March 30, 2021

Gillibrand, Cornyn Call On Biden Administration To Implement Overdue NDAA Provisions To Bolster Domestic Semiconductor Manufacturing

CHIPS Act And The American Foundries Act Were Passed Last Year To Increase Federal Support For Domestic Semiconductor Industry And Address Concerns About U.S. Semiconductor Manufacturing Competitiveness; Senators Urge Officials To Immediately Implement Key Provisions To Help Economy Recover

Today, U.S. Senators Kirsten Gillibrand (D-NY) and John Cornyn (R-TX) called on the Departments of Commerce, Defense, and Labor to implement long overdue provisions included in the FY21 National Defense Authorization Act (NDAA) that would bolster domestic semiconductor manufacturing. Last Congress, Gillibrand and Cornyn led the Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act (S. 3933) and the American Foundries Act (S.4130) and successfully included provisions in last year’s NDAA based off these bills. The provisions will strengthen federal support for the domestic semiconductor industry and create good-paying U.S.-based jobs, address the global chip shortage, and reinforce critical supply chains and reduce American dependence on foreign materials.

“International factory closures coupled with the increasing demands for semiconductors has resulted in a global chip shortage that has impacted U.S. manufacturing, slowed shipments of consumer electronics and called into question the security and integrity of American supply chains due to our reliance on foreign companies. These provisions, that became law last year, will help address these problems by providing manufacturing incentives and research initiatives to build the domestic chip industry. We hope that you can implement these new tools as soon as possible to address the vulnerabilities in domestic manufacturing and critical supply chains,” wrote the senators. 

The senator continued“[t]hese steps are essential to our national security and to U.S. leadership in this critical industry and we request you fully utilize these key provisions towards your solution in creating well-paying jobs, bolstering the semiconductor industry, and reducing our country’s dependence on foreign materials. Continued U.S. leadership in semiconductor technology, design, and fabrication is important to the U.S. economy and national security.” 

Semiconductors enable nearly all industrial activities, including systems that undergird U.S. technological competitiveness and national security. Semiconductor design and manufacturing is a global enterprise with materials, design, fabrication, assembly, testing, and packaging operating across national borders. In the modern age, U.S. strength in semiconductor technology and fabrication is vital to U.S. economic and national security interests. 

However, the number of U.S firms involved in semiconductors and related device manufacturing has dropped and the U.S only accounts for approximately 12% of global semiconductor production capacity. This reduction in the number of firms is largely a result of industry consolidation and a lack of federal investment to ensure American competitiveness in the industry. Additionally, American companies continue to outsource manufacturing while foreign governments have aggressively subsidized production. 

The provisions passed in FY21 NDAA will increase federal support for semiconductor manufacturing by providing new federal incentives to conduct advanced research and development of semiconductor technology, secure the supply chain, and strengthen national and economic security by reducing reliance on foreign semiconductor manufacturing. These programs will help ensure our domestic microelectronics industry can safely and securely supply consumers, our military, intelligence agencies, and other government needs. Specifically, Gillibrand and Cornyn are urging the administration to boost domestic semiconductor manufacturing by:  

  • Quickly distributing grants to states to assist in constructing, expanding, or modernizing commercial semiconductor fabrication, assembly, testing, packaging, and advanced R&D facilities. 
  • Funding semiconductor startups and a Manufacturing USA Institute; and establishing a National Advanced Packaging Manufacturing Program to reinforce our domestic semiconductor ecosystem.
  • Developing a national semiconductor technology center, through the Department of Commerce, and a Department of Defense National Network for Microelectronics Research and Development to allow for research prototyping of advanced semiconductor technology that would strengthen economic competitiveness and security of the domestic supply chain.
  • Creating partnerships that bring together government, private sector industry, and academics to create technology, training, and growth opportunities that are not available in the U.S. today.

Full text of the letter can be found here and below.

Dear Secretary Raimondo, Secretary Austin, & Secretary Walsh,

We write today to further explain the Congressional intent of Sec. 9901-9908 from P.L. 116-283 FY21 National Defense Authorization Act (NDAA). These provisions were based off of two of our bills, the Creating Helpful Incentives to Produce Semiconductors for America Act (S. 3933) and the American Foundries Act (S.4130). The goal of both bills and this section is to give you tools to help the economy recover and spur a domestic manufacturing expansion within the semiconductor industry.

