Biden’s high-tech problem in Michigan

Hemlock Semiconductor continues as an independently run entity with two shareholders: Corning Inc. owns 80.5%, and Shin-Etsu Chemical owns 19.5%. Hemlock specializing in specialty glass, ceramics, and related materials and technologies used in semiconductors.

Biden has a high-tech problem in Michigan,

Christine Mui,

Politico, 02/20/2024

Some Information

Corning Incorporated is an American multinational technology company specializing in specialty glass,  ceramics, and related materials and technologies including advanced optics, primarily for industrial and scientific applications. The company was named Corning Glass Works until 1989. Corning divested its consumer product lines (including CorningWare and Visions Pyroceram-based cookware, Corelle  Vitrelle tableware, and Pyrex glass bakeware) in 1998 by selling the Corning Consumer Products Company subsidiary (later Corelle Brands, now known as Instant Brands) to Borden. “Corning Inc. Wikipedia.”

Hemlock Semiconductor has been a leading global provider of hyper-pure polysilicon and is the only polysilicon manufacturer headquartered in the United States. Polysilicon is used to make computer chips – the “brains” behind the electronic devices. HSC is just one of six major manufacturers in the world that makes polysilicon used to create semiconductor wafers. In fact, nearly all electronic devices in the world contain HSC polysilicon.

Corning owns 85% of Hemlock Semiconductor. Shin-Etsu Handotai owns 15% of Hemlock. Shin-Etsu has plants in Arizona and also a Fab plant near the east coast. I would plan and order thousands of Shin-Etsu semi-conductors for assembly into Chrysler key fabs.

Signing the 2022 CHIPS and Science Act into law

When President Joe Biden signed the 2022 CHIPS and Science Act into law, aiming to boost America’s once-dominant microchip industry, he gave a special callout to Hemlock Semiconductor. Hemlock being a 63-year-old company in central Michigan that leads the nation in making a single, crucial high-tech material.

Biden held it up as an example of exactly what he wanted the new law to support.

“Nearly one-third of all the chips in the world use polysilicon made in Hemlock,” Biden said in a speech  from the White House South Lawn. “Imagine if we had more of these kinds of factories across the country. This law will make that a reality.”

Now the administration is getting ready to unleash the law’s flood of tax breaks — estimated to be worth  more than $25 billion over a decade. But instead of supporting Hemlock, the Treasury Department and Internal Revenue Service have proposed rules that would cut the company out. Lawmakers say Biden and the administration are not meeting the intent of the law.

Michigan Senator (Democrat) Gary Peters raised concerns about the implementation of CHIPS and Science Act in direct conversation with Biden, as well as with other members of the administration. Gary . . .

“Chip-grade polysilicon manufacturers are essential. I’ll keep fighting to ensure they receive the federal support.”

But a problem has emerged.

The administration is getting ready to unleash the law’s flood of tax breaks, estimated to be worth more than $25 billion over a decade. But instead of supporting Hemlock, the Treasury Department and Internal Revenue Service proposed rules cutting the company out. Lawmakers say Biden and the administration are not meeting the intent of the law.

Tension — between the aspirations of the law Biden articulated on the South Lawn and the way his administration is implementing it is fueling frustration within the president’s party in a crucial swing state. Sen. Gary Peters, a Michigan Democrat, said he raised concerns about the implementation of CHIPS in a direct conversation with Biden, as well as with other members of the administration.

What is Going on in Michigan?

The company mobilized its supporters which includes Governor Whitmer of Michigan, to lean on the administration in an effort to open up the benefit more widely. Their argument highlights a key challenge of the fast-evolving Biden policy to bolster America’s role in a crucial global industry: Where to draw the line on which companies merit taxpayer support as part of the $526 billion semiconductor industry and which are left out in the cold.

Last March, the bill only offered breaks to companies that made finished chips and the machines used to print them. Firms such as Hemlock making critical components of semiconductors were not included. Those firms were making the case that the guidance is too narrow. Politicians connected to the industry have rallied to their side.

Michigan’s Democratic Gov. Gretchen Whitmer wrote to Biden, warning that his made-in-America chip policy would fail if it didn’t support suppliers like Hemlock. “[W]e risk losing our future to China,” she wrote.

The same month, all nine Michigan Democrats in Congress wrote to Treasury Secretary Janet Yellen, saying expanding U.S. leadership in the industry will “only be possible” if semiconductor-grade polysilicon producers can get the tax break as they argue the act intended.

I believe the better argument being is the support of a domestic supplier over international.

Final tax rules were initially planned for December. The rule affirmation was pushed back to June. Mean-while observers want to get certainty much sooner. Suppliers are increasingly on edge and worrying if their months-long campaign will pay off.

Supporters in Congress also say they will push until the rules are out.

And Why?

Keeping the base of the semiconductor supply chain in America was “one of the explicit reasons that the CHIPS and Science Act was passed and signed into law in the first place,” Bobby Leddy, spokesperson for Whitmer, told POLITICO. He said her office is “keeping our foot on the gas” as it works with the Congressional delegation and federal partners.