U.S. Pitches Investment in Domestic Chips, Communications Tech

Two U.S. agencies want to boost spending on the domestic production of information and communications technology to help mitigate supply chain vulnerabilities exposed by the coronavirus pandemic.

The Commerce and Homeland Security departments prepared the recommendations in response to an executive order on reducing U.S. dependence on foreign countries for critical goods. The production of many IT and communications inputs is increasingly concentrated in China, the agencies warned, adding that outsourcing has resulted in a significant reduction of the U.S. workforce.

Domestic manufacturing of products such as printed circuit boards and semiconductors can be revitalized through federal procurement incentives and programs, the agencies wrote.

U.S. Presents ‘Buy American’ Plan to Ease Supply Chain Squeeze

They’re specifically proposing increased use of the Defense Production Act, through which the federal government can offer grants, purchase commitments, loans, and loan guarantees to domestic companies. They’re also seeking funding for the Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act, which includes programs to promote U.S. semiconductor research, development, and production.

The legislation was part of the fiscal 2021 National Defense Authorization Act but hasn’t received any funding. Both chambers included CHIPS money in their China competition bills (H.R. 4521, S. 1260); House and Senate leaders have said they want to negotiate a final version of that legislation.

Federal agencies should give procurement preference to sensitive equipment vendors that have undergone vetting for their product’s reliability, integrity, and security, the report states.

Congress should also fund a supply chain office at Commerce to identify, monitor, and address supply chain vulnerabilities, the agencies said.

Additionally, the report recommends funding programs that train and retain IT and communications workers, such as registered apprenticeships, technical education programs, and grants that are aligned with “real-world” job opportunities.

To contact the reporter on this story: Maria Curi at mcuri@bloombergindustry.com

To contact the editors responsible for this story: Sarah Babbage at sbabbage@bgov.com; Loren Duggan at lduggan@bgov.com