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    Chip Makers Turn Cutthroat in Fight for Share of Federal Money

    Semiconductor companies, which united to get the CHIPS Act approved, have set off a lobbying frenzy as they argue for more cash than their competitors.WASHINGTON — In early January, a New York public relations firm sent an email warning about what it characterized as a threat to the federal government’s program to revitalize the U.S. semiconductor industry.The message, received by The New York Times, accused Intel, the Silicon Valley chip titan, of angling to win subsidies under the CHIPS and Science Act for new factories in Ohio and Arizona that would sit empty. Intel had said in a recent earnings call that it would build out its facilities with the expensive machinery needed to make semiconductors when demand for its chips increased.The question, the email said, was whether officials would give funding to companies that outfitted their factories from the jump “or if they will give the majority of CHIPS funding to companies like Intel.”The firm declined to name its client. But it has done work in the past for Advanced Micro Devices, Intel’s longtime rival, which has raised similar concerns about whether federal funding should go to companies that plan to build empty shells. A spokesman for AMD said it had not reviewed the email or approved the public relations firm’s efforts to lobby for or against any specific company receiving funding.“We fully support the CHIPS and Science Act and the efforts of the Biden administration to boost domestic semiconductor research and manufacturing,” the spokesman said.Rival semiconductor suppliers and their customers pulled together last year as they lobbied Congress to help shore up U.S. chip manufacturing and reduce vulnerabilities in the crucial supply chain. The push led lawmakers to approve the CHIPS Act, including $52 billion in subsidies to companies and research institutions as well as $24 billion or more in tax credits — one of the biggest infusions into a single industry in decades.President Biden with Intel’s chief executive, Patrick Gelsinger, at an Intel semiconductor facility under construction in New Albany, Ohio, in September.Pete Marovich for The New York TimesBut that unity is beginning to crack. As the Biden administration prepares to begin handing out the money, chief executives, lobbyists and lawmakers have begun jostling to make their case for funding, in public and behind closed doors.In meetings with government officials and in a public filing, Intel has called into question how much taxpayer money should go to its competitors that have offshore headquarters, arguing that American innovations and other intellectual property could be funneled out of the country.“Our I.P. is here, and that’s not insignificant,” said Allen Thompson, Intel’s vice president of U.S. government relations. “We are the U.S. champion.”The Global Race for Computer ChipsA Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.Crackdown on China: The United States has been aiming to prevent China from becoming an advanced power in chips, issuing sweeping restrictions on the country’s access to advanced technology.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: The sprawling $280 billion bill passed by U.S. lawmakers last year gives the federal government new sway over the chips industry.States, cities and universities have also gotten into the act, hoping to lure subsidies and jobs expected to be generated by manufacturing sites and new research and development.Purveyors of chips, their suppliers and the trade associations that represent them together spent $59 million on lobbying last year, according to tracking from OpenSecrets, up from $46 million in 2021 and $36 million in 2020, as they tried to ensure that Congress approved their funding.Some of those activities have now shifted to making sure companies snag the biggest portion.“Everybody wants their piece of the pie,” said Willy Shih, a management professor at Harvard Business School who follows semiconductor issues. He said it wasn’t surprising that companies would be raising tough questions about competitors, which could be helpful for the Commerce Department in setting policies.“We haven’t done something of this scale in the U.S. in a long time,” he said. “There is a lot at stake.”How the Biden administration distributes the funding in coming months could shape the future of an industry that is increasingly seen as a driver of both economic prosperity and national security. It may also influence how vulnerable the United States remains to foreign threats — particularly the possibility of a Chinese invasion of Taiwan, where more than 90 percent of the world’s advanced chips are made.Since American researchers invented the integrated circuit in the late 1950s, the U.S. manufacturing share has dwindled to around 12 percent. Most American chip companies, including AMD, focus on designing cutting-edge products while outsourcing the costly manufacturing to overseas foundries, most of which are in Asia.AMD’s chief executive, Lisa Su, at a technology trade show last month. AMD and Intel have been fierce competitors.David Becker/Getty ImagesTaiwan Semiconductor Manufacturing Company developed the foundry concept in the 1980s and dominates that market, followed by Samsung Electronics. Intel, which both designs and makes its own chips, fell behind TSMC and Samsung in manufacturing technology but has vowed to catch up and build its own foundry business to make chips for customers.The industry’s concentration has left it particularly vulnerable to supply chain disruptions. During the pandemic, shortages of lower-end “legacy” chips that are used in cars forced automakers to repeatedly close factories, sending prices soaring.The CHIPS Act aims to rectify some of these shortcomings by