US chip funding faces $150bn+ boost

US Commerce Secretary Gina Raimondo proposed on Monday that the US's plan to tackle the semiconductor shortage could receive a $52 billion (€42.4 billion) boost, which she claims could ultimately lead to between seven and 10 new factories.

Secretary Raimondo delivered a speech at an event outside a Micron factory that predicted private, state and local investments could swell the sum allocated to the programme by as much as $100 million (€81.6 billion), bringing to total fund above $150 billion (€122.4 billion).

She expects states to supplement funding given by federal funding using their own funds as the US looks to increase domestic production as a number of key chip suppliers withhold shipments as global markets aim for greater strides in electrification, the digital transition and greener engines.

Read more: The scramble to end the semiconductor shortage

US President Joe Biden's "Chips for America" act will see the US tackle this issue head-on and see greater investment in facilities to increase domestic production of semiconductors.

Raimondo added the Commerce department should be fully transparent when it rewards funding, and she expects states will have to compete on funding for chip facilities.

She told the event: "We just need the federal money to unlock private capital. It could be seven, could be eight, could be nine, could be 10 new factories in America by the time we're done."

Raimondo previously met the industry leaders on May 21 about how best to deal with the semiconductor shortage

At these talks, she said: “Our goal for these conversations is to bring together a range of industry leaders to get more information on the impact the shortage is having on their industry, what are the short-term and long-term solutions that we can tackle together, and where specifically the Administration can be most helpful.

“These conversations continue to be incredibly useful – both to me and to industry leaders. Our hope is these conversations will lead to solutions not only for the near-term shortage but also measures to strengthen the domestic supply chain in the long term."

The funding will go towards funding tax subsidies for R&D and chip production. 

The semiconductor shortage has affected a number of industries, such as automotive, which is looking to transition towards greater electrification throughout the decade and has seen a number of key players suffer production losses, and the technology sector, which has seen significant demand increases throughout the pandemic.

Many Western companies are reliant on predominantly East Asian suppliers, who have been withholding supply from the automotive industry, although a number of suppliers admit they may be able to match market demand by the end of the year.

Read more: The semiconductor shortage may last into 2022

IHS Markit data suggests total cuts in global automotive manufacturing caused a loss of roughly 1.3 million cars for the first quarter.

The Chips for America bill was originally proposed by Joe Biden on the campaign trail in mid-2020 with an original sum of $50 billion increased by $2 billion earlier this month.

It was signed into law in February 2021.

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