By on November 30, 2021

Despite the semiconductor shortage having encouraged the automotive sector to repeatedly idle factories, word on the ground is that things are becoming more stable. Companies are seeing less production downtime overall and workers are reporting more reliable working conditions across the board. However, several automakers have continued to express concerns (e.g. Volvo), alleging that chip shortages could stretch deep into 2022, while the U.S. government ponders how to advance chip production in-country and become less dependent on Asian suppliers.

Commerce Secretary Gina Raimondo has been touring Michigan, meeting with union members and industry heads, and plans to urge Congress to move on a $52 billion in funding bill aimed at boosting domestic production. We’ve questioned the efficacy of the CHIPS Act before, primarily in relation to how the subsidies would be allocated. But there are new concerns that the plan will mimic the Biden administration’s EV subsidies by spending heaps of taxpayer money and giving union-backed organizations a larger cut. 

“We’re at an inflection point and we have to make choices,” Raimondo told the press ahead of her appearance at the Detroit Economic Club on Monday. “If we’re serious about restoring American leadership in the global economy, we have to start by rebuilding our semiconductor industry so we can meet the demands of this moment.”

Considering how many components the automotive sector has outsourced, there’s a case to be made for localized production without government incentives. But the Biden administration has said it wants to accelerate the process to ensure a robust economy as soon as possible. It’s highly similar to the EV tax credit scheme (via Build Back Better) and may include the same pro-union provisions that left many wondering how much of the proposal was actually about aiding legacy automakers, technology firms, and the White House’s political allies. However, concerns that union-related provisions would crop up in the CHIPS Act didn’t manifest until after Raimondo attended a roundtable at the UAW Region 1A headquarters.

“I am extremely focused on making sure that every penny is implemented and is transparent and that we get out of this investment what we need so that we create good jobs — good, union, high-paying jobs in America,” Automotive News quoted Raimondo as saying during the meeting. “And there will be strings attached.”

When pressed, the commerce secretary reportedly did not refute that those strings could be linked to union membership.

From AN:

“It’s premature to say,” Raimondo said, sitting a few feet away from UAW President Ray Curry.

The new wrinkle of potentially tying subsidies of chip manufacturing to union jobs comes as Michigan Sen. Debbie Stabenow and U.S. Rep. Dan Kildee are trying to get an additional $4,500 tax credit for EVs assembled in U.S. factories represented by a labor union added to Biden’s Build Back Better social spending bill.

Biden endorsed the Stabenow-Kildee provision during a visit to GM’s Factory One EV plant in Detroit earlier this month. Curry, the UAW president, mentioned the Stabenow-Kildee provision during remarks Monday about the need for passage of both the Build Back Better bill and the microchip production legislation.

Auto executives who attended Monday’s meeting with Raimondo said the year-long shortage of microchips has not eased much in the second half of the year.

“It’s still very hand-to-mouth,” Lear CEO Ray Scott said. “Are we better than the second quarter? Yes … but it’s literally daily line-of-sight in inventories.”

After months of idled plants and decreased output of new vehicles, automakers are eager to get a national public policy focused on boosting domestic production of microchips.

“We need to get beyond the meetings and get additional chips,” said Jonathan Jennings, Ford’s vice president of global commodity purchasing and supplier technical assistance.

Raimondo said passing the CHIPS Act would be vital for ensuring President Biden’s goal of ensuring 50 percent of all U.S. vehicles on the road are electric within the next 10 years. She expects Congress to move forward on passing it without many impediments, too. But the opposition has pointed out that the political split on infrastructure is widening, as conservative and independent legislators are shying away from unrestrained government spending — especially when inflation has become a serious concern and there’s a chance preferential treatment will be given to organizations that already favor the Democratic Party.

Automotive News noted that the UAW visit was attended exclusively by Democratic politicians. Though the event’s organizer, U.S. Rep. Debbie Dingell, stated that Republican Rep. Fred Upton had originally planned to make an appearance but could not due to a conflicting schedule. Democrat Michigan Gov. Gretchen Whitmer, Sen. Gary Peters (D-Bloomfield Township), and Sen. Debbie Stabenow (D-Lansing) did manage to show up, however.

“This is not a partisan issue,” Dingell said.

Your author is less concerned with the presumed political allegiances (you’re not going to separate UAW leadership from the Democratic Party anytime soon) and more worried about the way in which funds are being allocated.

Linking those electric vehicle incentives to unions put Tesla at a noteworthy disadvantage, despite it being the largest American producer of EVs by far. If the Biden administration was wholly concerned with promoting electrification or ensuring funding was allocated fairly, the un-unionized Tesla would be getting a larger share of the whole and more money would be set aside for building a national charging network. We’ve even questioned the need for additional EV subsidies on multiple occasions, with myself and Jo Borrás coming to similar conclusions. We don’t need them and they’re not working as advertised.

