President Joe Biden’s top economic aides have been stressing for months that passing legislation to provide $52 billion to the semiconductor industry is crucial to America’s economic future.
But this week, as the bill has continued to languish and with Senate Minority Leader Mitch McConnell recently suggesting he'll stand in the way of its passage, Biden’s aides have upped the rhetorical stakes.
They are now more directly arguing that semiconductors are not just an economic issue — but a national security one, as well.
In a new letter Wednesday, Commerce Secretary Gina Raimondo teamed up with Defense Secretary Lloyd Austin to argue that alleviating the semiconductor shortage is “imperative for our national security.”
Futurum Research Principal Analyst Daniel Newman also noted during an appearance on Yahoo Finance that nearly 100% of leading semiconductors are made overseas.
“That's an issue for national security; that's an issue for global technology leadership,” he said.
‘Game-changing capabilities our war-fighters need’
Biden officials say that semiconductors play a key role in weapons systems, and if the Department of Defense can keep critical efforts closer to home, that will speed up the deployment of future capabilities.
Domestic chip manufacturing will “enable game-changing capabilities our war-fighters need,” Lloyd and Raimondo wrote.
Defense contractors like Lockheed Martin (LMT) have also raised concerns about the semiconductor shortage, noting that many of their weapons — including the Javelin missile currently being produced for Ukraine — are semiconductor dependent.
The effects of the delay have been keenly felt in the economic sphere. Intel (INTC) recently postponed the groundbreaking on a key Ohio factory due to delays with the bill. CEO Pat Gelsinger has even warned that production might migrate to Europe if the issue isn’t resolved soon.
During a Yahoo Finance appearance in May, Raimondo warned that Intel and other companies could flee within months if the logjam continues. This week’s letter now predicts permanent damage could come within weeks.
Brian Deese, the director of Biden’s National Economic Council, added during a Yahoo Finance live appearance Wednesday that, as part of the response to inflation, the White House is “so focused on trying to urge Congress to act...on things like semiconductors that go into almost every durable, good produced here in the country.”
The Commerce Secretary put an even finer point on it earlier this week during a television interview, saying that “it isn’t right to play politics with national security — that’s what I think is happening.”
‘We're in a conundrum here’
The fate of the years-long semiconductor effort on Capitol Hill is expected to be decided in the coming weeks as Congress rushes to pass a range of bills before the August recess, with the midterms elections looming soon afterwards.
Leader McConnell’s stance — that a bipartisan bill is not happening if Democrats continue to move forward on their unrelated reconciliation effort — has left negotiators only a few options.
One would be for the House of Representative to simply pass the version of the bill that the Senate approved in June 2021. A second would be to pass a stripped-down version of the legislation that only includes the funding for semiconductor makers and not other broader provisions around trade and competition with China.
A third option, which is what Biden officials and many Democrats are still discussing publicly, is to finish negotiations on the bill and then push it forward and see if McConnell's blockade holds.
McConnell didn't retreat during remarks to reporters on Tuesday.
“There are members I have who are not overly fond of [the overall bill] but who think there's a national security aspect to the chips deficit,” the Republican Senate leader said. “We're in a conundrum here at the moment.”
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.