International factory closures coupled with the increasing demands for semiconductors has resulted in a global chip shortage that has impacted U.S. manufacturing, slowed shipments of consumer electronics and called into question the security and integrity of American supply chains due to our reliance on foreign companies. These provisions, that became law last year, will help address these problems by providing manufacturing incentives and research initiatives to build the domestic chip industry. We hope that you can implement these new tools as soon as possible to address the vulnerabilities in domestic manufacturing and critical supply chains.

Semiconductors enable nearly all industrial activities, including systems that undergird U.S. technological competitiveness and national security. Semiconductor design and manufacturing is a global enterprise with materials, design, fabrication, assembly, testing, and packaging operating across national borders. In the modern age, U.S. strength in semiconductor technology and fabrication is vital to U.S. economic and national security interests.

Lack of U.S. leadership in this space is disturbing, especially as it relates to military readiness. China’s state-led efforts to develop an indigenous vertically integrated semiconductor industry are unprecedented in scope and scale. If successful, this could significantly shift global semiconductor production and related design and research capabilities to China, undermining the U.S. and other foreign firms’ leading positions. Although China’s current share of the global industry is still relatively small and its companies produce mostly low-end chips, China’s industrial policies aim to establish global dominance in semiconductor design and production by 2030. 

The economic and national security risks posed by relying too heavily on foreign semiconductor suppliers cannot be dismissed or minimized and America must continue to invest in our domestic semiconductor industry in order to keep American manufacturing jobs. 

We worked to include the provisions in the NDAA in order to provide your agencies the capacity to increase federal support for semiconductor manufacturing by providing new incentives to build domestic manufacturing facilities, conduct advanced research and development of semiconductor technology, secure the supply chain, and ensure national and economic security by reducing reliance on foreign semiconductor manufacturing. These provisions will help ensure our domestic semiconductor industry can safely and securely supply consumers, our military, intelligence agencies, and other government needs. 

We hope that grants to states assisting in constructing, expanding, or modernizing commercial semiconductor fabrication, assembly, testing, packaging, and advanced R&D facilities can begin to be distributed by the end of this year. Additionally, Congress designated the Secretary of Commerce to fund semiconductor startups and a Manufacturing USA Institute as well as establish a National Advanced Packaging Manufacturing Program to reinforce a robust domestic semiconductor ecosystem. Construction of these facilities would change the economic landscape. 

Furthermore, the provisions call for the establishment of a National Semiconductor Technology Center through the Department of Commerce and a Department of Defense run National Network for Microelectronics Research and Development. These enterprises would allow for research prototyping of advanced semiconductor technology to strengthen our economic competitiveness and security of the domestic supply chain. Supporting research and the growing, global demand for this technology will be critical to remaining at the forefront of the technology revolution and leading the acceleration of next-generation semiconductors as we pave the way for our future economy. 

These provisions also support the creation of partnerships that bring together government, industry, and academia to create technology, training, and growth opportunities that are not available in the U.S. today. Specifically, the Secretary of Commerce and Secretary of Labor should encourage collaboration with the private sector on workforce training and apprenticeships in semiconductor manufacturing. Moreover, the Secretary of Defense can foster partnership programs with the private sector to provide incentives for the development of advanced, measurably secure microelectronics for use by the Department of Defense, Intelligence Community, critical infrastructure sectors of the U.S. economy, and other national security applications. 

As the semiconductor industry has increasingly become global, it is imperative that we secure the supply chains and ensure our national and economic security by reducing reliance on foreign semiconductor manufacturing. Through the Multilateral Microelectronics Security Fund, the administration can support the development and adoption of secure microelectronics and the security of its supply chains. This fund would also allow the U.S., its allies and partners to reach agreements promoting consistency in their policies related to microelectronics, greater transparency including supply chains, and greater alignment in export control and foreign direct investment policies.

These steps are essential to our national security and to U.S. leadership in this critical industry and we request you fully utilize these key provisions towards your solution in creating well-paying jobs, bolstering the semiconductor industry, and reducing our country’s dependence on foreign materials. Continued U.S. leadership in semiconductor technology, design, and fabrication is important to the U.S. economy and national security. We look forward to working with you to make investments in the U.S. semiconductor industry in the interest of our economic and security interests. 

Sincerely,