allocating $39 billion in grants for new or expanded U.S. factories. The Commerce Department has indicated that about two-thirds of the money will be steered toward makers of leading-edge semiconductors, a category that includes TSMC, Samsung and Intel. All three companies have already broken ground on major expansions of their U.S. facilities.The remaining third is expected to go toward legacy chips, which are heavily used in cars, appliances and military equipment.Another $11 billion of funding is expected to go toward building a handful of chip research centers around the country. Government and academic institutions in Texas, Arizona, Georgia, Indiana, Florida and Ohio have filed documents describing why they should be considered for funding. Even tiny Guam has raised its hand.One challenge for the Commerce Department will be to distribute the money widely enough across the nation to create several thriving “ecosystems” that can bring together raw materials, research and manufacturing capacity, but not undermine the effort by spreading it too thinly. With dozens of companies, universities and other players interested in snagging a share, the funding could go fast.Commerce Secretary Gina Raimondo told reporters on Wednesday that the goal was to create “at least two” new clusters of manufacturing capacity for leading-edge chips, in addition to facilities producing other kinds of semiconductors. Each cluster would employ thousands of workers and support a web of businesses supplying the raw materials and services they need.“We have very clear national security goals, which we must achieve,” Ms. Raimondo said, noting that not every chip maker will get what it wants. “I suspect there will be many disappointed companies who feel that they should have a certain amount of money, and the reality is the return on our investment here is the achievement of our national security goal. Period.”The competition has intensified as the Biden administration prepares to release the ground rules for applications next week. The grants, which can range up to $3 billion or more per project, could start going out this spring.Executives say huge spending by governments in South Korea, Taiwan, China and elsewhere has helped shape the chip industry globally. And the current U.S. policy push could again alter the market, by giving some companies advantages that allow them to edge out competitors.Most chip companies, in publicly discussing the subsidies, have stressed the common goal of bolstering U.S. production. But clear differences among them have emerged. Many are outlined in the more than 200 filings that companies, organizations, universities and others submitted to the Commerce Department last March.Beyond extolling the merits of their own manufacturing plans, some applicants made the case that rival projects deserved less funding or should face strict limits on how they operated, though few companies mentioned their competitors by name.Intel, along with other U.S.-based firms like GlobalFoundries and SkyWater Technology, expressed concerns about foreign-owned companies, including whether their U.S. factories could continue operating in the event of a crisis in their home country.Taiwan Semiconductor Manufacturing Company, which is building a factory site in Phoenix, has objected to “preferential treatment based on the location of a company’s headquarters.”Adriana Zehbrauskas for The New York TimesIntel has argued that foreign investment is welcome, but that its longtime concentration of chip design, research and manufacturing in the United States meant that it should get special consideration.But competitors argue that investing heavily in Intel could be a risky bet for the U.S. government, and some Biden administration officials have questioned whether Intel can follow through on its plans to catch up to its competitors technologically. The company has suffered from a severe drop in sales and announced on Wednesday that it would cut its stock dividend.U.S. officials have also stressed the need to support a U.S. expansion by TSMC, in part because it produces leading-edge chips crucial to the military.TSMC, which has broken ground on a $40 billion investment in two advanced factories in Arizona, countered in its filing that “preferential treatment based on the location of a company’s headquarters” would not be an effective or efficient use of U.S. money. AMD, one of TSMC’s largest customers, has advocated its U.S. expansion.AMD and Intel, both based in Santa Clara, Calif., have competed fiercely for the market for microprocessor chips.In its filing in March, AMD expressed concerns about whether certain unnamed competitors had proved that they could operate effectively as a foundry and make leading-edge chips. Intel has struggled on both counts. And AMD highlighted the risk that grant recipients would not immediately spend that money to outfit their factories with equipment.“Any facility receiving federal assistance must be operational upon completion of construction,” AMD wrote. “A facility that sits idle or is held in reserve for demand increases should immediately forfeit any federal funds.”Mr. Thompson of Intel declined to comment on the email. But he defended the “smart capital” strategy articulated by Patrick Gelsinger, Intel’s chief executive, which has stressed building factory shells and then investing to equip them in accordance with market demand.Intel is continuing to follow that strategy with construction projects in Arizona, New Mexico and Ohio, to ensure that its new facilities are built out “in alignment with the market,” Mr. Thompson said. But Intel has no intention of using the government money for “basically just building shells,” he said. “The goal is to ensure that we have the capacity to support our customers.”Ana Swanson reported from Washington, and Don Clark from San Francisco. More

