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Even with billions of dollars, making semiconductor chips domestically will be tough

MARY LOUISE KELLY, HOST:

The CHIPS Act, signed into law last week, could provide up to $280 billion for research and chip manufacturing in the U.S. so it can rely less on places like China and Taiwan. But experts warn this will be a long and complicated process. NPR's Emily Feng visited a chip factory in the U.S. to understand more.

EMILY FENG, BYLINE: The first thing Adam Milton has me do when I get to Wolfspeed's gleaming, new factory in upstate New York is cover my shoes.

ADAM MILTON: Yeah. So for all of our employees, we want to keep the salt, the mud, the nastiness of the Northeast outside and keep it away from our campus.

FENG: Milton's an operations vice president who helped set up this $1.2 billion factory. By the end of this year, it will be shipping out silicon carbide wafers. That's the material that semiconductor chips are printed and etched onto. Then those chips go into our electric cars and industrial gadgets.

We peek inside the clean room where Wolfspeed makes its transparent wafers. Engineers and technicians in bunny suits - covering everything from head, face to toe - work in these perfectly regulated environments.

MILTON: That's not necessarily to protect the people. The people are already safe in this environment. It's to keep, you know, bodily particles and shedding of things - keep it away from the product.

FENG: Once the factory opens for production at the end of this year, it will run around-the-clock.

So when this gets up and running at 2 a.m., there are people in bunny suits working this place.

MILTON: There are people here 24/7 - absolutely.

FENG: Wolfspeed is a manufacturing company with technology the U.S. wants to stay in the U.S. That's part of what the CHIPS Act aims to do. The act appropriates about $80 billion - now ready to go - in the form of tax credits, incentives and matching federal grants to chip makers if they build in the U.S. and not China. It then directs Congress to approve another $200 billion over the next five years for research.

STEPHEN EZELL: That matters because, you know, for years the U.S. federal government invested more in R & D as a share of our GDP than any other country in the world. Now we have fallen to ninth.

FENG: Stephen Ezell is a vice president at the Information Technology and Innovation Foundation. It's a nonprofit research institute focused on technologies like the semiconductor space. China has criticized the CHIPS Act as a threat to free trade. Ezell disagrees.

EZELL: Some have called that industrial subsidies. Our view of it is different. When you look around the world - Korea, Taiwan, China, Israel - virtually all of these countries offer incentive packages, whose intent is to defray, to some extent, the 10s of billions of dollars it can cost to build a new fab.

FENG: But building from scratch also takes time. Just to give you an example, Wolfspeed's process began in 2013. That's when the State University of New York's Polytechnic Institute helped fund an entire industrial campus. Milton says the state built the roads, water supply and even a power substation. Chipmaking needs super stable energy supply with multiple backups, which New York State provided.

MILTON: Just about three miles north of here is a main power station for a lot of New York as well as the Northeast. And so it's actually got redundant feeds from Niagara Falls, from nuclear energy coming from Canada, from other solar plants and wind turbines across the Northeast.

FENG: Wolfspeed's New York factory is at 300 employees now, but they want to double that. Rex Felton, global operations VP at Wolfspeed, says hiring skilled technicians and engineers is a bottleneck. Even with the Polytechnic Institute nearby providing lots of talent, bolstering science and engineering education will help long term.

REX FELTON: I think every company that does semiconductors today runs into that. We're starting relatively slow. We're going to grow very quickly, and I think it's going to continue to be something we're going to have to work on.

FENG: One of the two bills that were combined to create the final CHIPS Act included immigration reform to lift green card caps for foreign-born graduates and make it easier for highly skilled immigrants to stay. But that part didn't make it into the final law. Wolfspeed is also just one part of an extremely complex supply chain. There are companies that only design chips, others that make them, others that create the tools to etch and deposit materials on Wolfspeed's wafers and, finally, other companies still to test and package the finished chips. Here's Milton again.

MILTON: But one of the big drivers for our business going forward is the electrification of the automobile industry. And so with more and more companies seeing the benefit of going electric, they want to work with Wolfspeed.

FENG: And some of the biggest car companies that are buying from Wolfspeed at the moment are Chinese. The point is not to make semiconductor chips all American, but to create the conditions whereby the most critical and advanced steps of the process are once again U.S. dominated. Emily Feng, NPR News, Marcy, N.Y.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Emily Feng is NPR's Beijing correspondent.