U.S. semiconductor funding might move forward

Semiconductor chips can be seen as the brain in a lot of modern electronics, controlling smart phones, computers on desktops, in autos and in an array of other devices.

In Ohio, they might also be the engine that creates thousands of high-paying jobs.

Funding for the semiconductor industry is found in more than one big piece of legislation awaiting final votes in Congress.

And the recent naming of members to a House-Senate conference committee could be a step toward resolution on that front.

Sen. Sherrod Brown has been named to that conference to iron out differences between House and Senate versions of bills that would fully fund CHIPS, to the tune of $52 billion.

“This is a must-pass bill,” Brown said in an interview Wednesday.

Funding has been a long time coming.

In February this year, the House of Representatives passed $52 billion in CHIPS Act investments as part of the America COMPETES Act. The Senate passed the same amount for the semiconductor industry as part of its version of the legislation, the U.S. Competition and Innovation Act, in June 2021.

Now, the conference committee must reconcile differences between the bills.

“It’s when you’re trying to do something new, it’s a little more challenging unless there’s a crisis right in front of your face,” said Scott Paul, president of the Alliance for American Manufacturing. “This crisis is certainly front and center. And it took a while to kind of coalesce around this strategy.”

In Ohio, the legislation is carefully watched. The extent of Intel’s development plans near Columbus depends on CHIPS funding, Intel leaders have said.

When Intel announced in January that it will build two computer chip factories in Licking County, the company’s CEO, Patrick Gelsinger, said the project could grow further if Congress fully funded CHIPS.

The project will create 3,000 jobs in two semiconductor-production plans.

A message seeking comment was sent to Intel for this story.

Just for construction, the project would mean some 5,000 building trades workers working for 10 years, and perhaps more, as Brown sees it.

“Workers will come front and center, that’s my first commitment,” Brown said.

“Semiconductors are at the heart of America’s economic growth, technology leadership, and national security, so investing in the future of domestic chip production and innovation is a national priority,” John Neuffer, Semiconductor Industry Association president and CEO, said in a statement.

Ohio is in the CHIPS

Brown and Sen. Rob Portman have called the need for CHIPS funding “self evident.”

“Over the summer, General Motors, Ford, and other automotive companies announced short-term plant closures in Lima and Toledo, in many cases due to pandemic-related production issues at overseas manufacturers of automotive-grade chips,” the senators wrote in their letter. “In light of the far-reaching consequences for our nation’s economy and national security, there is bipartisan consensus in favor of funding the CHIPS for America Act to catalyze new semiconductor investments in the United States — we should move quickly to ensconce that consensus in law.”

Loren Thompson, the Virginia-based chief operating officer of the non-profit Lexington Institute, says the U.S. semiconductor industry has fallen so far compared to global industry leaders “that it probably can’t come back without an infusion of taxpayer money.”

It’s not difficult to track how American industry got to this point. In Thompson’s telling, Taiwan and South Korea drew companies with “huge benefits” — lowered taxes, real estate breaks, other incentives.

The incentives worked.

From 1985 to 2014, U.S. semiconductor manufacturing lost 35% of its employees, according to a 2017 Walden University study. Semiconductor firms began offshoring product manufacturing because of the lower cost of labor and facilities, that study said.

In 1990, the U.S. and Europe made more than three-quarters of the world’s semiconductors, the Wall Street Journal noted. By late 2020, they made less than a quarter.

“We’ve fallen so far behind, that just cutting taxes now would not be sufficient,” Thompson said. New research and capital equipment will require more than that, he said.

The US will not have a “first-class” economy or military without a strong technology base, he said. “At the moment, there is no technology more important to being a first-class power than semi-conductors.”

The Ohio Manufacturers’ Association and JobsOhio have asked Ohio lawmakers to fund the Act.

But there has been opposition, to the form if not the substance of the bills.

“The problem with the bill is it’s all talk and no action,” Rep. Steve Chabot, R-Cincinnati, said in a February hearing.

He said two-thirds of the bill’s provisions are “findings, senses of Congress, policy statements and other non-binding filler.”

Said Chabot: “It mandates over 170 reports. Legislating more bureaucracy and paperwork at the State Department will accomplish little more than bringing a knife to a gun fight in the international arena.”

Beyond CHIPS, the bill could have have an impact on the Air Force Research Laboratory, which is headquartered at Wright-Patterson Air Force Base, Brown said. The senator believes facets of the legislation will lead to more research and development, giving AFRL and its business partners a potential shot in the arm.

But Brown also sees the industrial policy bills as a way to start to partially restore domestic manufacturing, of semiconductors and more, helping to reverse what he called “chasing cheap labor around the globe.”

“That’s why we’re in this position,” Brown said. “That’s why 99% of LED lighting is made in China. It’s why over 90% of chips are made in mostly in East Asia. … It’s why we had to stop assembly lines in auto and appliances and others, because we didn’t have the chips.”

Paul, the president of the Alliance for American Manufacturing, said at the core of the bill is the investment to re-shore semiconductor manufacturing. But there’s more to it than that, he said.

The version that passed the House also has provisions that would strengthen U.S. trade laws, making it more difficult for importers to evade trade enforcement mechanisms, Paul said. He thinks Ohio leaders want to include those in the final bill.

“I do think there is reason to be optimistic,” Paul said.