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    Fed Minutes Showed Policymakers Were Still Intent on Easing Inflation

    Federal Reserve officials thought they needed to do more to cool the economy even before a series of strong data releases in recent weeks.Federal Reserve officials believed that they needed to do more to slow the economy and wrestle painfully rapid inflation back under control as of their meeting early this month, minutes from the gathering showed.The notes, released on Wednesday, showed that “all participants” continued to believe that rates needed to rise by more, and that “a number” of them thought that monetary policy might need to be even more restrictive in light of easing conditions in financial markets in the months prior.“Participants generally noted that upside risks to the inflation outlook remained a key factor shaping the policy outlook,” the minutes said. “A number of participants observed that a policy stance that proved to be insufficiently restrictive could halt recent progress in moderating inflationary pressures.”The takeaway is that policymakers were still intently focused on wrestling inflation back under control even before a spate of recent data releases showed that the economy has maintained a surprising amount of momentum at the start of 2023. In the weeks since the Fed last met, inflation data have exhibited unexpected staying power, and a range of data points have suggested that both the job market and consumer spending remain robust. A release on Friday is expected to show that the Fed’s preferred inflation indicator climbed rapidly on a monthly basis in January, and that consumption grew at a solid pace.That creates a challenge for Fed officials, who had been hoping that their policy changes last year would slowly but steadily weigh on the economy, cooling demand and forcing companies to stop raising prices so quickly. If demand holds up, businesses are more likely to find that they can continue to charge more without driving away their customers.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Labor Board Curbs Gag Rules in Severance Agreements

