Biden team races to deliver chip grants before Trump takes over

The Commerce Department has provisionally awarded most of the $39 billion of grant money allocated under 2022’s Chips Act to re-energize U.S. chip production. But nearly $30 billion of that is tied up in complex government negotiations, leaving those deals in limbo as a new administration prepares to take over.

Intel was given the largest preliminary award—up to $8.5 billion in grants for factory projects, plus up to $3 billion for defense-industry manufacturing facilities. It is counting on the funds to pay for massive facilities in Arizona, New Mexico, Ohio and Oregon as the company’s core business making chips for personal computers and servers is struggling.

The Commerce Department is aiming to finalize as many of them as possible in the next two months ahead of the incoming Trump administration, according to people familiar with the matter. Government and company officials say the legally binding, finalized awards would be impossible to pull back absent an act of Congress.

Donald Trump threw the program’s fate into question on the campaign trail, telling podcast host Joe Rogan that the government should encourage chip production in the U.S. by taxing imported chips rather than offering the grants of the Chips Act.

“That chip deal is so bad," Trump said in the late-October interview. “When I see us paying a lot of money to have people build chips, that’s not the way. You didn’t have to put up 10 cents. You could have done it with a series of tariffs."

What will happen under the new administration remains unclear. The Chips Act passed with bipartisan support, and many of the chip projects it is supposed to fund are in the districts of Republican lawmakers. Some industry executives who have spoken to people within Trump’s orbit expect the law to survive the transition of power.

House Speaker Mike Johnson (R., La.) said before the election that Republicans “probably will" work to repeal the act, although he later said it wasn’t on the chopping block and instead could be streamlined to eliminate “costly regulations and Green New Deal requirements."

A Commerce Department spokesman pointed to the program’s benefits, including the expected creation of more than 125,000 jobs and a surge in domestic investment worth hundreds of billions of dollars. “Our team continues to implement this bipartisan law in accordance with statute" and would have more announcements in the coming weeks, the spokesman said.

The White House said in a statement that it would carry out the law “with speed and efficiency until the end of the term."

A senior administration official cited the act’s national-security and economic importance—not the potential threat from Trump—as the reasons why the government was moving quickly to finalize grants.

The Commerce Department and its leader, Secretary Gina Raimondo, have been major champions of expanding U.S. chip manufacturing, recognizing chips’ growing importance in the geopolitical and economic competition between the U.S. and China.

Chip plants have skyrocketed in price in recent years, with a single cutting-edge factory costing north of $20 billion. Generous incentives from governments outside the U.S. and lower costs overseas have drawn manufacturing away in the past three decades, pushing the share of global chip production in the U.S. to 10% in 2022, according to a Boston Consulting Group estimate.

The Commerce Department has been negotiating final contracts with grant recipients for months, doing intensive due diligence and hashing out terms among lawyers for the government and the companies. The first major finalized award came on Friday when Taiwan Semiconductor Manufacturing Co.received up to $6.6 billion in grants for three factory projects at a site in Arizona.

Chip companies have been frustrated with the drawn-out negotiations and the intensive approach the Commerce Department has taken in evaluating projects. Department officials including Chips Program Office director Mike Schmidt and chief investment officer Todd Fisher, a veteran private-equity executive, have taken a hard look at companies’ projects—to the consternation of some companies who hoped for looser oversight.

Some business groups in states where there are big chip factory projects also have criticized the length of the negotiations. Last week, a collection of business groups in Ohio, New Mexico, New York and Oregon sent a letter to the Biden administration saying they were growing concerned that the funds were “not being distributed in a timely manner" and asking that they be made available in the next 30 days.

Pat Gelsinger, Intel’s Chief Executive, told The Wall Street Journal in October that he was frustrated with the pace of the grants and had factored them out of the company’s financial picture this year. But he noted its bipartisan backing and the emphasis on supporting the chip industry independent of which administration was in power.

In a statement, Intel said it was working with the government to finalize its grant, and looked forward to working with the Trump administration to help restore American chip-making leadership.

Write to Asa Fitch at asa.fitch@wsj.com