Key Takeaways
- •Witnesses and members highlighted the shift from CHIPS Act grants to government equity stakes and the dismantling of Natcast, threatening long-term U.S. semiconductor research and development leadership.
- •Jason Grebe (Senior Vice President of Corporate Planning, Intel) urged Congress to extend the Advanced Manufacturing Investment Credit and provide targeted tariff exemptions for specialized manufacturing inputs.
- •Rep. Soto (D, FL-9) questioned Grebe on the federal government becoming a 10 percent stakeholder in Intel, which Grebe defended as a bipartisan effort to accelerate domestic manufacturing.
- •Democrats criticized the administration for cutting research personnel and programs, while Republicans prioritized permitting reform and countering Chinese state subsidies to ensure American technological dominance.
- •Failure to extend the manufacturing tax credit by 2026 risks stalling private investment as the U.S. competes with China’s $150 billion state-led semiconductor funding strategy.
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Hearing Analysis
Overview
This hearing examined the current state of the United States semiconductor ecosystem, focusing on the strategic necessity of domestic manufacturing to support the burgeoning artificial intelligence (AI) sector and maintain national security. Members and witnesses discussed the decline of American semiconductor manufacturing capacity—which has dropped from 36 percent in 1990 to approximately 10 percent today—and the urgent need to counter the aggressive industrial policies of the People's Republic of China. The discussion centered on the implementation of the CHIPS and Science Act, the impact of AI on chip demand, and the regulatory hurdles hindering the construction of new fabrication plants (fabs).
Key Testimony & Policy
Witnesses emphasized that leadership in semiconductors is the prerequisite for leadership in AI. Jason Grebe, Senior Vice President at Intel Corporation, testified that Intel is investing over $100 billion in facilities across Arizona, New Mexico, Oregon, and Ohio. He argued that the U.S. must build its own infrastructure to avoid dependency on foreign entities, noting that 90 percent of leading-edge production is currently concentrated in Taiwan. Grebe specifically called for the extension of the Advanced Manufacturing Investment Credit (AMIC) under IRC Section 48D, which is set to expire at the end of 2026, and urged for "smart" tariff policies that do not penalize domestic manufacturers for importing specialized tools or chemicals unavailable in the U.S.
Asad Ramzanali, Director of AI Technology Policy at the Vanderbilt Policy Accelerator, provided a critical assessment of the CHIPS and Science Act's implementation. While noting the success of the $39 billion manufacturing incentive program in putting the U.S. on track to produce 28 percent of advanced chips by 2032, he expressed deep concern over the "gutting" of the $11 billion R&D program. Ramzanali highlighted the recent closure of the National Center for the Advancement of Semiconductor Technology (Natcast), a nonprofit intended to manage R&D funds, and warned that the current administration's shift toward broad funding solicitations might merely subsidize activities the industry would have undertaken anyway.
The hearing also addressed the financial risks inherent in the AI boom. Ramzanali warned of "circular financing" involving NVIDIA Corporation, which holds a 90 percent market share in AI chips. He noted that NVIDIA and major cloud providers like Microsoft, Google, and Amazon are investing in the very AI model companies that purchase their chips, potentially inflating revenues and creating systemic risks for the broader economy. Meanwhile, Jason Oxman, President and CEO of the Information Technology Industry Council (ITI), advocated for permitting reform, specifically regarding the Clean Air Act and the Toxic Substances Control Act (TSCA), to accelerate fab and data center construction.
Notable Exchanges & Partisan Dynamics
The hearing featured significant partisan disagreement regarding the current administration's management of semiconductor policy. Rep. Kathy Castor (D, FL-14) and Rep. Yvette Clarke (D, NY-9) criticized the Trump administration for slashing personnel in the CHIPS Program Office and shutting down Natcast, labeling these moves as "self-sabotage." They argued that these actions, combined with "chaotic" tariffs and a "reckless" conflict with Iran, were disrupting supply chains for critical materials like noble gases and rare earth minerals.
Conversely, Republican members focused on the need for deregulation and tax incentives. Rep. Gabe Evans (R, CO-8) questioned witnesses on how outdated interpretations of the Clean Air Act delay projects, while Chairman Gus Bilirakis (R, FL-12) and Rep. Brett Guthrie (R, KY-2) emphasized the existential threat posed by China’s $140 billion investment in its own chip ecosystem.