It would be a shame to see the chip solution flattering in a similar manner, especially considering this is all being done under the auspices of saving the American economy. But there are concerns that too little of the proposed investments go toward building the kind of chips the automotive sector actually uses. Of the proposed $52 billion, only $2 billion will be used to prioritize the older chips that go into cars.

Then there’s the matter of the government considering the implementation of the Defense Production Act to force automakers to furnish information pertaining to semiconductor supply lines and chip sales. On the one hand, having that data would help lawmakers make informed decisions and determine whether or not certain companies were “hoarding” semiconductors on the sly and using it as an excuse for production lapses. On the other, this would represent the kind of federal involvement in business normally reserved for wartime.

Raimondo believes passing the CHIPS Act would result in 6 new domestic microchip plans within 18 months. Michigan wants to house as many of those as it can, so a bit of political influence and favoritism is bound to take place. But the United States has been pouring more money into infrastructure programs than ever before and we need to ensure those plans will actually assist in bolstering the economy and ensure reliable access to semiconductor chips. All in all, there are not many good solutions for this problem. But there are plenty of bad ones and we should probably remain mindful of that fact.

[Image: Orhan Cam/Shutterstock]

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31 Comments on “Report: Biden Admin May Link Semiconductor Subsidies to Unions...”


  • avatar
    28-Cars-Later

    “Automotive News quoted Raimondo as saying during the meeting. “And there will be strings attached.””

    What patriotic junta Yellen (and perhaps Klain) are leading. Watch it be linked to injections for UAW members come the spring (or the next contract).

    “especially when inflation has become a serious concern and there’s a chance preferential treatment will be given to organizations that already favor the Democratic Party.”

    “subdivisions of the Democratic Party.” FIFY.

  • avatar
    Lou_BC

    “But there are new concerns that the plan will mimic the Biden administration’s EV subsidies by spending heaps of taxpayer money and giving union-backed organizations a larger cut of the money’

    Evidence?

    Isn’t the EV “subsidy” just a tax break on EV’s?

    Semi-conductor industry isn’t necessarily tied to the auto industry.

    TTAC now TTASC? The Truth About Semi-Conductors?

    • 0 avatar
      Matt Posky

      Is this comment a joke?

      We’ve been discussing semiconductors for over year because the automotive sector continues using the shortage as an excuse (valid or not) for why it’s been cutting production, which has increased vehicle pricing and impacted tens of thousands of auto manufacturing jobs. The U.S. government has also repeatedly claimed the CHIPS Act will primarily help domestic carmakers. This article was literally about how officials met with the UAW to discuss the issue this week.

      • 0 avatar
        Lou_BC

        “Is this comment a joke?”

        Projecting again!

        Yes, the semi-conductor shortage affects the auto industry. Are domestic (read USA) semi-conductor manufacturers unionized?
        Spending billions on semi-conductor manufacturing will help the auto industry and EVERY industry that sells products using them.

  • avatar
    ToolGuy

    Jonathan Jennings doesn’t like meetings? I like this guy!

  • avatar
    SCE to AUX

    What a sickening game.

    And, it’s ridiculous for them to tie future EV production to the chip shortage, as though EVs are more dependent on chips. Mfrs have already cut features from their existing products, which aren’t EVs.

    • 0 avatar
      slavuta

      All I want is a car without all the nannies and electronics. I am fine not having a sticking out screen. Everybody has a phone for navigation.
      Show me, which one is like this now?

  • avatar
    redapple

    Debbie Dingell>? Oh jeez. Michigan’s Nancy Pelosi.

  • avatar
    FreedMike

    I think the intent here is to make sure the jobs created go to domestic workers, which I’m 110% down with. Thus, the unionization requirement. But that clearly stinks of political payback. Seems to me a better way to do that would be to implement domestic-content requirements, which takes the political payback argument off the table.

    But this illustrates once again what I’ve said time and time again: this stuff happens because elected officials are paid off by special interests. And before those of you with a rightist bent say, “yeah, it’s the Dems that are crooked,” take a long look at the payola heading into GOP coffers.

    Campaign finance reform can’t happen soon enough.

    • 0 avatar
      Matt Posky

      This is extremely sound cautionary advice. One party’s shenanigans never means the other is exempt from past or future wrongdoing.

      I do wonder if we’ll ever get money of of politics, however, since I can’t see legislators ever voting against a payday. Fingers crossed.

  • avatar
    aja8888

    The government of this country needs to get its nose out of business. It does this to play favorites and get votes. It’s sickening.

    • 0 avatar
      slavuta

      And then some analysts like Kudlow will say, “We’re not Russia. We’re not supposed to do this”
      I say – “Russia, russia. You do everything exactly the same. You only say, we’re not russia but in fact – very russia”
      Welcome to the government capitalism. So resembling German nazis. Just about time to start prosecuting some group and we’re there. Or, may be, we’re! Love Trump? – terrorist.

