Commerce Secretary Raimondo on why we need to produce chips in the U.S.

The Senate voted this week to advance a bill that’s supposed to help the United States compete with China in computer chip manufacturing.

The bill, nicknamed CHIPS-plus, would give American companies more than $50 billion in federal subsidies to incentivize them to manufacture semiconductors in the U.S. It would also give companies hefty tax credits to build costly chipmaking factories here.

Secretary of Commerce Gina Raimondo is an advocate of the bill, and national security is among the reasons. Semiconductors are essential to the design of our weapons, helicopters and the broader U.S. inventory of defense electronics, but most of those components are made overseas.

The following is an edited transcript of Raimondo’s conversation with Marketplace’s Marielle Segarra.

Gina Raimondo: We purchase 90% of the most sophisticated chips that are used in the military from Taiwan. So if, God forbid, China were to — in any way — disrupt our ability to buy these chips from Taiwan, it would really be an absolute crisis in our ability to protect ourselves.

Marielle Segarra: The chip shortage also affects innovation, right? Like, what kinds of tech innovation are we missing out on when chips are in short supply here?

Raimondo: Every single piece of innovation, literally. Biotechnology depends upon chips. All cloud computing depends upon chips. Artificial intelligence, everything digital. And shame on us that we allowed manufacturing to move to Asia and we find ourselves in a vulnerable position.

Segarra: So let’s talk about the bill. The bill would give companies billions of dollars of federal money to design or make chips in the U.S. And also, there would be incentives to build chip factories here. What would a company need to do to access that money? What would the process be like?

Raimondo: It’ll be a very rigorous process. It will be a competition, open, very transparent. And I should say, there will be a lot of strings attached. This is not a blank check for companies, right? This money is for companies to incentivize them to build in America, to help make up for the fact that it’s much, much, more expensive to build a huge factory in the United States than it is in Taiwan or Malaysia or [elsewhere in] Asia. But, the money can’t be used for stock buybacks. [It] can’t be used for investments in China or any other country. It will have very strict restrictions on how the money can and can’t be used. And also, we expect companies to invest alongside of us. So our money should really be just a small piece of the overall project, just enough to help close that gap in the difference of cost between building here versus building overseas.

Segarra: If this bill becomes a law, how soon would the average American feel the effects of it, do you think?

Raimondo: Very, very soon because what we’ve been told by companies is that as soon as the bill passes, that’s a signal to them that they’re going to commit to building in the United States. So for example, in Ohio, Intel already has announced a new $20 billion factory. As soon as the bill passes, they’re gonna start working on construction there.

Segarra: And how long does it take to build a factory?

Raimondo: Anywhere between a year and three years, depending on how big it is, how complex it is, is it a brand-new construction from scratch versus an expansion, etc.

Segarra: I feel like it just shows that, I mean, these problems are, especially once they become entrenched, you can’t turn it around immediately. It seems like it’s more of a long-term investment here.

Raimondo: Yes, that’s exactly right. You know, there’s a lot of people now who are saying, how could Germany possibly have let itself become so dependent on Russia for so much of its oil? You know, that’s where we’re headed, being overly dependent on Taiwan for chips. So, five years down the road, we don’t want to be saying that about America and Taiwan chip dependency. We want to be saying we are secure and able to build in America what we need.

Related links: More insight from Marielle Segarra

If you want to read more about this bill and what comes after the Senate’s vote, CNBC has a story with more details.

You heard Secretary Raimondo say that a chipmaking factory can take three years to build. Well, Bloomberg has a story that talks about what that entails. Like $15 billion and facilities that are cleaner than a surgical theater. No dust allowed.

The secretary also mentioned the Intel chip facilities in Ohio. The company has paused that construction until the CHIPS bill is passed.

A couple of weeks ago, Intel CEO Pat Gelsinger told The Washington Post that the company will delay the plant further if the bill stalls.