Intel: No CHIPS Act, no groundbreaking ceremony

Congressional inaction could affect $100 billion project

Intel confirmed in late June it would postpone the groundbreaking ceremony on its $20 billion project in New Albany to construct two semiconductor plants, which could increase to eight plants at a cost of $100 billion. The postponement of the July 22 event, according to a prepared statement released by Intel on June 23, was in response to Congressional inaction on legislation it considers important for the domestic production of semiconductors.

This decision, according to Dorsey Hager, Executive Secretary-Treasurer of the Columbus/Central Ohio Building and Construction Trades Council, has the potential to impact future phases of Intel’s grand construction plans for Central Ohio. 

“If politicians in Washington, D.C. keep playing politics, it could cost us jobs,” Hager said.

Phase One of the project is expected to create over 7,000 union construction jobs, as Intel builds two plants, also known as fabs, in Licking County.Intel’s initial investment of $20 billion makes the project the largest construction project in the history of Ohio, and additional proposed phases could push the total to $100 billion. However, without support for the Creating Helpful Incentives to Produce Semiconductor (CHIPS) for America Act, the other $80 billion of work may not occur. 

At the center of the holdup is the CHIPS Act, a bill designed to onshore chip manufacturing in America. The legislation was initially intended for only American-based semiconductor manufacturers but was opened to foreign-based manufacturers as well. It is designed to encourage these companies to build factories in the U.S. and manufacture semiconductors in America to help alleviate the “chip” shortage. 

The proposed language will provide an income tax credit for semiconductor equipment or manufacturing facility investment through 2026. It also includes the establishment of a Manufacturing USA institute for semiconductor manufacturing.  

While both the U.S. House and Senate passed the CHIPS Act, there are significant differences in the two bills. According to Reuters, the Senate legislation, passed in June 2021, included $52 billion for chips subsidies and authorized another $200 billion to boost U.S. scientific and technological innovation to compete with China.

However, the House version, passed in February, is nearly 3,000 pages long and includes a number of trade proposals not in the Senate bill. So far, it appears Democrats and Republicans are not willing to compromise. 

Democrats in the House want to pass the CHIPS Act as part of the $300 billion United States Innovation and Competition Act (USICA). Republicans in both the House and Senate are concerned with the high price tag of the USICA, along with other provisions within the bill, including immigration. 

While talks continue, there is no indication either side is willing to break the stalemate.

Hager though, is optimistic the bill will eventually pass, and not dramatically impact Intel’s overall plan for central Ohio.

During a joint event in January between the state of Ohio and Intel announcing the project, Keyvan Esfarjani, Senior Vice President of Manufacturing, Supply Chain and Operations at Intel, stressed the importance of the CHIPS Act to the project. 

“The scope and pace of Intel’s expansion in Ohio, however, will depend heavily on funding from the CHIPS Act,” he said. 

In their prepared statement on the postponement, Intel confirmed their intent to construct Phase One, but also reaffirmed other phases will be affected should Congress not pass the CHIPS Act. 

“We are excited to begin construction on a new leading-edge semiconductor manufacturing plant in Ohio, and grateful for the support of Governor DeWine, the state government and all our partners in Ohio,” the company said. “As we said in our January announcement, the scope and pace of our expansion in Ohio will depend heavily on funding from the CHIPS Act.”

During a late June appearance with Ohio Sen. Rob Portman at the Aspen Ideas Festival, Intel CEO Pat Gelsinger told CNBC he is not a delay guy, and the idea of announcing a delay, “sucks.” 

According to Intel’s website, these subsidies create a 30 percent to 50 percent cost disadvantage for companies that produce semiconductors in the U.S. If approved, the CHIPS Act would level out this disadvantage. The CHIPS Act would cap Intel’s subsidies at $3 billion for each fab in Columbus, which according to CNBC, would allow Intel to remain competitive. Besides Intel, multiple other semiconductor manufacturers are relying on CHIPS Act funding to either build or expand facilities. 

“It is time for Congress to act so we can move forward at the speed and scale we have long envisioned for Ohio and our other projects to help restore U.S. semiconductor manufacturing leadership and build a more resilient semiconductor supply chain,” Intel said in its prepared statement.