    The National Labor Relations Board said severance pacts requiring confidentiality and nondisparagement violated a law on collective worker activity.The National Labor Relations Board has ruled that it is generally illegal for companies to offer severance agreements that prohibit workers from making potentially disparaging statements about the employer or from disclosing details of the agreement.The ruling by the board, which has a Democratic majority, overturns a pair of 2020 decisions, when the board was controlled by Republicans and found that such severance agreements were not illegal on their face. It continues the labor board’s worker- and union-friendly trajectory under appointees of President Biden.The earlier decisions held that the severance agreements were illegal only if accompanied by other circumstances making them suspect, such as the possibility that they were being used to cover up the illegal firing of employees who tried to form a union.Still, Anne Lofaso, a professor of labor law at West Virginia University, said the latest decision was limited to rights under the National Labor Relations Act, such as employees’ rights to draw attention to unsafe working conditions, or to engage in other activities that protect or benefit workers as a group.She said an employer could still offer workers a severance agreement requiring them to give up their right to sue over, say, race discrimination under the Civil Rights Act of 1964.In the ruling, issued Tuesday, the board said it was returning to longstanding precedent. The 2020 standard, it said, ignored the fact that a severance package with confidentiality or nondisparagement provisions could on its own “unlawfully restrain and coerce” workers’ labor rights.“It’s long been understood by the board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights,” the board’s chairman, Lauren McFerran, said in a statement.Charlotte Garden, a professor of labor law at the University of Minnesota, said the 2020 approach had effectively tried to “narrow the rule to situations where an employer was trying to cover up their own previous unlawful activity and prohibit employees from talking about it.” The current ruling, she added, takes a broader view of when employees have the right to speak out.The case involved a Michigan hospital that permanently furloughed 11 union members during the pandemic. To receive severance benefits, they were required to sign an agreement that barred them from making statements that could disparage the hospital and from sharing the terms of the agreement.In furloughing the workers and offering them the agreement, the hospital also bypassed the union, depriving it of a chance to negotiate the terms, according to Tuesday’s ruling.In his dissent, Marvin Kaplan, the board’s lone Republican, argued that offering the severance agreement was illegal because the hospital circumvented the union, but not specifically because of its nondisclosure and nondisparagement provisions.Under Mr. Biden’s appointees, the labor board has moved relatively quickly to reinstate workers who it determines have been fired illegally. It has also issued rulings effectively expanding the financial remedies available to such workers and making it easier for a subset of employees within a workplace to unionize. More

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    U.S. Could Default on Debt as Early as Summer, New Estimate Says

    The Bipartisan Policy Center said the nation could run out of cash this summer or early fall if Congress did not raise the debt limit.WASHINGTON — The United States faces a default sometime this summer or early fall if Congress does not raise or suspend the debt ceiling, a Washington think tank warned on Wednesday.The projection from the Bipartisan Policy Center is the latest estimate of when the government could run out of cash to pay its bills. The nation, which borrows huge sums to help pay for everything from military salaries to Social Security benefits, hit its $31.4 trillion borrowing cap on Jan. 19. Since then, the Treasury Department has been employing what are known as extraordinary measures to ensure that the government has enough to pay what it owes, including payments to bondholders.“We anticipate that those emergency measures, as well as the cash that Treasury has on hand, will most likely be exhausted at some point during the summer or early fall,” Shai Akabas, the center’s director of economic policy, said during a briefing on Wednesday morning.Last week, the nonpartisan Congressional Budget Office projected that the department’s ability to prevent the United States from defaulting on its debt could be exhausted between July and September. That estimate was slightly more favorable than what Treasury Secretary Janet L. Yellen suggested when she told Congress last month that her department’s ability to keep financing the country’s obligations could be exhausted in June.The day when the United States runs out of cash — known as the X date — depends largely on how much the Treasury Department collects in 2022 tax revenue, the Bipartisan Policy Center said. The group warned that moment could be “too close for comfort” given the vagaries around tax receipts.“There is a possibility that the cash balance in early to mid-June will be so low that it will necessitate action,” Mr. Akabas said. He added that given “the considerable uncertainty in our nation’s current economic outlook,” it was impossible to know for certain when the X date might happen.“Policymakers have an opportunity now to inject certainty into the U.S. and global economy by beginning, in earnest, bipartisan negotiations around our nation’s fiscal health and taking action to uphold the full faith and credit of the United States well before the X date,” he said.Ms. Yellen’s extraordinary measures to keep the government running have included redeeming some existing investments and suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Once those measures are exhausted, the United States will need to borrow more money or face default. She has urged Congress to raise or suspend the debt limit.It remains unclear how quick or easy it would be to do that. Republican lawmakers have insisted that President Biden agree to undefined spending cuts to win their votes to raise the cap, arguing that the borrowing binge is putting the United States on a path to fiscal disaster. Mr. Biden has insisted that he will not negotiate spending cuts as part of any debt limit legislation, saying that the cap has to be raised to fund obligations that Congress — including Republicans — have already approved. More

