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Biden administration says New Hampshire computer chip plant the first to get funding from CHIPS law

by Ethan Kim
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Semiconductor Investment

The Biden administration has announced a significant financial allocation of $35 million to BAE Systems for the purpose of expanding production at a computer chip manufacturing facility in New Hampshire. This facility specializes in the production of computer chips designed for military applications, including use in advanced military aircraft such as the F-15 and F-35 jets.

This allocation of funds marks a pivotal development as it represents the first disbursement of incentives provided under the bipartisan CHIPS and Science Act, which was enacted last year. This comprehensive legislation has earmarked over $52 billion to bolster the development and manufacturing of semiconductor technology within the United States.

The selection of a military contractor, BAE Systems, for this investment underscores the national security-oriented objectives of the CHIPS law. It reflects the recognition that modern weapons systems increasingly rely on advanced semiconductor chips, which hold the potential to play a critical role in both the prevention and engagement of conflicts.

President Joe Biden signed this legislation into law in August 2022, driven in part by concerns that a potential military conflict involving Taiwan could disrupt the global supply of advanced computer chips, potentially leading to a recession in the United States.

Commerce Secretary Gina Raimondo emphasized the importance of diversifying sources of advanced technologies, stating, “We can’t gamble with our national security by depending solely on one part of the world or even one country for crucial advanced technologies.” She views these investments as a unique opportunity to bolster both national security and economic interests while nurturing a sustainable domestic semiconductor manufacturing industry.

The COVID-19 pandemic had previously exposed the vulnerability of global computer chip supply chains, leading to shortages that impacted various industries, including automotive production in the United States, contributing to supply disruptions and price increases early in President Biden’s tenure.

The administration’s incentives have already attracted more than $230 billion in planned investments within the semiconductor and electronics sectors. President Biden has actively visited and promoted various manufacturing facilities, such as Intel in Ohio, Taiwan Semiconductor Manufacturing Co. in Arizona, and IBM investments in New York, using these commitments to bolster his economic policies and appeal to voters in anticipation of the 2024 elections.

In a statement, President Biden affirmed the commitment to further investment, stating, “Over the coming year, the Department of Commerce will award billions more to make more semiconductors in America, invest in research and development capabilities to keep America at the forefront of new technologies.”

Government officials highlight that the investment in BAE Systems’ facility will ultimately result in cost savings for taxpayers. As the company meets specified benchmarks, the funding will enable a fourfold increase in the plant’s production capacity, effectively reducing the cost of chip manufacturing by half and generating overall savings for federal agencies procuring these chips.

White House national security adviser Jake Sullivan emphasized that the benefits of this increased capacity extend beyond the United States, benefiting NATO allies and partners in Asia. However, he underscored the critical importance of expanding the domestic manufacturing base to safeguard U.S. national security interests, ensuring that critical needs are not contingent on vulnerable foreign supply chains, especially during moments of crisis.

Frequently Asked Questions (FAQs) about Semiconductor Investment

What is the CHIPS and Science Act?

The CHIPS and Science Act is a bipartisan legislation enacted to provide substantial financial incentives, totaling over $52 billion, aimed at advancing the development and manufacturing of semiconductor technology within the United States.

Why was $35 million allocated to BAE Systems?

The $35 million allocation to BAE Systems is intended to support the expansion of a computer chip manufacturing facility in New Hampshire that specializes in producing chips for military applications, including advanced military aircraft like the F-15 and F-35 jets.

What prompted the focus on national security in the CHIPS law?

The CHIPS law places a strong emphasis on national security due to the increasing reliance of modern weapons systems on advanced semiconductor chips. These chips are seen as crucial for both the prevention and engagement of conflicts, and their availability is deemed vital for the nation’s security interests.

Why did President Biden sign the CHIPS incentives into law?

President Biden signed the CHIPS incentives into law in August 2022, partly driven by concerns that a potential military conflict involving Taiwan could disrupt the global supply of advanced computer chips, potentially leading to a recession in the United States.

How has the COVID-19 pandemic impacted semiconductor supply chains?

The COVID-19 pandemic exposed the vulnerability of global computer chip supply chains, resulting in shortages that affected various industries, including automotive production in the United States. This disruption led to supply constraints and price increases.

What is the expected impact of these incentives on the semiconductor industry?

The incentives provided by the Biden administration have already attracted more than $230 billion in planned investments within the semiconductor and electronics sectors. These investments are expected to strengthen the domestic semiconductor industry and promote research and development capabilities in the United States.

What is the long-term goal of the Department of Commerce regarding semiconductors?

The Department of Commerce intends to continue awarding billions of dollars to support increased semiconductor production in the United States. Additionally, they aim to invest in research and development to ensure that the country remains at the forefront of new semiconductor technologies.

How will the investment in BAE Systems’ facility benefit taxpayers?

The investment in BAE Systems’ facility is expected to result in cost savings for taxpayers. As the company meets specific benchmarks, the funding will enable a fourfold increase in the plant’s production capacity, effectively reducing the cost of chip manufacturing by half and generating overall savings for federal agencies purchasing these chips.

What is the international significance of this increased chip production capacity?

White House national security adviser Jake Sullivan emphasized that NATO allies and partners in Asia will also benefit from the increased chip production capacity. However, he stressed the critical importance of expanding the domestic manufacturing base to ensure that critical national security needs are not dependent on vulnerable foreign supply chains, especially during times of crisis.

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