Pennsylvania’s chipmaking comeback left in limbo under Donald Trump

{"text":[[{"start":8,"text":"Fifteen months ago, the US government earmarked money to help restore the historic heartland of computer chipmaking in America as it tried to wrestle high-tech manufacturing back from Asia."}],[{"start":19.65,"text":"But as demand for chips to power the AI boom races higher, the federal money has not arrived. Lehigh Valley fears being left behind. "}],[{"start":29.7,"text":"“Everybody is scratching their heads . . . I think even the companies themselves are trying to figure it out,” said Don Cunningham, head of the local Economic Development Corporation, which is based in a stately building in Bethlehem, Pennsylvania that used to be a club for steel company bosses."}],[{"start":46.9,"text":"The legacy of the steel industry looms large over the city. But high-tech chipmaking also has deep roots in this part of eastern Pennsylvania. "}],[{"start":55.75,"text":"The first mass-produced transistors, the building blocks of today’s semiconductors, were manufactured in neighbouring Allentown in 1951. Western Electric and Bell Labs, the pioneering US research outfit, employed thousands of people there at their height in the 1970s."}],[{"start":73.95,"text":"Their former base on Union Boulevard now houses a school, drive test centre and employment office."}],[{"start":79.95,"text":"“Most people are surprised when they realise we’ve produced advanced technologies for the last seventy years,” said Cunningham, a former Democratic mayor of the city."}],[{"start":88.65,"text":"Efforts to revive local chip manufacturing have been left in limbo by Donald Trump’s sudden upending of US semiconductor policy over the past year."}],[{"start":96.85000000000001,"text":"Trump has attacked Biden-era subsidies and wielded threats against individual companies to extract commitments to US manufacturing. "}],[{"start":104.2,"text":"As in Bethlehem, advanced manufacturers across the country are trying to plan vast, multi-decade investments based on a policy landscape that shifts by the day."}],[{"start":114.45,"text":"“When the current administration came in, and contracts started getting frozen, and people started theorising about who ‘does President Trump like and who does President Trump not like’ . . . it just created a lot of uncertainty,” said Bethlehem mayor Willie Reynolds."}],[{"start":129.6,"text":"A commerce department official said it was aggressively working through outstanding projects under the Chips Act, with a focus on getting more for taxpayer money."}],[{"start":null,"text":"

• A man in a light blue button-down shirt stands on a balcony with office buildings in the background.
• Workers in full cleanroom suits operate and monitor semiconductor manufacturing equipment inside a yellow-lit facility.

"}],[{"start":138,"text":"The promise of the semiconductor industry for the local economy is on display at a sprawling chipmaking facility outside Allentown owned by Broadcom, the $1.8tn San Jose-based chip giant."}],[{"start":151.35,"text":"Inside the chip “fab”, engineers in white “bunny suits” to prevent contamination of the sensitive equipment are churning out the specialised laser chips for advanced data centres. "}],[{"start":161.9,"text":"Doug Dopp, its manufacturing director, proudly explains that output has “easily” tripled in the past four years, requiring him to repurpose parts of the facility previously used for research as “clean rooms” for making chips. "}],[{"start":175.4,"text":"He estimates the company will probably invest more in the facility this year “than we’ve spent in probably the last six years”. "}],[{"start":182.95000000000002,"text":"The specialist photonics semiconductors produced here are used to knit together the chips that power artificial intelligence applications such as ChatGPT."}],[{"start":192.50000000000003,"text":"Tech giants such as Amazon and Microsoft, alongside the likes of OpenAI and Anthropic, are pouring hundreds of billions of dollars into data centre construction. "}],[{"start":203.30000000000004,"text":"One of the biggest beneficiaries of the resulting chipmaking boom has been Taiwan’s TSMC, which has cornered the market in advanced manufacturing over the last two decades."}],[{"start":null,"text":"

• Douglas Dopp stands with arms folded in a glass-enclosed corridor at Broadcom Semiconductors in Pennsylvania.
• A worker in a cleanroom suit handles a semiconductor wafer near a large piece of manufacturing equipment at a Broadcom facility.

"}],[{"start":213.85000000000005,"text":"Funds to expand Lehigh Valley chipmaking were promised in the dying days of Joe Biden’s administration, under the 2022 Chips Act — a generational industrial policy to bring critical semiconductor manufacturing capacity back to America with $39bn in subsidies as well as massive tax breaks."}],[{"start":234.90000000000006,"text":"Infinera and Coherent, two companies that build specialised chips critical for data centres and electric vehicles, were earmarked for $93mn and $79mn respectively in direct manufacturing grants, just days before Trump took office."}],[{"start":250.40000000000006,"text":"“We really started churning those remaining chips awards out,” in the last weeks of the Biden administration, recalled one former senior commerce department official. "}],[{"start":259.30000000000007,"text":"The grants have been pending ever since. The commerce department is in regular communication with both companies, according to a current official, who expressed confidence that Infinera’s project, which was subject to a final legal deal, would go ahead."}],[{"start":276.05000000000007,"text":"The official added it was up to Coherent to decide whether to proceed with its expansion. "}],[{"start":null,"text":""}],[{"start":281.30000000000007,"text":"Infinera was planning to base its new chip testing and packaging plant in southern Bethlehem. But the company — since acquired by Nokia — has yet to secure the land or permits for the new site. A Nokia spokesperson declined to comment on whether the project was still expected to go ahead."}],[{"start":298.30000000000007,"text":"Coherent says it is still working with the US government to finalise the grant for a planned expansion of its facility in neighbouring Easton, where it manufactures silicon carbide wafers used in electric vehicles and increasingly in data centres. “We kind of have to be on their timeline,” chief executive Jim Anderson said."}],[{"start":317.4000000000001,"text":"Successive US administrations have tried to shift a larger share of chipmaking back on to American soil. For the Biden administration, placing some of its Chips Act grants in a swing district of Pennsylvania also had clear electoral logic."}],[{"start":331.9000000000001,"text":"But Trump has excoriated his predecessor’s idea of offering handouts to companies to build in the US. He forced through new deals with the largest subsidy recipients including TSMC and Micron, requiring much larger spending commitments to receive the cash."}],[{"start":348.3500000000001,"text":"With Intel, the administration went further, converting about $11bn in federal grants into a 10 per cent equity stake. Intel executives have said the move was intended to stop them selling their manufacturing business, as the company cut costs, shuttering or pausing many US sites. "}],[{"start":366.3500000000001,"text":"But Trump’s intervention did not stop Intel closing its office in the Lehigh Valley. The US chipmaker axed roughly 50 staff, with the rest now working remotely."}],[{"start":null,"text":"