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    China’s Economic Support for Russia Could Elicit More Sanctions

    U.S. officials pledged to crack down on shipments to Russia that can be used for both civilian and military purposes, but that has proved hard to police.WASHINGTON — President Biden and his top officials vowed this week to introduce additional sanctions aimed at impeding Russia’s war efforts against Ukraine. But the administration’s focus is increasingly shifting to the role that China has played in supplying Russia with goods that have both civilian and military uses.As one of the world’s biggest manufacturers of products like electronics, drones and vehicle parts, China has proved to be a particularly crucial economic partner for Russia.Beijing has remained officially unaligned in the war. Yet China, along with countries like Turkey and some former Soviet republics, has stepped in to supply Russia with large volumes of products that either civilians or armed forces could use, including raw materials, smartphones, vehicles and computer chips, trade data shows.Administration officials are now expressing concern that China could further aid Russia’s incursion by providing Moscow with lethal weapons. While there is no clear evidence that China has given weapons and ammunition to Russia, Secretary of State Antony J. Blinken warned in recent days that China may be preparing to do so.President Biden, speaking in Kyiv on Monday, said the United States and its partners would announce new measures targeting sanctions evasion this week. He did not specify whether those actions would be directed at Moscow or its trading partners.“Together we have made sure that Russia is paying the price for its abuses,” he said the next day in Warsaw.And in a speech on Tuesday at the Council on Foreign Relations, Wally Adeyemo, the deputy Treasury secretary, said the United States would be working “to identify and shut down the specific channels through which Russia attempts to equip and fund its military.”“Our counterevasion efforts will deny Russia access to the dual-use goods being used for the war and cut off these repurposed manufacturing facilities from the inputs needed to fill Russia’s production gaps,” he said.The comments came on the same day that Wang Yi, China’s top diplomat, visited Moscow.The actions that the United States has taken against Russia in partnership with more than 30 countries constitute the broadest set of sanctions and export controls ever imposed against a major economy. But this regime still has its limits.One year into the war, the Russian economy is stagnant, but not crippled. The country has lost direct access to coveted Western consumer brands and imports of the most advanced technology, like semiconductors. But individuals and companies around the world have stepped in to provide Russia with black market versions of these same products, or cheaper alternatives made in China or other countries.Russia is unable to produce precision missiles today because the country no longer has access to leading-edge semiconductors, a U.S. official said.Maxim Shipenkov/EPA, via ShutterstockIn particular, the United States and its allies appear to have had limited success in stopping the trade of so-called dual-use technologies that can be used in both military equipment and consumer goods.The United States included many types of dual-use goods in the export controls it issued against Russia last February, because the goods can be repurposed for military uses. Aircraft parts that civilian airlines can use, for example, may be repurposed by the Russian Air Force, while semiconductors in washing machines and electronics might be used for tanks or other weaponry.The Chinese Spy Balloon ShowdownThe discovery of a Chinese surveillance balloon floating over the United States has added to the rising tensions between the two superpowers.Tensions Rise: In the aftermath of the U.S. downing of a Chinese spy balloon on Feb. 4 and three unidentified flying objects a week later, the nations have traded accusations over their spying programs.U.S.-China Meeting: Secretary of State Antony Blinken held a confrontational meeting with his Chinese counterpart on Feb. 18 in Munich, resuming diplomatic contact between Washington and Beijing.A ‘Military-Civil Fusion’: The international fracas over China’s spy balloon program has thrown a light on Beijing’s efforts to recruit commercial businesses to help strengthen the Chinese military.Unidentified Objects: As more objects were shot down after the balloon incident, experts warned that there was an “endless” array of potential targets crowding America’s skies. Here’s a look at some of them.Top U.S. officials warned their Chinese counterparts against supporting Russia’s war effort after the invasion of Ukraine last year, saying there would be firm consequences. While China has been careful not to cross that line, it has provided support for Russia in other ways, including through active trade in certain goods..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.The United States has cracked down on some of the companies and organizations providing goods and services to Russia. In January, it imposed sanctions on a Chinese company that had provided satellite imagery to the Wagner mercenary group, which has played a large role in the battle for eastern Ukraine. In December, it added two Chinese research institutes to a list of entities that supply the Russian military, which will restrict their access to U.S. technology.But tracking by research firms shows that trade in goods that the Russian military effort can use has flourished. According to the Observatory of Economic Complexity, an online data platform, shipments from China to Russia of aluminum oxide, a metal that can be used in armored vehicles, personal protective equipment and ballistic shields, soared by more than 25 times from 2021 to 2022.Shipments of minerals and chemicals used in the production of missile casings, bullets, explosives and propellants have also increased, according to the Observatory of Economic Complexity. And China shipped $23 million worth of drones and $33 million worth of certain aircraft and spacecraft parts to Russia last year, up from zero the prior year, according to the group’s data.Data from Silverado Policy Accelerator, a Washington nonprofit, shows that Russian imports of integrated circuits, or chips, which are crucial in rebuilding tanks, aircraft, communications devices and weaponry, plummeted immediately after the invasion but crept up over the past year.In December, Russia’s imports of chips had recovered to more than two-thirds of their value last February, just before the war began, according to Silverado. China and Hong Kong, in particular, together accounted for nearly 90 percent of global chip exports to Russia by value from March to December.Shipments from China to Russia of smart cards, light-emitting diodes, polysilicon, semiconductor manufacturing equipment and other goods have also risen, the firm said.Secretary of State Antony J. Blinken said he had shared concerns with Wang Yi, China’s top diplomat, that Beijing was considering providing weapons and ammunition to aid Russia’s campaign in Ukraine.Pool photo by Stefani ReynoldsRelations between the United States and China have soured in recent weeks after the flight of a Chinese surveillance balloon across the United States early this month. But divisions over Russia are further straining geopolitical ties. A meeting between Mr. Blinken and Mr. Wang, his Chinese counterpart, on the sidelines of the Munich Security Conference on Saturday night was particularly tense.U.S. officials have been sharing information on China’s activities with allies and partners in their meetings in Munich, a person familiar with the matter said.On “Face the Nation” on Sunday, Mr. Blinken said he had shared concerns with Mr. Wang that China was considering providing weapons and ammunition to aid Russia’s campaign in Ukraine, and that such an action would have “serious consequences” for the U.S.-Chinese relationship.“To date, we have seen Chinese companies — and, of course, in China, there’s really no distinction between private companies and the state — we have seen them provide nonlethal support to Russia for use in Ukraine,” Mr. Blinken said.“The concern that we have now is, based on information we have, that they’re considering providing lethal support,” he added. “And we’ve made very clear to them that that would cause a serious problem for us and in our relationship.”U.S. officials have emphasized that China by itself is limited in its ability to supply Russia with all the goods it needs. China does not produce the most advanced types of semiconductors, for example, and restrictions imposed by the United States in October will prevent Beijing from buying some of the most advanced types of chips, and the equipment used to make them, from other parts of the world.Russia is unable to produce precision missiles today because the country no longer has access to leading-edge semiconductors made by the United States, Taiwan, South Korea and other allied sources, a senior administration official said on Monday.“While we are concerned about Russia’s deepening ties with them, Beijing cannot give the Kremlin what it does not have, because China does not produce the advanced semiconductors Russia needs,” Mr. Adeyemo said during his remarks. “And nearly 40 percent of the less advanced microchips Russia is receiving from China are defective.”But Ivan Kanapathy, a former China director for the National Security Council, said that most of what Russia needed for its weapons were less advanced chips, which are manufactured in plenty in China.“The U.S. government is very well aware that our export control system is designed in a way that really relies on a cooperative host government, which we don’t have in this case,” Mr. Kanapathy said.He added that it was “quite easy” for parties to circumvent export control through the use of front companies, or by altering the names and addresses of entities. “China is quite adept at that.” More