A specific point of contention arose regarding the U.S. government's 10 percent equity stake in Intel. Rep. Darren Soto (D, FL-9) questioned the nature of this arrangement, while Ramzanali argued that converting grants to equity stakes without clear legal authority removed important taxpayer protections and project milestones. Grebe defended the agreement, stating it aligned the interests of the taxpayer with Intel’s success in reshoring manufacturing.
Organizations Mentioned
- Intel Corporation: Discussed as the only American company designing and manufacturing leading-edge logic chips at scale; currently receiving $8 billion in CHIPS Act grants and $3.2 billion via the Secure Enclave program. - People's Republic of China (China): Identified as the primary strategic competitor, criticized for using state subsidies to dominate rare earth materials and foundational semiconductor nodes. - National Center for the Advancement of Semiconductor Technology (Natcast): A nonprofit recently shut down by the Department of Commerce, which witnesses argued was essential for long-term R&D and workforce development. - NVIDIA Corporation: Highlighted for its 90 percent market share in AI chips and its role in "circular financing" with major cloud and AI model companies. - U.S. Department of Commerce: Discussed regarding its role in administering CHIPS Act funds, recent staffing cuts, and the decision to move away from the Natcast model. - National Science Foundation (NSF): Praised as a critical national security agency for R&D, though witnesses noted its funding remains insufficient to compete with Chinese investment. - Taiwan Semiconductor Manufacturing Company (TSMC): Mentioned in the context of its new Arizona facilities and the broader strategic risk of chip production concentration in Taiwan. - Information Technology Industry Council (ITI): Represented by Jason Oxman, the group advocated for permitting reform, tax credit extensions, and access to global markets.
What's Next
Several legislative and regulatory deadlines were identified as critical for the semiconductor sector. The Advanced Manufacturing Investment Credit (AMIC) is scheduled to expire at the end of 2026, with industry witnesses urging an immediate extension to provide investment certainty. Additionally, the Environmental Protection Agency’s (EPA) TSCA fee authority expires on September 30, which witnesses suggested is an opportunity for Congress to reform the "laborious" chemical qualification process. Members indicated that further oversight hearings may be necessary to investigate the "circular financing" risks in the AI market and the status of R&D funding following the dissolution of Natcast.
Transcript
The chairman recognizes himself for five minutes for an opening statement. Good afternoon everyone and welcome to today's hearing examining the state of the semiconductor ecosystem. From consumer devices and household items to AI applications, semiconductors or chips are critical components to today's society and are essential to our national and economic security. Semiconductors come in many forms as you know, logic and memory, leading edge and legacy, each serving distinct and indispensable functions across the economy. For decades the U.S. has dominated the world stage of semiconductors, leading in areas such as global revenue, manufacturing capacity, and semiconductor design to name just a few. But that leadership is no longer guaranteed unfortunately. American semiconductor manufacturing capacity has declined over 25 percent since 1990. Our adversaries, particularly China, are actively seeking to unseat us from global leadership and disrupt our supply chains. Through my work on the Energy and Commerce Committee and the Select Committee on China, I've seen firsthand the strengths and strategic vulnerabilities of the U.S. semiconductor ecosystem that defines our strategic competition with China. While the U.S. remains a leader in semiconductor design, China is rapidly scaling its own capabilities, backed by significant state subsidies and maintains a dominant position in the rare earth materials critical to chip production. At the same time, demand for semiconductors is being transformed by artificial intelligence. AI applications are among the most critical use cases of semiconductors in today's society. AI is the leading use case for semiconductors and the AI surge is responsible for over half of the total semiconductor revenue, potentially reaching $500 billion this year and $1 trillion by 2030. AI is a critical driver of economic growth as you know, seeding global leadership or leaving our semiconductor supply chains vulnerable to disruption at the hands of China could be catastrophic for U.S. leadership in AI. The good news is that we have not ignored these emerging threats. Between congressional and executive action, including actions in this committee, there's been an array of actions to strengthen U.S. global semiconductor leadership. This hearing will also examine those solutions and consider what other actions may be taken. Thank you again to all of our witnesses for being here. We appreciate you so very much. Thanks for the time. I'm looking forward to hearing your expertise and to the conversation ahead. So I'll yield back and recognize the ranking member of the full committee, actually the subcommittee, Ms. Schakowsky, for her five minutes for an opening statement. You're recognized.
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