Senators urge Commerce to prioritize national security in chips funding

Illustration picture of semiconductor chips
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

By David Shepardson

WASHINGTON (Reuters) -Two key U.S. senators said on Thursday they want the Commerce Department to prioritize national and economic decisions in awarding $39 billion in semiconductor manufacturing subsidies rather than using the funds to aid ailing companies.

Senate Intelligence Committee chair Mark Warner and Republican Senator John Cornyn said in a letter the success of the program funded by Congress in August 2022 "depends on a strategic approach that aligns with our national priorities ... We implore you to take time to go through every application and determine which ones are most worthy based on national security concerns."

The Commerce Department did not immediately comment on Thursday. The department said last week it had received more than 300 statements of interest covering 37 states seeking incentives for facilities for commercial fabrication, packaging, and R&D, and from material suppliers and equipment manufacturers.

"The intent of the CHIPS Act is not to bailout the semiconductor industry that is currently experiencing a cyclical industry downturn," Warner and Cornyn wrote. "Given that individual fabs can cost over $20 billion, we urge you to ... selectively provide incentives to projects deemed to be of national importance."

The Commerce Department plans to begin accepting applications in late June. The CHIPS law also creates a 25% investment tax credit for building chip plants, estimated to be worth $24 billion

They added that Commerce should seek "assurances that the recipient will secure supply chains and use domestic suppliers where possible" and noted some competitive applications "may not receive funding."

The Biden administration has proposed rules to limit recipients of U.S. funding from investing in the expansion of semiconductor manufacturing in foreign countries of concern such as China and Russia, and limits recipients of incentive funds from engaging in joint research or technology licensing efforts with a foreign entity of concern.

In October, the department issued new export controls to cut off China from certain semiconductor chips made anywhere in the world with U.S. equipment, vastly expanding its reach in its bid to slow Beijing's technological and military advances.

(Reporting by David Shepardson in WashingtonEditing by Matthew Lewis)