• A technician in a blue lab coat examines semiconductor components under a microscope at a manufacturing workstation.
• A person holds a silicon wafer containing numerous small semiconductor chips.

"}],[{"start":377.9000000000001,"text":"For smaller recipients of Chips Act subsidies, such as those in Bethlehem, Trump’s policy reversals have left locals wondering if their projects will ever go ahead."}],[{"start":387.55000000000007,"text":"Lehigh lost out on an earlier round of “Tech Hub” funding under the Chips Act three years ago, which went to locations in Texas, Oklahoma and New York. "}],[{"start":396.8500000000001,"text":"“We learnt where our gaps are — we have a nice cluster, but we don’t have this huge critical mass,” Cunningham reflects. "}],[{"start":403.6000000000001,"text":"One undeniable strength is the local talent. A study by the Semiconductor Industry Association predicts that the national chip workforce will grow by almost 115,000 jobs by 2030, a rise of 33 per cent, but warns of a major shortfall in the number of technicians and engineers with advanced degrees from America’s universities."}],[{"start":424.8500000000001,"text":"The Lehigh Valley still hosts a significant workforce. In the decades since its 1970s heyday, Bell Labs-Western Electric fragmented through a complex array of splits and acquisitions."}],[{"start":436.00000000000006,"text":"“What used to be Bell Labs really did seed a lot of the area, and that’s expanded into a number of companies,” said Mary Nadeau, a veteran engineer."}],[{"start":444.95000000000005,"text":"She and colleague Sanjay Sunder, now at Cisco, are part of a close-knit community of experienced chip engineers who have ridden the ebbs and flows of corporate transformations. "}],[{"start":null,"text":""}],[{"start":455.85,"text":"They recall how, in the 1990s, Lehigh Valley pivoted away from manufacturing chips to designing them. It reflected a broader trend that saw American chipmaking relocate to Asia, first with Japanese memory chip companies in the 1980s, and then with the astonishing rise of TSMC in the 1990s. "}],[{"start":473.70000000000005,"text":"The DotCom bubble only accelerated the process of American chip companies outsourcing their manufacturing to Asia. During the ebullience of that period, there was a sign on the highway outside Bethlehem which read: “Move over Silicon Valley, here comes Lehigh Valley.” Sometime after the bubble popped, the sign was quietly removed. "}],[{"start":494.80000000000007,"text":"But the data centre boom of the past three years has increased demand for the kind of semiconductor technology the area is known for. "}],[{"start":503.45000000000005,"text":"Much of the attention around the AI data centres has focused on processor chips such as Nvidia’s “graphics processing units”. Yet the networking technology linking these chips, which transmits data at the speed of light on fibre instead of by electrons through copper, is just as important. "}],[{"start":522.1,"text":"TD Cowen analysts recently forecast a “Cambrian Explosion” for the optics industry as the AI data centre boom seeks new innovations to boost performance. This is the strong suit of the local workforce, including Sunder and Nadeau. "}],[{"start":null,"text":"

The legacy of Bell Labs

1. 1951

   Bell Labs and Western Electric, the pioneering research group and manufacturing arm of the Bell telecoms conglomerate, start building the first transistors in Allentown.

2. 1987

   AT&T, parent company of the ‘Bell System’, buys the land that will become Tek Park, the site of today’s Broadcom chip fab.

3. 1996

   AT&T moves away from manufacturing and spins off Western Electric, and its Allentown semiconductor division. The new company is named Lucent.

4. 2002

   Lucent then spins off its semiconductor division to become Agere Systems, which soon winds down the historic Allentown chip fab.

5. 2014

   After Agere merged with Santa Clara-based chip company LSI Logic, the combined group is sold to Avago Technologies, the former semiconductor division of Hewlett-Packard. 

6. 2016

   Avago Technologies acquires chip designer Broadcom and takes its name for the combined entity, which has become today’s $1.8tn chip giant.

"}],[{"start":536.45,"text":"Sunder said hiring in the field was becoming more competitive. “Hardware is very much back,” he said, after years of tech workers gravitating towards software. At Cisco, they recruited candidates from across the US, attracting some from the west coast “who say they really don’t want the California lifestyle”, Nadeau said."}],[{"start":556.1,"text":"If big local players could expand, it would support a richer local start-up ecosystem, argued Wayne Barz, chief operating officer of Ben Franklin Technology Partners of Northeastern Pennsylvania, an incubator for start-ups."}],[{"start":570.65,"text":"But developments in Washington continue to put bumps in the road, from trade disputes that interrupt supply chains for the rare elements used in chipmaker to new fees for the H-1B skilled worker visa. "}],[{"start":583.8,"text":"“I don’t know how that all plays out,” said Barz. “I mean, the beauty of American democracy is it changes every couple of years.” "}],[{"start":598.3,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776853087_1781.mp3"}