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The Billionaires Behind a Push to Reinvigorate U.S. Chip-Making

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Amid the controversy about how the USA can bring more manufacturing of semiconductors back to the country and worries it has turn out to be a national security concern, a surprising group of well-connected billionaires has quietly assembled to influence the best way Washington approaches this thorny challenge.

Over the past several months, without attracting much notice, Eric Schmidt, the previous chief executive of Google and a longtime Democratic donor, has joined Peter Thiel, a co-founder of PayPal and a vocal Trump supporter, to back an unusual nonprofit enterprise capital fund to speculate in chip-making across the country. The group also features a cadre of former government officials, including Ashton B. Carter, former secretary of defense, and H.R. McMaster, former national security adviser.

The billionaires aren’t simply funding the hassle themselves: The group has met with lawmakers in Congress hoping that U.S. taxpayers will help foot the bill.

The ask: $1 billion.

The group, called America’s Frontier Fund, describes itself as “the nation’s first deep-tech fund that invests for the national interest.”

And its influence has already turn out to be clear: Late last month, the White House directed the fund to guide the Quad Investor Network, which the White House describes as “an independent consortium of investors that seeks to advance access to capital for critical and emerging technologies” across the USA, Japan, India and Australia.

The fund’s chief executive is Gilman Louie, a gaming executive turned enterprise capitalist who led In-Q-Tel, a enterprise fund backed by the C.I.A. Mr. Louie is a well-known face around Washington; he was recently named to President Biden’s Intelligence Advisory Board and is anticipated to testify before senators on strengthening the supply chain.

However the Schmidt-Thiel-backed organization can also be raising greater than a number of eyebrows, and questions: What’s it the billionaires want? Will they steer government dollars toward corporations they’ve invested in or will profit from?

Mr. Schmidt has been criticized for having an excessive amount of influence within the Biden and Obama administrations; Mr. Thiel was seen as having the ear of former President Donald J. Trump.

“I’m undecided what that organization can accomplish that the U.S. government can’t accomplish itself,” said Gaurav Gupta, an emerging-tech analyst on the industry research firm Gartner.

Mr. Louie said the skepticism wasn’t warranted: “If anything, we’d like more Eric Schmidts to get entangled, not stand on the sidelines. We’d like more technologists who’ve influence.”

Updated 

June 9, 2022, 6:05 p.m. ET

In a press release to DealBook, Mr. Schmidt said: “As all of our national security commissions have shown, government, industry, academia and philanthropy must work together if we would like free and open societies to guide this next wave of innovation for the good thing about all. America’s Frontier Fund is a very important bridge in that effort.”

At stake is U.S. primacy in the worldwide innovation race that it led within the twentieth century, thanks in great part to American chip breakthroughs — and all of the attendant advantages. The danger of inaction, industry experts say, is that China’s recent investments in deep science and tech will put it in first place, with Chinese technology, and even perhaps ideology, someday dominating on the earth.

“In our current trajectory, the U.S. is losing its grip,” said Edlyn Levine, a quantum physicist and one among the founders of the fund. “Whoever leads has a primary mover advantage and truly will dominate in that sector the identical way the USA did in early semiconductors.”

In 2020, in accordance with the Semiconductor Industry Association, the USA accounted for less than “12 percent of world semiconductor manufacturing capability.” That yr, the revenues of the South Korean electronics giant Samsung overtook those of the American chip pioneer Intel. In 2021, Intel did the unthinkable: The corporate said it could outsource more production to Asia, most notably to Taiwan Semiconductor Manufacturing, an approach that some questioned amid pandemic supply chain struggles and that some imagine led to the departure of Intel’s chief executive on the time, Bob Swan.

But progress has stalled on measures that might help fund these efforts. Last yr, Congress passed the Creating Helpful Incentives to Produce Semiconductors Act, often known as CHIPS, however the bill stays unfunded as lawmakers debate the small print of the Bipartisan Innovation Act, which would offer over $50 billion for semiconductor production efforts, including for the sort of tech development that a enterprise fund like America’s Frontier Fund is hoping to speculate in.

In a speech last month, a frustrated Mr. Biden urged lawmakers to “pass the rattling bill.” Considered one of its authors, Senator Sherrod Brown, a Democrat of Ohio, told DealBook that members of Congress were working on getting it to the president’s desk, though he didn’t say when which may occur.

Michael Gwin, a White House spokesman, said, “The president has been clear that we don’t have a moment to waste.”

It is obvious that build up chip capability is a priority for the USA, and that the people backing the fund have the expertise and deep ties to drive motion in Washington and on Wall Street. But whether this public-private effort can bring back manufacturing in a rustic long reliant on Asian factories would require greater than a slight shift in broader business operations and lots of government dollars.

The founders say they’re committed to the mission, whether or not they get federal funding. (They’ve also began a related fund, raising money from nonprofit organizations.) “I don’t need the federal government to present us permission to go save the country,” Mr. Louie said. “It’d be nice in the event that they would help us.”

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