture chips in an effort to counter Chinese competition and sustain a strategic industry. The total subsidies will amount to a whopping US$52 billion, authorized by the Chip Law which was approved by both parties in Congress. This Monday, the first subsidy package of $1.5 billion was formalized, going to the company GlobalFoundries, the largest domestic maker of made-to-order semiconductors.
The government will also offer the company $1.6 billion in federal loans. The subsidies and financing, for which there are 170 companies on the list, are part of the so-called Chip Law, which Congress approved in 2022. It allows the government to invest more than $52 billion to revitalize computer chip manufacturing in the country, as well as advance research and development in the face of geopolitical risks and competition from China.
The funds are expected to help pay for new factories in the United States, and it is anticipated that the projects will create around 1,500 manufacturing jobs and 9,000 under construction over the next decade, according to the Commerce Department. The Chips Law includes, in addition to direct subsidies, loans and loan guarantees worth US$75 billion, although distributing the support has been a slow process.
Chips are now considered critical resources for national security, and the subsidies aim to prevent any chip shortage that could lead to closures, layoffs, and furloughs of thousands of American workers in auto manufacturing plants across the country. In addition to boosting domestic chip manufacturing, the US is trying to limit China’s influence in the industry by imposing stricter export controls. This included isolating Beijing from advanced semiconductors used in artificial intelligence for fear that they could be used in military and cyber espionage operations.
The state funding aligns with the growing urgency among governments, chip manufacturers, and users around the world to shore up the industry for that vital input. The US share in chip production was 37% in 1990, but it dropped to 12% in 2020. The subsidies and financing from the government aim to strengthen the country’s chip production and protect national security by expanding domestic production of chips used in technology such as satellites and space communications. Intelligence Director Lael Brainard said “During the pandemic, we faced a shortage of chips, leading to closures, layoffs, and furloughs of thousands of Americans workers in auto manufacturing plants across the country,” ensuring that this does not happen again.”
These initiatives suggest that the semiconductor industry is expected to grow, despite a brief decline in 2023, which saw a 13% increase. White House officials also suggest the US is trying to ensure a stronger hold on a sector vital for national security, technological innovation and global economic competition.