Feds Seek Input on How to Create Semiconductor Hubs

The federal government is planning to make $500 million available later this spring under last year’s CHIPS and Science Act that could transform communities around the country through the creation of new research and manufacturing hubs for semiconductors.

But first, officials from the U.S. Department of Commerce are asking for input from the public as they consider a number of key questions in designing the program. The questions include what criteria to use in picking who will receive funding, how to help those areas be successful in creating future generations of semiconductors, and how to measure their success.

“We're asking you for the best ideas, the best examples, best practices because we want to make sure that this effort is successful,” Alejandra Castillo, the assistant Commerce secretary for economic development told Route Fifty in an interview last week.

The $54.2 billion bipartisan bill passed by Congress last July is mainly known for providing billions in subsidies to encourage semiconductor companies to build the computer chips used in everything from smartphones to refrigerators here in the United States. But the bill also calls for spending $10 billion to create the hubs.

Under the law, the hubs are envisioned as consortiums of different kinds of entities that would be involved in doing research to create innovations in the industry and to build the chips. 

“A tech hub is a collection of economic drivers in a region,” Castillo said. “It's not a building. It's not one particular entity. It's really an interconnected ecosystem that supports critical emerging technology.”

The consortiums, she said, might be partnerships involving universities, the private sector, nonprofits, unions, community colleges and philanthropy. “All of these different stakeholders have a role to play in the creation of these tech hubs,” she said. 

Significantly, under the law, the hubs will not be created in areas like Silicon Valley where technology has already become an important part of their economies.

A 2019 Brookings Metro report found that because industries tend to cluster together, 90% of the increase in jobs in industries that rely on innovation, between 2005 and 2017, occurred in only five “superstar” metropolitan areas—Boston, San Francisco, San Jose, Seattle and San Diego.

As a result, one-third of the innovation jobs are concentrated in only 16 of the nation’s 3,006 counties. More than half of the jobs are in only 41 counties. 

To reverse that trend, the law requires the Commerce Department to “ensure geographic and demographic diversity” by creating at least three hubs in each of the U.S. Economic Development Administration’s six regional offices.

At least a third of the hubs will have to “significantly benefit a small and rural community,” which the law defines as a metropolitan area with no more than 250,000 people. In addition, at least one of the 20 hubs has to be in a low-population state that does not have an urbanized area with at least 250,000 people.

“This is the type of transformational economic change that can really take a region into the industries of tomorrow,” Castillo said. 

Echoing Commerce Secretary Gina Raimondo’s remarks last month in laying out the criteria the department will use to award subsidies to companies, Castillo said the hubs will also support the nation’s security by decreasing its dependence on semiconductors built in China.

Congress, as part of its $1.7 billion omnibus spending bill last December, provided funding for the first $500 million of the project. President Joe Biden in his budget proposal last week asked Congress to approve the next $4 billion in the next spending bill.

The department hasn’t decided how the first tranche of money will be split up, Castillo said. The department is planning to make money available in the Notice of Funding Opportunity it issues in late spring. Some of the money will go to helping consortiums develop their plans. The department will designate the nation’s first hubs, although how many hasn’t been decided on yet, according to Castillo. Some of the funds will also go to help the first hubs implement their plans.

But before starting the application process, the Commerce Department is designing the program, as well as another program that will help areas with lower labor participation rates get involved. The department is seeking input for both these programs.

More immediately, it issued a Request for Information last month as it considers how “a region that has different types of assets can come together to really propel the economy of that particular region,” Castillo said. “I'm making everyone else send us their best thoughts, their ideas, their best practices of what they believe are successful.”

The public has until this Thursday, March 16, to give their thoughts on key questions, like:

• What are the defining features of a region that indicate that a tech hub will take hold, and how will the Economic Development Administration (EDA) know if a tech hub succeeds?
• What existing assets and resources that generate, support, and enable technology innovation, demonstration and deployment should tech hubs have? 
• When designating tech hubs, what additional geographic, demographic, or other place-specific factors or data should the EDA consider?
• Are there specific metrics that the EDA should consider for designating tech hubs?

In addition, the Commerce Department is also asking for input on questions on how to help the hubs succeed, including:

• What are historical and existing examples of successful regional hub programs and what can be learned from these examples?
• Are there statutory, regulatory, policy, design or implementation issues with current EDA programs or operations that inhibit or prohibit EDA in some way?
• Are there specific workforce and labor development, business and entrepreneurial development, technology development and maturation, or infrastructure activities that the EDA should emphasize through the program?

The department is also in the process of figuring out how to spend the first $200 million of the $1 billion Distressed Area Recompete Pilot Program, which seeks to allow areas with lower labor participation rates take part in growing the semiconductor industry.

The department is asking for input by March 27, on questions like:

• What barriers should be addressed to increase job placement/retention and/or job creation? What unique challenges and opportunities do you see in your community?
• Given that the law limits the size of grants to communities to $20 million, what types of initial investments would most significantly increase employment rates?

The program is of “critical importance,” Castillo said. “We're always looking at economic development with a lens towards equity. And equity is not just looking at urban and rural America, but also looking at indigenous communities, looking at coal communities and making sure that we don't leave anyone behind.”