December 16, 2021

Warren Calls on Commerce to Use CHIPS Funding to Address Supply Chain Bottlenecks Causing Significant Price Increases for American Families

Text of Letter (PDF)

Washington, D.C. - United States Senator Elizabeth Warren (D-Mass) sent a letter to U.S. Department of Commerce Secretary Gina Raimondo expressing concern about inadequate supply-chain resiliency and the lack of domestic investment in semiconductors, and the adverse impact these problems have on manufacturers, workers, and consumers. In the letter, Senator Warren encourages Secretary Raimondo to use funding in the CHIPS for America Act, which passed as part of the FY 2021 NDAA, to push back against industry consolidation in the semiconductor industry and address supply-chain resiliency and competitiveness in the industry. The global chip shortage and its consequences are ultimately resulting in significant price increases for American families and contributing to the recent increases in inflation, as well as job losses due to auto plant shutdowns. 

“The global chip shortage and its consequences are ultimately resulting in significant price increases for American families and contributing to the recent increases in inflation. Faced with rising costs, CEOs are protecting corporate profits by passing on increased costs to consumers,” Senator Warren wrote. 

Last week, Senator Warren chaired a Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth hearing on “Promoting Competition, Growth, and Privacy Protection in the Technology Sector.” The hearing highlighted rising prices and other problems caused by industry consolidation and a lack of competition. At the hearing, Barry C. Lynn, Executive Director of the Open Markets Institute, described the semiconductor industry as the “single best illustration of the far-reaching nature of the threats posed by today’s extreme concentration of industrial capacity,” noting that “in the case of our production systems, the concentration of manufacturing capacity for key inputs and final products has repeatedly resulted in the breakdown of the ability to ensure that we have what we need, when we need it.” 

The semiconductor industry has undergone significant consolidation in the last decade: the number of large semiconductor companies worldwide declined from 160 in 2010 to 97 in 2020.  Concentration in semiconductor manufacturing is even greater, with just five companies controlling 54% of global wafer capacity. This market concentration has reduced competition, allowing giant corporations to deliver massive returns for shareholders, while harming consumers by enabling these dominant companies to increase prices and underinvest in key capabilities.  

Last year, Congress passed the CHIPS for America Act as part of the FY 2021 National Defense Authorization Act. Additionally, the Senate has passed the United States Innovation and Competition Act of 2021 (USICA), which among other things would fund the CHIPS for America Act programs. The Senate and House are working on a path forward on USICA, including to address a number of outstanding issues unrelated to the CHIPS for America Act.

The CHIPS for America Act has tasked the Department of Commerce with awarding billions of dollars in grant funding “to incentivize investment in facilities and equipment in the United States for semiconductor fabrication, assembly, testing, advanced packaging, or research and development.” Under USICA funding levels, this would be a significant program, with $19 billion appropriated for fiscal year 2022, and $5 billion annually from 2023 through 2026. This legislation gives broad discretion in awarding grants, but funds can only be awarded to projects that are “in the interest of the United States.”

In the letter, Senator Warren argues that it is in the national interest of the United States to use the CHIPS for America Act funding to push back against industry consolidation and encourages the Commerce Department to do so. 

“I encourage you to seize this opportunity through proper utilization and appropriation of these funds, ensuring that American consumers and workers see the full benefits of domestic investment,” Senator Warren concluded.

This letter is part of Senator Warren’s ongoing oversight of the role of corporations with soaring profits in jacking up prices for American consumers and driving inflation.