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    How Arizona Is Positioning Itself for $52 Billion to the Chips Industry

    The state has become a hub for chip makers including Intel and TSMC, as the government prepares to release a gusher of funds for the strategic industry.In recent weeks, Gina Raimondo, the commerce secretary, has talked with Senator Mark Kelly of Arizona, spent time with the president of Arizona State University and appeared at a conference with the mayor of Phoenix.Their discussions centered on one main topic: chips.Ms. Raimondo is in charge of handing out $52 billion for semiconductor manufacturing and research under the CHIPS Act, a funding package intended to expand domestic production of the foundational technology, which acts as the brains of computers. The legislation, which passed in August, is a prime piece of President Biden’s industrial policy and part of a push to ensure America’s economic and technology leadership over China.Arizona wants to make sure it is in position for a portion of that once-in-a-generation gusher of federal funding, for which the Commerce Department will begin taking applications after Thursday. As a result, Arizona officials have inundated Ms. Raimondo to promote the state’s growing chip industry and talked with the chief executives of giant chip companies such as Intel and Taiwan Semiconductor Manufacturing Company.Arizona, which is vying for subsidies along with Texas, New York and Ohio, may have a head start on the action. The state has been home to semiconductor makers since the 1940s and has 115 chip-related companies, whereas there is one major manufacturer in Ohio.Arizona has also led the nation in chip investments since 2020, with the announcements of two new chip-making plants by TSMC and two additional factories from Intel that will cost a combined $60 billion. State leaders had helped persuade the companies to open the facilities by offering big tax breaks and water and other infrastructure grants. They also promised to expand technical and engineering education in the state.State officials and chip companies also acted as a lobbying bloc in Washington. They helped shape the CHIPS Act to include federal tax credits, subsidies, and research and work force grants. TSMC expanded its lobbying staff to 19 people from two in two years, and Intel spent more than $7 million in lobbying efforts last year, the most it had spent in two decades. Arizona State University spent $502,000 on lobbying last year, also the most in two decades.“It has been an intentional and an all-hands-on-deck effort,” said Sandra Watson, president of the Arizona Commerce Authority, a nonprofit economic development organization that has helped lead state efforts to attract chip companies and push for the CHIPS Act.Sandra Watson, president of the Arizona Commerce Authority, hosted more than 20 chief executives of chip companies at the Super Bowl this month.Caitlin O’Hara for The New York TimesThe Commerce Department is expected to soon begin handing out $39 billion in subsidies to semiconductor makers, later opening the process to companies, universities and others to apply for $13.2 billion in research and work force development subsidies. The CHIPS Act also provides an investment tax credit for up to 25 percent of a manufacturer’s capital expenditure costs.Ms. Raimondo has described the process as a “race” among states. “Every governor, every state legislature, every president of public universities in every state ought to be now putting their plan of attack together,” she said in August during a visit to Arizona State University’s tech research and development center. “This is going to be a competitive process.”The Commerce Department declined to comment.Arizona’s history with chip manufacturing stretches back to 1949, when the telecom hardware and services provider Motorola opened a lab in Phoenix that later developed transistors. In 1980, Intel built a semiconductor plant in Chandler, a suburb southeast of Phoenix, drawn by the state’s low property taxes, relative proximity to its Silicon Valley headquarters and stable geology. (Earthquakes are rare in Arizona.)During President Donald J. Trump’s administration, he pushed an “America First” policy agenda. That opened an opportunity for Doug Ducey, a Republican who was then Arizona’s governor, and other state officials to transform their economy into a tech hub.Arizona’s governor at the time, Doug Ducey, and Commerce Secretary Gina Raimondo while touring the TSMC construction site in December.T.J. Kirkpatrick for The New York TimesIn 2017, Mr. Ducey and other Arizona officials traveled to Taiwan to meet with executives of TSMC, the world’s biggest maker of leading-edge chips. They promoted the state’s low taxes, its business-friendly regulatory environment and Arizona State University’s engineering school of more than 30,000 students.Mr. Ducey, who was close to Mr. Trump, also had calls with Commerce Secretary Wilbur Ross, Defense Secretary Mark Esper and Secretary of State Mike Pompeo on financial incentives to expand domestic production of chips.“My job is to sell Arizona,” Mr. Ducey said. “In this case, it was to sell Arizona to TSMC but also to the administration.”In 2019, Mr. Ducey helped set up calls between the cabinet secretaries and TSMC’s executives to lock in a deal to open manufacturing plants in Arizona. The state promised tax credits and other financial incentives to help offset costs for the company to move production to the United States from Taiwan.In May 2020, TSMC announced plans to build a $12 billion factory in Phoenix. Later that year, the city provided TSMC with $200 million in infrastructure incentives, including water lines, sewage and roads. One traffic light would cost the city $500,000.“TSMC appreciates the support from our dedicated partners on the state, local and federal levels,” said Rick Cassidy, the chief executive of TSMC Arizona, adding that the CHIPS Act funds will enable the company and its suppliers to expand “for years to come.”The CHIPS Act is a prime piece of President Biden’s industrial policy. He toured TSMC’s Arizona plant in December.T.J. Kirkpatrick for The New York TimesIn early 2021, Pat Gelsinger, Intel’s chief executive, announced a sweeping strategy to increase U.S. production of chips. States began soliciting the company. Arizona officials highlighted their long relationship with Intel and perks, such as the state’s low property and business taxes.Intel soon announced a $20 billion expansion in Chandler, with two additional factories that would bring 3,000 new jobs to the state. Chandler also approved $30 million in water and road improvements for the new plants.“The Arizona government has been a great collaborator,” said Bruce Andrews, Intel’s chief government affairs officer. “By investing in semiconductors early, they created an ecosystem that has had a jobs multiplier effect and massive economic benefits.”But some of the tax breaks have rankled Arizona residents, who say the moves have hurt funding for public schools. The state ranks 47th in per-student spending.“We need to bring business to our state, but we need to look at balance,” said Beth Lewis, the executive director of Save Our Schools in Arizona. “Corporations are choosing not to settle in Arizona because of our devastated public education system.”Arizona pressed ahead with pushing Congress to create legislation for chip subsidies. In March 2021, Senator Kelly joined Senators John Cornyn, Republican of Texas, and Mark Warner, Democrat of Virginia, the authors of legislation that would become the CHIPS Act, in a call with the new Biden administration to push for the White House’s support of funding.Mr. Kelly, an early sponsor of the CHIPS Act, became a chief negotiator on the legislation in Congress. He negotiated the inclusion of a four-year 25 percent investment tax credit in the bill, including a provision that ensured Intel and TSMC would get the tax credits even though their Arizona factory projects were announced before the bill would go into effect.Mr. Kelly also helped the president of Arizona State University, Michael Crow, lobby for the inclusion of more than $13 billion in grants for research and development and work force training. And Mr. Kelly and state leaders hosted administration officials at events to showcase the state’s semiconductor efforts as part of the White House’s manufacturing strategy.Senator Mark Kelly of Arizona at TSMC’s factory in December.Adriana Zehbrauskas for The New York Times“We have the potential to lead the nation in microchip production,” Mr. Kelly said in a statement. “I was honored to lead this effort, and now I’m working to maximize it for Arizona”Mr. Ducey, who left office when his term ended in January, pushed for more tech-friendly policies, including an income-tax cut. He also said he would use $100 million that the state had received from federal Covid grants to attract more chip companies and help them apply for funds provided by the CHIPS Act.In December, TSMC announced a second factory that would bring its total investment in Arizona to $40 billion. Mr. Biden and Ms. Raimondo traveled to Phoenix to speak at the announcement, with Mr. Kelly accompanying them on Air Force One.Arizona officials continue to pitch semiconductor companies to open factories in the state.This month, Ms. Watson hosted more than 20 chief executives of chip companies at the Super Bowl in Glendale. Katie Hobbs, Arizona’s new governor and a Democrat, and Mr. Kelly heralded how the state could benefit from the CHIPS Act.“There’s a robust pipeline,” Ms. Watson said. More

