US announces $7.4B semiconductor research fund cancellation

The US Commerce Department on Monday announced the semiconductor research fund cancellation, ending a $7.4 billion program established for the first time by the Biden administration. The move came amid fears of "waste, fraud, and abuse" in the administration of the fund, officials continued.

The funds also would be used to help fund the National Semiconductor Technology Center (NSTC), a signature research program under the $52.7 billion CHIPS and Science Act of 2022. The act was signed into law by President Joe Biden, which had the goal to boost chip manufacturing in the US, improve national security, and reduce US dependence on overseas chipmakers, especially amid increased tensions with China.

With the semiconductor research fund cancellation, the NSTC will then be managed by the National Institute of Standards and Technology (NIST), a Commerce Department agency. The project formerly was managed by the National Center for the Advancement of Semiconductor Technology (Natcast), a non-profit organization created to enable public and private partners to support US semiconductor innovation.

Commerce Department’s Strong Rebuke

In its report, the Commerce Department assailed Natcast severely as "a semiconductor slush fund" accruing to political allies of the Biden administration. Political appointees controlled Natcast, the department charged, and credited the previous administration with squandering taxpayer funds.

"Natcast is a tax-payer funded, non-profit organization created and run by senior Biden Administration political appointees. The Trump Administration and the Department of Commerce are cutting waste, fraud, and abuse — taxpayer-funded think tanks and non-profits are a relic of the past," the department said.

Commerce Secretary Howard Lutnick gave the charges credibility by arguing that "from the beginning, Natcast was a semiconductor slush fund that did nothing but line the pockets of Biden loyalists with American tax dollars."

The semiconductor research fund cancellation is part of a broader effort by the Commerce Department to take back control of federal spending programs authorized by the CHIPS Act.

Charges of Illegal Structure

The Department then alleged that the Biden administration unlawfully founded Natcast, stating that it was founded as a loophole to circumvent the restrictions on the government agencies explicitly forming corporations. Authorities allege that this creation was done intentionally in an attempt to insulate Natcast from oversight and restrict the authority of future administrations.

“The Biden administration acted to protect Natcast from any true oversight or accountability and tie the hands of future administrations," the Commerce Department stated.

Natcast's Response

Natcast has nonetheless remained focused on the NSTC. In a statement last week, the group emphasized its support for White House initiatives, referring to itself as "a linchpin to realizing a more prosperous, competitive, and secure leadership position for America."

Natcast insisted that its programs were designed to enable collaboration between industry, academia, and government, and threatened that interference with funding would undermine US leadership in advanced semiconductor research.

Bigger Picture

The semiconductor research fund cancellation is calling into question the future of US semiconductor policy. The CHIPS and Science Act was met with broad acclaim as a historic move to push back against China's growing chip manufacturing and supply chain dominance. Critics now worry the cancellation will slow crucial research and development projects, compromising America's competitiveness on the world stage.

At the same time, critics of the decision believe that the NSTC's activities will persist within NIST, maintaining accountability and efficacy and preventing political abuse of taxpayer funds.

For an industry that is already balancing supply chain interruptions, geopolitical threats, and breakthroughs in technology, the uncertainty added by removing the semiconductor research fund is an additional layer of compounding uncertainty. Industry insiders are watching anxiously to see whether NIST can reclaim the reins and make headway in propelling US chip innovation.

Conclusion

The shelving of the $7.4 billion chip fund merely underscores the deep political discord over the best approach to America's chip ambitions. While opponents see the action as a setback for innovation, proponents expect it to halt corruption and restore accountability.

Whether the revoking of the semiconductor research fund is a short-term setback or lasting barrier will be witnessed, but the US competitiveness in the international chip race could not be higher.