The U.S. will grant California-based tech firm Intel $8.5 billion to boost domestic semiconductor production across four locations—Chandler, Arizona; New Albany, Ohio; Rio Rancho, New Mexico; and Hillsboro, Oregon—Commerce Department officials announced Wednesday, shortly before President Biden’s trip to Intel’s Ocotillo Campus in Chandler.
The funding comes from the CHIPS and Science Act, which lawmakers passed in 2022 after witnessing the strain on global supply chains in the wake of the Covid-19 pandemic.
The grants are expected to “directly create over 10,000 manufacturing jobs and nearly 20,000 construction jobs,” Commerce officials said. Intel has so far locked in $19.5 billion in federal grants and loans, which (along with another $25 billion in estimated tax breaks) the firm says it will fold into a much bigger $100 billion spending spree planned over the next five years, according to Reuters.
For the record: “Although semiconductors were invented in the United States, only about 10 percent of the world’s chips are made domestically,” the New York Times reports.
That kind of reliance on other nations is “an economic security problem. It’s a national-security problem. And we’re going to change that,” Secretary of Commerce Gina Raimondo said in a call with reporters Tuesday. With Intel’s current plans, that 10-percent figure is expected to double by the end of the decade, she said.
But not everyone is convinced. Some $3.5 billion of Intel’s grant will fund the creation of a “secure enclave” for building chips for defense and intelligence work. But: “We [already] have systems for getting the military the sensitive chips it needs,” a Congressional aide told The American Prospect, referring to an accreditation process already in place within the Department of Defense and emerging innovations that make it possible to assess the integrity of a chip at various stages of the production life cycle. “We could be investing more in modernizing technologies we already have to make it easier and more secure for any supplier to build these chips.” Read more on the secure enclave plan and its dissenters here.
Rewind: “For decades, Intel led the world in making the fastest and smallest semiconductors, selling them at a premium price and plowing the profits back into more research and development to stay ahead of the pack,” Reuters writes. “But Intel lost that manufacturing edge in the 2010s to TSMC and its profit margins plummeted as it cut prices to keep market share with inferior products.”
“It took us three-plus decades to lose this industry. It’s not going to come back in three to five years,” Gelsinger told reporters Tuesday. “I do think we’ll need at least a CHIPS 2 to finish that job,” he added.
Bigger picture: “Intel is the fourth company to receive a federal award under the new program, and brings the total announced grants to more than $10 billion,” the Times notes. “The first three grants—to GlobalFoundries, Microchip Technology and BAE Systems—were to makers of legacy chips, which are created with older production processes but are still used in many products like cars and dishwashers.”
More to follow? “Other major chip makers including Taiwan Semiconductor Manufacturing, Samsung Electronics and Micron Technology have applied for grants for projects each worth tens of billions of dollars, and those awards are expected to be announced soon,” the Wall Street Journal reports.
Read more: “A Review of the 2023 Semiconductor Market and a Look to 2024,” via the Semiconductor Industry Association, reporting one month ago.
In other industry developments:
Welcome to this Wednesday edition of The D Brief, brought to you by Ben Watson with Bradley Peniston. Share your newsletter tips, reading recommendations, or feedback for the year ahead here. And if you’re not already subscribed, you can do that here. On this day in 1922, the USS Langley was commissioned as the Navy’s first aircraft carrier.
U.S. troops are indeed conducting training with Taiwan, Taiwan’s Defense Minister Chiu Kuo-cheng confirmed last week, without elaborating greatly.
“This exchange is for mutual observation, to identify the problems we have, figure out how to improve and to recognize their strengths so we can learn from them,” Chiu told reporters Thursday.
Chiu was responding to a question about a recent report from SOFRep alleging U.S. special forces, via the Defense Department’s Special Operations Forces Liaison Element, have “started to take up permanent positions at the Taiwanese Army’s amphibious command centers in Kinmen and Penghu.” (For the record, Chiu did not confirm U.S. troops are on those outlying islands.)
ICYMI: In February, Taiwan’s United Daily News reported Green Berets were preparing for a long-term stay in Taiwan. Taiwan News picked up the story on March 2, about a week before SOFRep filed its report.
Background: “The U.S. planned to expand its presence of troops in Taiwan to between 100 and 200 last year, up from roughly 30 in 2022,” the Wall Street Journal reports, citing U.S. officials. And the matter is, of course, quite sensitive, with U.S. and Taiwanese officials staying “largely silent on the deployment as they attempt to avoid agitating Beijing.”
The bigger concern: What happens if China decides to blockade Taiwan? The island may only have about three months before its defense collapses. Taiwan Plus News explored the issue in a video report published one week ago, here.
There’s also a new book featuring Taiwan that’s coming out in late April. It’s called “World on the Brink: How America Can Beat China in the Race for the Twenty-First Century,” and it’s from Dmitri Alperovitch of the Silverado Policy Accelerator think tank, based in Washington.
Additional reading:
The Marine Corps’ is making progress on futuristic loitering munitions and unmanned missile launchers—but the work has been constrained by Congress’s failure to pass a new budget, the service’s assistant commandant said Monday. “What we can’t do is accelerate them as fast as I would like, and build a depth of magazine to the level that I would like,” Gen. Christopher Mahoney said in an interview with Defense One. Sam Skove has more.
Watch Mahoney’s full interview, which is part of the 2024 State of Defense series, here.
Afghanistan evac: what went wrong? For almost four hours, House lawmakers grilled Mark Milley, former chairman of the Joint Chiefs, and Kenneth McKenzie, former head of U.S. Central Command, about the chaos of the 2021 withdrawal. The retired generals pointed to the State Department, amid other things.
McKenzie said the chaos was due in large part to State Department foot-dragging before it ordered a non-combatant evacuation operation, or NEO, on Aug. 14. “As you are aware, the decision to begin a NEO rests with the Department of State, not the Department of Defense. Despite this, we had begun positioning forces in the region as early as 9 July, but we could do nothing to commence the operation of evacuation until NEO was declared,” Mckenzie said.
Other factors. “But that error would not have had such a terrible effect if not for a series of other interconnected developments, the generals said. The most important of those: former Afghanistan President Ashraf Ghani’s hasty departure in the middle of August,” wrote D1’s Patrick Tucker. Read on, here.
