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What the federal semiconductor bill could mean for GlobalFoundries

A man walks down in a hallway in a building with the words Global Foundries written on the wall.
Kevin Trevellyan
/
Vermont Public
GlobalFoundries, which operates a plant in Essex Junction seen here, stands to financially benefit from a bill passed by Congress last week.

A bill passed by Congress last week will invest billions of dollars in the American semiconductor industry. It’s now on President Joe Biden’s desk, and he’s expected to sign it.

The bill would send over $52 billion to domestic computer chip makers. That includes GlobalFoundries, which operates a plant in Essex Junction and is Vermont’s largest private sector employer. 

Reporter Henry Epp spoke about what this bill could mean for GlobalFoundries with Anna Van Dine on our daily news podcast, The Frequency. Their conversation has been edited for clarity and brevity.

Anna Van Dine: Henry, you’ve been covering GlobalFoundries for a while now. What would getting some of this $52 billion mean for the company?

They haven’t told me how much they’ll receive, but they’re in line to get a significant chunk of change from the federal government. And they could use that money to invest in their facilities, like the one in Essex, and they could also hire more people.

While they wouldn’t provide specifics, the company put out a statement after the bill passed last week, saying the funds they’ll receive will add on to investments they’re already making at their plants in Vermont and New York. They mentioned major investments at their headquarters in Malta, New York, where they’re building an entirely new plant, or “fab” as they’re called. No such details about Vermont in their statement, but they indicated they would invest in Essex as well.

This bill, which is called the CHIPS Act, wouldn’t just be giving them money, it would also give them a tax credit. It would apply a 25% tax discount when companies buy the machines used to make semiconductors. Those machines are really expensive. They cost millions of dollars each. Doug O’Laughlin, who publishes a newsletter about the semiconductor industry, told me this tax credit would be a big deal for GlobalFoundries.

"Global Foundries is spending billions a year," O'Laughlin said. "So those billions of dollars, they essentially get a 25% rebate straight back to them."

So they’ll likely benefit financially, which could lead to equipment upgrades and more jobs. But why does Congress and the Biden administration want to send so much money to the semiconductor industry in the first place?

Three big reasons: National security, competition with China, and the supply chain. A few months ago, we heard a lot about a shortage of semiconductors, which was impacting the availability of all kinds of products that rely on them, such as cars, phones and computers. So it’s partially a response to that shortage: To incentivize companies to make more semiconductors, thus tackling supply chain issues, and make them here in the U.S.

More from NPR News: < The semiconductor shortage (still)

That’s because the U.S. is increasingly reliant on chips made in Taiwan, and other parts of Southeast Asia. Obviously there's a lot of geopolitical tension between the U.S. and China, so this is an attempt to make the U.S. less reliant on foreign-made chips. This will likely grow the domestic semiconductor industry, but realistically, it's not going to end our reliance on chips from other countries, said Doug O’Laughlin.

"With $52 billion, can we just wave our hands and say semiconductors are now made in America? Not at all," he said. "We can say some of them are and it's much more friendly to do it here."

As for national security, the bill will also invest in research and development of chips used by the department of defense. The Essex plant makes some of those chips, so there could be some local benefit from that part of the bill as well.

So, it sounds like this bill could potentially bring investments and jobs to Vermont. If that’s the case, I’m assuming our whole congressional delegation voted in favor of the bill?

Well, two-thirds of it. Rep. Peter Welch voted for it. Sen. Patrick Leahy missed the vote because he was recovering from a broken hip, but touted that he signed off on the bill as President Pro Tem of the Senate, before sending it to President Biden. But Sen. Bernie Sanders was not on board. He repeatedly called this bill a “blank check” for the semiconductor industry. He noted on the Senate floor last week that he hears his colleagues worry about the deficit when considering things like Medicare expansion or the child tax credit.

"But it’s not a concern when you provide massive corporate welfare for enormously profitable corporations," Sanders said.

Sanders voted against the bill and was pushing to add more requirements to the spending, to ensure that companies don’t use the funds to buy back their own stock or move jobs overseas. He did not get all he wanted, though the Biden administration has said there are “guardrails” in the bill to make sure companies use the money to expand their domestic operations.

Finally, Henry, going back to GlobalFoundries, I remember we talked months ago about the company wanting to become their own power utility here in Vermont to cut costs. Whatever happened to that?

That is still in the works. GlobalFoundries wants to buy their power directly from the grid, rather than through Green Mountain Power, in order to save money. Environmental groups have opposed this move, over concerns that GlobalFoundries could skirt renewable energy standards.

More from Vermont Public: GlobalFoundries revises its utility proposal, but a key legal question remains

After months of legal wrangling and preparations, hearings before the Public Utility Commission in this case are scheduled to start later this month. That will ultimately determine whether GlobalFoundries can go forward with their utility plan.

Have questions, comments or tips? Send us a message or get in touch with reporter Henry Epp @TheHenryEpp.

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Henry is a reporter and co-host of The Frequency, VPR's daily news podcast.
Anna is a reporter and co-hosts VPR's daily news podcast, The Frequency, with Henry Epp.
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  • For decades, GlobalFoundries’ factory in Essex Junction has pumped out computer chips. With over 2,000 employees, the company is Vermont’s largest private, for-profit employer. Now, there’s a worldwide chip shortage leading to more business for the plant, which has seen its workforce shrink significantly from its heyday. But the company is investing more heavily in a facility over the New York border, leading some local leaders to question the company’s long-term commitment to Vermont.
  • Semiconductor manufacturer GlobalFoundries submitted a revised proposal Friday to buy electricity for its Essex Junction plant directly from the grid, bringing it in line with Vermont’s renewable energy requirements. But the proposal leaves questions about the plan’s legality.
  • Back in March, GlobalFoundries — one of the state’s largest employers and biggest consumers of electricity — announced a deal to stop buying electricity from Green Mountain Power and become its own utility. That proposal is now before the Public Utility Commission, the state body that regulates utilities.In the months since it was announced, the deal has raised some big questions: How will GlobalFoundries cut carbon emissions at its Essex Junction plant? Will they be held to the same clean energy standards as other utilities? And does the PUC even have the authority to allow this move?