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U.S. government shutdown would crush CHIPS Act momentum

A U.S. government shutdown would significantly impact implementation of the CHIPS and Science Act of 2022 as federal workers would be forced to stay home from work.

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If a U.S. government shutdown occurs at the end of the month, the ongoing work of multiple federal agencies to implement the CHIPS and Science Act of 2022 will come to a grinding halt.

U.S. Secretary of Commerce Gina Raimondo said a government shutdown would be "crushing" to the Commerce Department's efforts to dole out funding from the massive CHIPS Act competition package aiming to boost semiconductor production and technology innovation in the U.S.

Raimondo spoke during a hearing held by the House Committee on Science, Space and Technology on Tuesday, where she provided an update on where the Commerce Dept. stands in doling out its allotted $52 billion of the CHIPS Act.

"A shutdown sets us back in a huge way," Raimondo said. "Sending people home and slowing down our work -- that would be a huge problem."

Congress must pass appropriations bills to fund government operations before the new fiscal year begins on Oct. 1. However, it doesn't look like Congress will approve the necessary appropriations bills to avoid a shutdown, according to a report by the Brookings Institution. During a government shutdown, federal employees -- including those in agencies like the Commerce Dept. working to advance missives in the CHIPS Act – can't return to work until the government shutdown ends.

A government shutdown would harm national security, and not just because CHIPS Act work would stop, Raimondo said. The Commerce Dept. also manages export controls implemented by the Biden administration to keep advanced U.S. semiconductor technology out of China.

"Export control enforcement, export control work, investment of the CHIPS money, investment of the tech hub money -- it all stops," Raimondo said. "Every dollar and every day that we aren't working puts us greater at risk."

CHIPS Act funding release awaits guardrails

A government shutdown isn't the only obstacle poised to slow down distribution of CHIPS Act funding.

The Commerce Dept. has already received over 500 statements of interest and 100 applications from companies interested in CHIPS Act funding. However, no funding will be distributed to companies until the Commerce Dept. finalizes a rule establishing guardrails for those funds.

A shutdown sets us back in a huge way.
Gina RaimondoU.S. Secretary of Commerce

The guardrails were developed during CHIPS Act deliberations in 2022 and prohibit any company that accepts CHIPS Act funding from expanding or building new or advanced manufacturing facilities in a country of concern, including China, for ten years. The guardrails give authority to the Commerce Dept. to take back CHIPS Act funding should a company be found in violation.

Rep. Brian Babin (R-Texas) said during the hearing that the guardrails aim to protect CHIPS Act investments from "benefitting our adversaries." The Commerce Dept. oversees finalizing the rule to implement those guardrails, which Raimondo said should be complete within weeks.

Raimondo said the Commerce Dept. began taking applications for CHIPS Act funding alongside their work on the rule to expedite the process. She said the Commerce Dept. requires a significant amount of information from companies as part of the application process. The department won't fund companies until the guardrails are "firmly in place."

"The whole purpose of the CHIPS program is national security, so we have to be absolutely vigilant that not a penny of this helps China to get ahead of us and that none of these companies who receive our money do any research with China or investment in China that in any way undermines our own national security," she said.

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

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