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    Consumer debt hits record $16.9 trillion as delinquencies also rise

    Consumer debt across all categories totaled $16.9 trillion, up about $1.3 trillion from a year ago as balances rose across all major categories.
    Mortgages, auto loans and credit card delinquencies all increased, though to still-low levels.
    The rise in balances came amid an aggressive rate-hiking campaign by the Fed.

    Consumer debt hit a fresh record at the end of 2022 while delinquency rates rose for several types of loans, the New York Federal Reserve reported Thursday.
    Debt across all categories totaled $16.9 trillion, up about $1.3 trillion from a year ago, as balances rose across all major categories.

    Despite a decline in originations, mortgage balances increased to $11.9 trillion, up about $250 billion from the third quarter and about $1 trillion from a year ago. Originations for new home loans and refinancings fell to $498 billion, less than half where they were for Q4 in 2021 and a drop of about $135 billion from the third quarter.
    Mortgage loans considered in “serious delinquency” of 90 days or more rose to a rate of 0.57%, still low but nearly double where they were from the year prior. Auto loan debt delinquencies rose 0.6 percentage point to 2.2%, while credit card debt jumped 0.8 percentage point to 4%.

    A bank employee counts U.S. dollar notes at a Kasikornbank in Bangkok, Thailand, January 26, 2023. 
    Athit Perawongmetha | Reuters

    “Credit card balances grew robustly in the fourth quarter, while mortgage and auto loan balances grew at a more moderate pace, reflecting activity consistent with pre-pandemic levels,” said Wilbert van der Klaauw, economic research advisor at the New York Fed.
    “Although historically low unemployment has kept consumers’ financial footing generally strong, stubbornly high prices and climbing interest rates may be testing some borrowers’ ability to repay their debts,” he added.
    The rise in balances came amid an aggressive rate-hiking campaign from the Fed as it battled inflation running near its highest levels in more than 41 years.

    The Fed raised its benchmark rate seven times during the year, adding another increase in January that took the overnight borrowing rate to a target range of 4.5%-4.75%. Included in that series were four consecutive increases of three-quarters of a percentage point, boosting rates for multiple consumer debt instruments such as credit cards, mortgages and auto loans.
    Student loan debt also increased for the month, after staying flat during much of the pandemic amid government-backed amnesty for borrowers. The total balance hit $1.6 trillion in the fourth quarter.
    Auto loan debt edged higher, to $1.55 trillion, while credit card balances rose to just shy of $1 trillion.
    The explosion in consumer debt came amid an ongoing increase in federal government borrowing. Total U.S. government debt now stands near $31.5 trillion, up from $29.6 trillion at the end of 2022, according to Treasury Department data.

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    Biden Labor Secretary to Depart to Run N.H.L. Players Union

