Raimondo seeks to rally US behind $52 billion chip program

On State of the Union night, Commerce Secretary Gina Raimondo strode down the aisle and found her seat in front of Senate Republican leader Mitch McConnell.

McConnell, not known to waste words, complimented Raimondo on a recent writeup about her efforts to restore the U.S. as the world leader in advanced computer chips.

Factories, autos, appliances, electronics, toys, toothbrushes and weapons systems all depend on semiconductors, and the need for global supremacy in this small sector of the world economy is a rare area where Republicans and Democrats share the same vision.

“Nice George Will article,” McConnell said, referring to the conservative columnist's comments on Raimondo.

“Thank you. I'm going to implement that and I'm going to do it responsibly," Raimondo said of the $52 billion that lawmakers last year approved for research and the construction of semiconductor factories. She stressed to the Kentucky senator that national security was at stake.

“That’s why I voted for it,” McConnell said.

After a slew of chip companies announced new U.S. factories, Raimondo is in the process of delivering on the government's promised financial commitment. Starting next week, the application process will begin for semiconductor firms seeking to qualify for $39 billion in government backing to help fund their expansion.

Chips are integrated circuits that are embedded in a semiconductor, a material — notably silicon — that can manage the flow of electric current. The terms “chip” and “semiconductor” are often used interchangeably.

In a Thursday speech at Georgetown University, the commerce secretary plans to call for the development of two major semiconductor clusters inside the U.S. featuring a network of factories, research laboratories and other infrastructure. But fulfilling that vision means training tens of thousands of workers and figuring out scientific breakthroughs to lower the cost of producing advanced chips.

“There have been times in history,” Raimondo said in an interview, “where a president used the pursuit of a goal, a technological goal, like putting a man on the moon, like leading the world in nuclear technology, to catalyze the whole country to do their part in achieving that goal.”

To succeed, she said, the U.S. needs a whole-of-society effort. It's the kind of mobilization akin to World War II or the space race that grandparents talk about to younger generations, a make-or-break moment for the nation with the world's largest economy and military.

“We need to mobilize America,” Raimondo said.

The administration expects the $39 billion for factories will generate 10 times that, at a minimum, in private-sector investment. The potential benefits come from the spillover effects of computer chip production jobs that typically pay over $100,000, leading to additional economic activity and business formation.

The Biden administration needs to get universities to double the number of electrical engineers they're pumping over the next 10 years, Raimondo said. Community colleges and high schools need to do more to partner with companies to ensure that the next generation of workers have the training to segue into these jobs.

The new law also contains $11 billion to fund a research partnership between universities, companies and national laboratories — all with the mission of increasing a chip's processing power and lowering the cost of semiconductors so that there are buyers in a global market.

“We have to bring down the cost — big time — which means innovation, innovation, innovation,” Raimondo said.

Critics note that the real work is with administering the law and monitoring how the funds are used, warning that simply spending money does not guarantee the desired results and could create economic distortions.

“The CHIPS Act is a work in progress to say the least,” said Anthony Kim, a research fellow at the conservative Heritage Foundation. “Spending more is not and cannot be a solution, particularly in the current economy environment where inflationary pressures are still abundant."

The promise of government support is spurring construction plans, though it's still early in a process that will take years. Major chip companies such as TSMC, Intel, Micron, IBM and others have so far committed to roughly $200 billion for investments in new plants, according to the White House. Last week, Texas Instruments announced an $11 billion investment to expand its semiconductor production in Utah.

The moves are long term in nature. There is a relative glut of chips available right now, after a shortage as the world economy began to emerge from the coronavirus pandemic in 2021. White House officials have said the goal of their industrial strategy is to target sectors in which global demand will be greater than available supply over the long run, while protecting technologies that are key for more precise weapons and battlefield communications.