Explained: What is the US Chips Act over which Intel has ‘delayed’ plans to build $20 billion factory
Intel has reportedly delayed plans to build its $20 billion semiconductor factory in the US over the Chips Act. The chip-maker said that it’s not going ahead with the groundbreaking of Ohio facility as of now due to the ongoing delay of the Chips Act. “Unfortunately, Chips Act funding has moved more slowly than we expected and we still don’t know when it will get done,” Intel said in a statement. The chip giant, however, clarified that it still plans to begin construction on the project this year, and manufacturing should start by 2025.
What is Chips for America Act
Creating Helpful Incentives to Produce Semiconductors (Chips) Act is a $52 billion funding package for US’ domestic chip manufacturing. The US Senate passed a version of the bill in 2021, but it has yet to get approval from the US President Joe Biden. This is the summary of the bill as per US Congress website:
* The bill establishes investments and incentives to support US semiconductor manufacturing, research and development, and supply chain security.
* Specifically, the bill provides an income tax credit for semiconductor equipment or manufacturing facility investment through 2026.
* The bill also establishes a trust fund to be allocated upon reaching an agreement with foreign government partners to promote (1) Consistency in policies related to microelectronics; (2) Transparency in microelectronic supply chains; and (3) Alignment in policies towards non-market economies.
* The US Department of Commerce shall, through the National Institute of Standards and Technology (NIST), carry out a programme of research and development investment to accelerate the design, development, and manufacturability of next generation microelectronics, including through the creation of a Manufacturing USA institute for semiconductor manufacturing. Commerce shall also establish a program to match state and local government incentives offered to private entities for the purposes of building fabrication facilities relating to semiconductor manufacturing. Further, Commerce shall assess the capabilities of the US industrial base to support the national defense in light of the global nature of supply chains and interdependencies between the industrial bases of the US and foreign countries with respect to the manufacture and design of semiconductors.
* The Department of Defense shall prioritise the use of specified available amounts for programmes, projects, and activities in connection with semiconductor and related technologies.
* The President shall establish within NIST a subcommittee on matters relating to US leadership in semiconductor technology and innovation, which shall develop a national strategy on semiconductor research.
What is the aim of the US Chips Act
The share of modern semiconductor manufacturing capacity located in the US is said to have come down from 37% in 1990 to 12% in 2021. This is said to be largely because of big investments and incentives from other countries in chip manufacturing, something that the US government has not. By enacting the CHIPS for America Act in the FY 2021 National Defense Authorization Act (NDAA), Congress are said to have acknowledged the critical role the that the US semiconductor industry plays in the country’s future.
Where is the bill stalled
The funding still needs to be approved by the House of Representatives. The House and Senate reportedly need to come together to pass a bill that is agreeable to both. Presently, the bill is stalled as there is a gap between the House and Senate. The two chambers need to resolve some key differences in their bills. “The House legislation includes trade proposals that are not in the Senate bill, while the Senate bill authorizes an additional $200 billion to accelerate competition with China. That is not in the House version,” as per a report in the Newstack.