    Martin J. Walsh, a former mayor of Boston, was regarded as an unusually visible labor secretary.Labor Secretary Martin J. Walsh is leaving the Biden administration to become executive director of the National Hockey League Players’ Association, the union announced on Thursday.Mr. Walsh, a former Boston mayor who had led the city’s powerful Building and Construction Trades Council, helped to bolster the Biden administration’s pro-union credentials and usher in a period of more aggressive workplace regulation after the relatively hands-off approach during the Trump administration.Mr. Walsh said in a statement that he would leave the Labor Department in mid-March.Alongside President Biden, who has been more vocal about supporting unions than any other president in decades, Mr. Walsh was arguably the administration’s most visible proponent of unions. He joined Mr. Biden and Vice President Kamala Harris in meeting union organizers at the White House, and he served as vice chairman of an administration task force exploring how the federal government could increase union membership.Although union membership fell to 10.1 percent of the work force last year, the lowest rate on record, the country added nearly 300,000 union members amid a wave of worker organizing at major corporations including Starbucks, Amazon and Apple. (The rate fell because the work force grew even more rapidly.) Mr. Walsh cheered on the trend and warned employers to respect workers’ desire to unionize and refrain from coercive tactics.“As secretary of labor, I don’t appreciate that,” he said in an interview in August, when asked about complaints issued against Starbucks by the National Labor Relations Board. Workers who choose to organize “should be treated fairly and respectfully, not intimidated,” he added. Starbucks has denied violating labor law.Labor Organizing and Union DrivesTesla: A group of workers at a Tesla factory in Buffalo have begun a campaign to form the first union at the auto and energy company, which has fiercely resisted efforts to organize its employees.Apple: After a yearlong investigation, the National Labor Relations Board determined that the tech giant’s strictly enforced culture of secrecy interferes with employees’ right to organize.N.Y.C. Nurses’ Strike: Nurses at Montefiore Medical Center in the Bronx and Mount Sinai in Manhattan ended a three-day strike after the hospitals agreed to add staffing and improve working conditions.Amazon: A federal labor official rejected the company’s attempt to overturn a union victory at a warehouse on Staten Island, removing a key obstacle to contract negotiations between the union and the company.In the Inflation Reduction Act, the major climate and health bill that Mr. Biden signed last year, Mr. Walsh helped push for labor-friendly provisions, including incentives for the owners of clean energy projects to pay wages similar to union rates.When it came to regulation, Mr. Walsh’s approach was most visible in the Labor Department’s response to the Covid-19 pandemic. The Occupational Safety and Health Administration, an agency within the department, had declined to issue a new workplace rule governing Covid-19 under President Donald J. Trump.But Mr. Biden and Mr. Walsh pushed the agency to issue two so-called emergency standards — one outlining the steps employers in the health care industry would have to take to protect workers, and another requiring workers to either be vaccinated against the coronavirus or wear masks and be tested regularly. The Supreme Court blocked the latter rule, though it let stand a provision from another agency that required workers to be vaccinated at facilities that received funding from Medicare and Medicaid.After an executive order from Mr. Biden, the Labor Department also put forth a rule raising the minimum wage for federal contractors last year to $15 an hour. It proposed a rule that would make it more likely for millions of workers in industries like home care, construction and gig work to be classified as employees rather than independent contractors, guaranteeing them a minimum wage and overtime pay, and another that could raise the wages paid to construction workers on federally funded projects.It has recently cited six Amazon warehouses for creating work environments that have high risk for musculoskeletal injuries among workers. Amazon has said the accusations don’t reflect the steps it takes to ensure worker safety..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Ann Rosenthal, a longtime Labor Department lawyer who was at the department during the first year of the Biden administration, said Mr. Walsh was among the most effective of the 13 secretaries she served because of his credibility with unions and other worker advocates, his close relationship with Mr. Biden, and his political instincts and pragmatism. “He really checked all the boxes,” Ms. Rosenthal said.Mr. Walsh’s tenure at the department was not without controversy. Most prominent was the deal he helped broker in September between major freight rail carriers and a dozen unions representing more than 100,000 rail workers. The deal helped to avert a potentially crippling strike before the midterm elections and granted improvements in health benefits and wage increases of nearly 25 percent over five years.But the deal lacked paid sick days, and some workers complained that it did little to ease the grueling, unpredictable schedules that had put stress on their personal lives and health. Although members of four rail unions voted down the deal, the administration urged Congress to mandate the deal in November, and the president signed legislation enacting it. (Last week, one of the carriers, CSX, announced an agreement with unions that would provide four paid sick days a year for about 5,000 workers; a White House spokeswoman said Mr. Walsh had continued to push the rail carriers to offer paid sick leave.)Critics also complained that OSHA under Mr. Walsh didn’t go far enough in protecting workers from Covid-19. They said the agency should have devised regulations that applied to a variety of high-risk industries, such as meat processing, grocery and retail, not just health care. (The department said it had the power to ensure worker safety in these industries through other means, such as a so-called general duty clause.)Other rules, like the independent contractor rule and the one governing construction-worker wages, were proposed but not finalized during the first two years of the Biden administration — a delay that has worried some supporters.And Mr. Walsh and his administration colleagues failed in their efforts to win legislation that would have made it easier for workers to unionize, such as the Protecting the Right to Organize Act, or PRO Act, which would have blocked employers from requiring workers to attend anti-union meetings and made it possible to impose penalties on employers that violated labor law. The House passed the measure, but it stalled in the Senate.The Senate also killed a measure that would have granted consumers a $4,500 incentive to buy electric vehicles assembled at unionized plants in the country.A battery plant in Ohio that is a joint venture of General Motors and the South Korean manufacturer LG Energy Solution recently unionized. But without the kind of legislation that the Senate has balked at, unions face much longer odds in organizing at a proliferation of new battery and electric vehicle plants in the South.Mr. Walsh is a longtime fan of the Boston Bruins and has received political contributions from the hockey team’s owner. The Daily Faceoff, a hockey publication, previously reported on the contributions.The New York Times reported last month that Mr. Walsh was one of several candidates under consideration to replace Ron Klain as Mr. Biden’s chief of staff. That job eventually went to Jeffrey D. Zients. More