President Joe Biden is set to declare one of the largest federal investments in US chip manufacturing on Wednesday. The investment, a $8.5 billion grant, will be awarded to tech giant Intel. This announcement comes as Biden visits the politically significant state of Arizona and seeks to highlight his key legislative achievements to voters.
However, it will take years for new manufacturing projects to become operational. There are already environmental concerns regarding the sufficiency of water in Arizona to support the future needs of chip manufacturing.
The funding for several Intel projects, located in Arizona and three other states, is sourced from the CHIPS and Science Act. This act, one of Biden’s most significant legislative victories, was passed with bipartisan support in the summer of 2022.
The Biden administration has so far announced awards for only three other companies under the CHIPS Act. The law aims to boost domestic manufacturing of semiconductor chips, an industry where the US, once a leader, now manufactures only about 10% of the global supply.
The CHIPS Act funding is intended to address what Commerce Secretary Gina Raimondo described as a “national security problem” due to America’s reliance on Asia for most leading-edge chip production.
The preliminary funding agreement announced Wednesday includes the $8.5 billion grant and up to $11 billion in loans. This funding will support the construction, expansion, or modernization of Intel facilities in Arizona, Ohio, New Mexico, and Oregon.
In Chandler, Arizona, the funding is expected to support two new manufacturing facilities, known as fabs, and the modernization of an existing one. This will create 7,000 construction jobs and 3,000 manufacturing jobs, according to the White House.
Environmental Concerns
Water is a scarce resource in Arizona, which has spent much of the past two decades in drought. With new industries like semiconductor manufacturing coming in, competition for water with agriculture and housing developments appears to be growing.
Chip manufacturing is less water-intensive than growing crops, but it still requires a significant amount of water to cool down machinery and continuously rinse silicon wafers during production.
In Arizona, balancing economic growth with sustainable water usage has been a concern for years. However, manufacturers like Intel and Taiwan-based TSMC are exploring ways to recycle their water and reduce overall use.
Demand for Semiconductor Chips
About $39 billion from the CHIPS Act will go to companies building, expanding, or modernizing chip plants in the United States. Some companies will also be eligible for tax credits.
The Biden administration has received more than 600 statements of interest and preliminary applications. However, setting guidelines and creating an application process took time, which is administered by the Department of Commerce.
Potential Construction Delays
Even before the government doled out any of the money authorized by the CHIPS Act, the legislation has helped spark some private investments in the chips industry.
However, the timeline for construction on some of these projects may end up taking longer than initially expected. In January, TSMC said its second factory in Arizona will be delayed.
Intel told CNN in an email Wednesday that it won’t meet the “aggressive 2025 production goal,” but that construction has been underway in Ohio since 2022 and has been “proceeding on schedule.”
It may take years for new facilities to get to operational status, but local economies will see the demand for construction jobs as soon as there are shovels in the ground.