By David Shepardson and Alexandra Alper
WASHINGTON (Reuters) - California Governor Gavin Newsom and Senator Alex Padilla, both Democrats, urged the Biden administration on Monday to reverse its decision to cancel a subsidy program for building and expanding semiconductor research and development facilities.
The U.S. Commerce Department said late Friday it would scrap plans to fund the program from the $52.7 billion Chips and Science Act due to "overwhelming demand" for funding awards to subsidize chips production.
President Joe Biden, a Democrat who faces a close re-election battle against Republican Donald Trump in November, is aiming to boost domestic output as part of efforts to reduce reliance on China and Taiwan.
Newsom and Padilla called on the agency to undo its decision, arguing "without robust support for commercial R&D we risk our global leadership and ability to outpace our foreign competitors in the semiconductor industry."
The push comes as the department faces numerous demands for chips funding.
"We urge the Department of Commerce to reconsider its decision and ensure investment in commercial R&D through the CHIPS Act to drive innovation and support the resurgence of domestic semiconductor manufacturing," Newsom and Padilla added.
The Commerce Department said in response it was "continuously evaluating programmatic priorities to maximize the impact of available CHIPS funds," citing a recent decision by Congress to dedicate $3.5 billion to make chip production facilities safe for military use production.
The Commerce Department never disclosed the amount planned for the R&D awards but a source told Reuters that department officials had discussed awarding $2.5 billion or more.
Commerce Secretary Gina Raimondo said last month leading edge chips companies have requested more than $70 billion but they are dedicating $28 billion to those projects.
Another $11 billion is dedicated to research and development, but that "cannot replace direct commercial investments," Newsom and Padilla said.
Last month, Biden awarded Intel (NASDAQ:INTC), nearly $20 billion in grants and loans for chips projects. Some of that money will go to Intel's R&D hub in Hillsboro, Oregon.
In February, Commerce announced it was launching the $5 billion National Semiconductor Technology Center to create a private-public consortium to conduct research and prototyping of advanced semiconductor technology.
California-based semiconductor toolmaker Applied Materials Inc (NASDAQ:AMAT), which said last year it planned to spend up to $4 billion in a research center in the heart of Silicon Valley, had been seen as a strong candidate for a research award.
California has invested billions of dollars through a R&D Tax Credit and California Competes Program to support the growth of semiconductor companies with large R&D operatives including NVIDIA (NASDAQ:NVDA), Applied Materials, and Lam Research (NASDAQ:LRCX), Newsom and Padilla said.