  • avatar
    BSttac

    I mean once the UAW used members funds on paying of politicians instead of embezzling it shows how far other peoples money can go

  • avatar
    Master Baiter

    I for one am glad to hear the Biden administration is all over this chip shortage issue. Our problems are as good as solved.

  • avatar

    Who is Raimondo? Am I missing something? Mexican cartels?

    • 0 avatar
      chuckrs

      Commerce Secretary Gina Raimondo came to her current job from Governor of Rhode Island. Before that, she was RI state treasurer and earlier still in venture capital. Directly involved in state pension funds management as treasurer but not as governor. RI state pension funds have had lousy performance for a long time. I would have hoped she would have aimed the funds managers in the right direction. Would have been better to turn the funds over to Vanguard or Fidelity. A lot better.

      I can’t see any reason to tie chip fab investment to unions, especially car unions. Incenting chip fab for types of chips used in cars, yes.

  • avatar
    MitchConner

    1. Can you imagine some union goon making chips in Michigan?

    2. Biden isn’t senile. He’s just colossally stupid.

    3. I hope the Republicans take the House and Senate next year for no other reason than they can make his life miserable and get him to quit.

    • 0 avatar
      slavuta

      Biden is just a puppet. He said this himself, many times.

      “I am not allowed”
      “I will get in trouble”
      “What am I doing here”

    • 0 avatar
      Lou_BC

      “Can you imagine some union goon making chips in Michigan?”

      They unionized mechanical robots?

      • 0 avatar
        28-Cars-Later

        Robot union? They can bite my shiny metal… clamps.

      • 0 avatar
        dukeisduke

        “Chip production” happens in two phases: First is the wafer fabrication – a 150mm, 200mm, or 300mm diameter silicon wafer (300mm is best for yield) is produced, containing hundreds or thousands of chips, which happens in multiple steps, then the wafers are probe tested. It’s a highly automated process, and in newer fabs, wafers are never touched by human hands, traveling from process to process in an automated guideway system.

        The wafers are then shipped to an assembly/test (A/T) site (usually the same company as the fab), where the wafers are cut up into individual chips, then put into a leadframe and installed into a package (the thing that’s considered a “chip”, that you’re used to seeing when you look at a circuit board).

        It’s kinda like automobile manufacturing, where the parts are made in one place, and assembled in another. There are plenty of wafer fabs in the US, but the vast majority of the A/Ts are located in Asia.

        True domestic manufacturing would involve building A/Ts in the US, something that’s not likely to happen IMHO.

    • 0 avatar
      kcflyer

      “Biden isn’t senile. He’s just colossally stupid.”

      Maybe just evil? He labeled Rittenhouse a white supremacist despite no evidence to justify that slur. But when an admitted racist and career dirt bag gets set free by liberal prosecutors and judges to kill 6 and maim dozens our “dear leader” says he will wait for the facts to come out before commenting.

  • avatar
    wolfwagen

    How in the world are they going to build 6 plants in 18 months? In the USA no less – home of NIMBY, Environmental groups, Unions, etc. A lot of that 52 Billion will be needed to grease the skids. Most plants cost over a Billion dollars to build as well. So if they are only giving 2 Billion to make Automotive Chips that means 1 plant

  • avatar
    Dartdude

    I am just so tired of this Anti-American president. It is too bad we have to suffer thru 3 more years. Why can’t this administration follow their leader and take a early dirt nap.

  • avatar
    tonycd

    First, this entire story is clickbait about politics. So I categorically reject any mindless reply that my post is “political” or “knee-jerk partisan.” Answer my points on the merits or don’t bother wasting the electrons.

    That said, I don’t view the idea that subsidies will be used to promote unionism as a “concern.” I view it as excellent news for American workers. When union membership was over 25%, pre-inflation income for all American workers was much higher and income inequality much lower. Now it’s under 10%, and without the counterforce to unfettered corporate power, we’ve all seen what’s happened as workers have no bargaining power and no viable alternatives to abusive monopolies.

    As for the notion that the subsidies are economically misplaced because Tesla’s war on unions would make it ineligible for funds, two points:

    1) Tesla has been massively subsidized throughout its existence, including massive tax incentives for thousands of its initial customers, and through its acquisition of an essentially free factory. Extending this funding to encourage a viable multi-employer industry can only be good for American workers.

    2) The problem of an anti-union Tesla not getting subsidies is easily fixed: Tesla can stop blocking its workers who’ve been asking for a union election. Tesla is notorious for abusing its factory workers in multiple ways. To reward this abuse, even if it were arguably good for the abstraction that is “the economy,” is bad for real flesh-and-blood American workers — at Tesla and elsewhere — and therefore bad for America.

  • avatar
    Russycle

    “Sprinkle in a dash of self-righteous environmentalism and you have a recipe for disaster.”

    Not sure how that’s supposed to work. Do Subaru’s have unusually high death rates?

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