Intel CEO Cheers U.S. Senate Passage Of $52B In Semiconductor Funding

Pat Gelsinger and other industry officials have pushed for the U.S. to approve a massive multi-billion-dollar spending package to boost domestic semiconductor manufacturing. But the bill that includes the funding now awaits approval in the House of Representatives, where it faces some opposition. Two channel executives say the funding would help improve supply chains, but there are questions about whether the U.S. needs to focus on other areas of production.

Intel CEO Pat Gelsinger has hailed the U.S. Senate’s approval of $52 billion in spending for domestic semiconductor manufacturing and research as “an important step toward strengthening” the country’s leadership in the industry.

Gelsinger made the comments Tuesday, shortly after the Senate voted 68-to-32 to pass the U.S. Innovation and Competition Act, a bill formerly known as the Endless Frontier Act that aims to counter China’s growing technological prowess with investments in several areas, including tens of billions of dollars for the U.S. chipmaking.

[Related: Intel Reorganizes Groups, Names New Leaders Key To IDM 2.0 Strategy: Memos]

“Today, the Senate took an important step toward strengthening US leadership in chip manufacturing, innovation, research & development,” Gelsinger wrote on Twitter. “The USICA will boost investment in US manufacturing capacity, foster innovation & protect critical supply chain.”

The bill now awaits approval in the House of Representatives, where it faces opposition from several key Democrats, according to Protocol.

The bill’s $52 billion in spending for the U.S. semiconductor industry is meant to fund incentives and research initiatives in the CHIPS for America Act, which was approved earlier this year.

Gelsinger and several other industry officials have called for funding the provisions to counteract foreign governments that have been providing major subsidies to semiconductor research and manufacturing efforts overseas. U.S. investments in the semiconductor industry has remained relatively flat, and this has resulted in the country’s share of global semiconductor manufacturing to fall from its peak of 37 percent in 1990 to 12 percent today while Asia dominates with 70 percent.

Increased federal spending on semiconductor manufacturing has also been supported by several major IT and telecom vendors, including Amazon Web Services, Apple, AT&T, Cisco, Google, Hewlett Packard Enterprise, Microsoft and Verizon.

Intel is doubling down on chip manufacturing as part of its IDM 2.0 strategy, a major evolution of its integrated device manufacturing approach that also includes the expanded use of external foundries for certain products and the establishment of Intel Foundry Services, which will manufacturing chips designed by other companies.

In an April interview, Gelsinger said the U.S. should aim to grow its share of global semiconductor manufacturing to one-third of total input and that the company’s two newly announced fabs in Arizona, plus other fabs that have yet to be announced, will help the country get there.

Gelsinger has previously said that federal and state incentives are not necessary to build the new fabs, but he called them important because they will help accelerate Intel’s manufacturing plans and counter the large incentives provided to foundries in Asia.

“We want incentives, we want investments, because it is the right thing for them to accelerate manufacturing and this imbalance of the global supply chain,” Gelsinger said.

The Semiconductor Industry Association, which represents Intel and several other chipmakers in the U.S., urged the House to approve the Innovation and Competition Act, saying that its approval would “help strengthen America’s economy, national security, technology leadership, and global competitiveness for years to come.”

“Senate passage of USICA is a pivotal step toward strengthening U.S. semiconductor production and innovation and an indication of the strong, bipartisan support in Washington for ensuring sustained American leadership in science and technology,” said John Neuffer, CEO and president of the Semiconductor Industry Association, in a Tuesday statement.

President Joe Biden has been a key supporter of the Innovation and Competition Act and said on Tuesday it would help the U.S. grow critical industries and support the development of “vital” technologies, including artificial intelligence, computer chips and lithium batteries.

Biden added that he looks forward to working with the House on the bill and hopes to sign it into law “as soon as possible.”

“We are in a competition to win the 21st century, and the starting gun has gone off,” Biden said in a statement. “As other countries continue to invest in their own research and development, we cannot risk falling behind. America must maintain its position as the most innovative and productive nation on Earth.”

More U.S. Chipmaking Will Benefit Channel, But More Work Is Needed

Erik Stromquist, president of CTL, a Portland, Ore.-based company that sells Chromebooks, told CRN that while there is a need for increased investment in semiconductor manufacturing in the U.S., government and industry leaders also need to consider whether they need to invest in other areas of the supply chain, including final assembly of devices, much of which currently happens in Asia.

It’s an important consideration, according to Stromquist, because a lack of investment in the U.S. in areas such as chipsets, diodes and final device assembly means that many U.S.-made chips will still have to be sent overseas for assembly in devices like laptops.

“Right now, Intel builds the CPUs, and then they go to Asia for production, and then they come back as finished goods,” he said.

For those reasons, Stromquist said he believes it’s “going to be years before the industry is ready to have true made-in-the-U.S.A. computers.”

The other question is whether the U.S. workforce can support a dramatic increase in domestic semiconductor manufacturing capability, according to Stromquist.

“All that’s been outsourced and off-shored for a long time,” he said. “So a lot of those jobs are gone, those skill sets are gone, and people don’t like that wage group.”

Kent Tibbils, vice president of marketing at ASI, a Fremont, Calif.-based distributor, told CRN that diversifying where semiconductors are manufactured by increasing investments in the U.S. will benefit solution providers in the IT channel. That’s because having too much production concentrated in one area can lead to disruptions in the supply chain, he added.

For instance, Tibbils pointed to a drought in Taiwan that is threatening chip manufacturing output, which is heavily reliant on water. There are also geopolitical considerations that could impact supply chains, such as the tensions between China and Taiwan.

“I think having diversified manufacturing with semiconductor capacity in different [geographies] is a good thing overall for supply,” he said.

Tibbils agreed with Stromquist that the U.S. needs to consider how much of the supply chain it wants to invest in, but he said the need to source different components and processes from across the world is “just part of how a global economy is going to work.”

“You could even look at it at the semiconductor level, where there’s going to be pieces of the semiconductor manufacturing process that might be done here in the U.S., and then they have to send it to another part of the world to have some other part done.”

With the U.S. poised to join other countries like South Korea in making massive investments in semiconductor manufacturing, there is a risk of an over-correction that results in a surplus, according to Tibbils.

“Will there be enough overall demand in the market to keep all those factories running? That’s probably what makes a lot of people nervous,” he said.

However, given the increasing importance of semiconductors to automotive and other industries beyond the traditional IT world, Tibbils said demand will likely continue to be strong for a long time.

“Those companies wouldn’t be making this kind of investment if they didn’t have a lot of confidence in where the overall market is headed,” he said.