Commerce Secretary Howard Lutnick is signaling a potential halt in the disbursement of promised grants under the 2022 Chips and Science Act, as he seeks to secure larger investments from semiconductor companies in exchange for federal subsidies. According to sources familiar with the matter, Lutnick is pressuring firms to significantly expand their U.S.-based projects, mirroring the approach taken by Taiwan Semiconductor Manufacturing Co. (TSMC), which recently pledged an additional $100 billion to U.S. operations on top of a prior $65 billion commitment.
Lutnick’s push aims to increase semiconductor investment in the U.S. without raising the size of federal grants already allocated, the sources noted. However, Lutnick’s team has warned that previously agreed-upon subsidies could be withheld if companies do not meet the heightened expectations. While Lutnick has expressed an interest in expanding the 25% tax credit associated with the Chips Act—an incentive that many companies value more than the direct funding—such a move would require Congressional approval.
A Commerce Department spokesperson did not respond to requests for comment on the matter.
The Chips Act, a bipartisan law passed to revitalize the U.S. semiconductor industry, allocated $52 billion to counter decades of production outsourcing to Asia. However, since taking office, Lutnick’s team has delayed the release of funds, as the administration reviews existing agreements. Companies that signed preliminary agreements under President Biden’s administration now face uncertainty over when, or even whether, they will receive their grants.
Notably, TSMC recently reached a milestone that was expected to trigger a $750 million disbursement from its Chips Act award, though the payment’s status remains unclear. Similarly, Wolfspeed Inc., a North Carolina-based semiconductor manufacturer, indicated that its $750 million Chips Act deal could undergo changes.
In addition to the potential withholding of grants, Lutnick’s team has also discussed the creation of a new office within the Commerce Department designed to encourage large-scale investments in the U.S. The United States Investment Accelerator will oversee projects exceeding $1 billion and manage semiconductor subsidies, a move intended to expedite investments in the sector.
The U.S. semiconductor industry stands to benefit from several large players, including Intel, Micron, and Samsung, all of whom are set to receive more than $1 billion in Chips Act grants. However, some companies, like Samsung, have scaled back their investment plans, while Micron’s plans for a third facility in New York are currently under review.
Lutnick’s approach aligns with a broader strategy, including tariff incentives, which aim to ensure that foreign manufacturers continue investing in U.S. semiconductor production. However, some critics, including former President Donald Trump, have called for the repeal of the Chips Act, arguing that tariffs would better incentivize domestic production.
Despite the challenges, the expansion of the 25% investment tax credit remains a key component of Lutnick’s efforts. The tax credit, which incentivizes investment in U.S. semiconductor manufacturing, is crucial for companies like TSMC. As discussions about extending the credit continue, the fiscal implications are significant. The Peterson Institute for International Economics estimated that expanding the credit could cost up to $85 billion in lost revenue—far higher than initial projections.
The ongoing negotiations surrounding the Chips Act reflect the tension between ensuring U.S. competitiveness in the global semiconductor market and balancing the economic costs of these ambitious investments.
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