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Department of Defense Allocates Funding for Chip Development to Support Domestic Research

The Biden administration on Wednesday announced that it was awarding $238 million through the Defense Department to set up eight hubs around the United States for promoting innovation in the semiconductor industry.

The funds are one of the earliest releases of the nearly $53 billion in grants and subsidies that Congress and the Biden administration have approved to build up the domestic semiconductor industry, which U.S. officials say has been left vulnerable by decades of offshoring.

The Biden administration has a variety of funding programs in the works to encourage chip research institutions and manufacturers to set up operations in the United States. Most of these programs are run through the Commerce Department, and many will begin handing out money this fall.

While U.S. companies still design many of the world’s most advanced chips, much of the manufacturing of the technology has been outsourced to foreign locations, including Taiwan, leaving U.S. chip supply vulnerable if, for example, the Chinese government were to invade Taiwan.

The awards announced Wednesday will go to research institutes, consortiums and universities located in New York, Arizona, Indiana, Ohio, California, North Carolina and Massachusetts, defense officials said.

Each hub will receive $15 million to $40 million to fund the development of new chips for use in electromagnetic warfare, artificial intelligence, 5G and 6G wireless technologies, and quantum computing, among other areas. While the research will be directed at meeting the needs of the Defense Department, it is also expected to be useful for commercial applications.

Kathleen Hicks, the deputy defense secretary, said in a news conference Wednesday that the hubs would “tackle many technical challenges relevant to D.O.D.’s missions, to get the most cutting-edge microchips into systems our troops use every day: ships, planes, tanks, long-range munitions, communications gear, sensors and much more.”

The funding also aims to accelerate what the industry refers to as the “lab-to-fab transition,” the process of taking new chip technologies and turning them into viable commercial products.

David A. Honey, the deputy under secretary of defense for research and engineering, said the hubs would bring more prototype work to the United States.

“Now we’ll be able to get it done here,” he said. “And also we’re building out in the areas that are just not available anywhere else.”

The Commerce Department is separately setting up a string of research hubs for the semiconductor industry, collectively called the National Semiconductor Technology Center, drawing on $11 billion in funding it received for research and development.

Appearing before the House Science, Space and Technology Committee on Tuesday, Gina Raimondo, the commerce secretary, said that her department was on track to formally unveil that technology center this fall.

She also said that the department had received about 100 applications from companies hoping to receive grants that will be available to manufacturers.

While Ms. Raimondo acknowledged that the grant program faced challenges, like securing enough workers to staff new chip plants, she said that if properly implemented, the program would make the United States “the premier destination in the world” for chip design, research and manufacturing.

“That’s the vision that we’re trying to achieve with your support,” Ms. Raimondo told lawmakers.

Ms. Raimondo was also questioned about the release in prior weeks of an advanced smartphone by Chinese telecom giant Huawei. The company is under heavy U.S. trade restrictions, administered by the Commerce Department, that theoretically should have prevented such an innovation.

Ms. Raimondo said that she was upset by the development, but added that the U.S. government did not have any evidence that Chinese companies could manufacture the more sophisticated chips at scale.

Ms. Raimondo said that the United States could take various defensive measures to limit China’s access to advanced technology, but “my strongly held view is that what we do on offense matters so much more.”

“The reality is that over the past 30 years, this country has taken its eye off the ball of manufacturing,” she continued. “And when you don’t manufacture you lose out on innovation, and you become dependent on other countries.”

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