US Semiconductor Subsidy Distribution Mobilizes Wall Street... Team Formed in Washington

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The U.S. administration under Joe Biden has announced that subsidies under the 'CHIPS and Science Act (CSA)' will be provided within this year, and it is reported that a team of Wall Street experts is busily working on the distribution of these subsidies. With the 2024 presidential election approaching, the distribution of semiconductor subsidies, which will greatly influence local public opinion, is showing signs of overheating not only among the central government and corporations but also local governments, leading to the deployment of numerous experts to ensure orderly allocation.

[Image source=Reuters Yonhap News]

According to the Wall Street Journal (WSJ) on the 15th (local time), a team of former Wall Street employees is working on reviewing subsidy payments under the CHIPS Act in a corner of the Commerce Department building near the White House in Washington, D.C. Since implementing the CHIPS Act in August last year, the Biden administration has been working toward distributing $39 billion of the total $52 billion subsidy (approximately 69 trillion KRW) allocated for manufacturing facility investments within this year.

The Commerce Department formed a 'Chips for America' team of 140 members last February. Among them, a team centered around about 30 Wall Street personnel was formed. The team members range in age from 23 to 64, with about half being women. WSJ reported that the team members refer to this group as a 'startup' within the government.

Leading the team is Todd Fisher, a former executive at major U.S. investment firm KKR, with team members including Sarah O'Rourke, a former partner at global consulting firm McKinsey, and Farha Faisal, who was with Blackstone, the world's largest private equity firm. Also included are Kevin Quinn and Suriyan Ringa, former Goldman Sachs bankers, and Mary Alex Smith, a former JP Morgan banker.

President Joe Biden [Photo by AP News]

In the market and academia, while it has been common for Wall Street veterans like Jerome Powell, Chair of the U.S. Federal Reserve, or former Treasury Secretary Steven Mnuchin to hold senior government positions, it is unprecedented for an entire team within the administration to be composed solely of Wall Street alumni.

WSJ explained, "To revive the U.S. semiconductor industry, the Biden administration has launched the largest government-led revival policy since World War II, relying on masters of the free market (Wall Street personnel)." It added that the team's performance will serve as an initial test to determine whether the U.S. semiconductor industry's resurgence can be realized.

Within the U.S., there is skepticism about the success of such government-led industrial revival policies. Given the upcoming presidential election next year, it is difficult for industrial policies, which must maximize capital efficiency, to remain free from electoral considerations. Ultimately, there is a possibility that these limited resources will be used as tools to capture votes by promising job creation.

Gina Raimondo, U.S. Secretary of Commerce
[Photo by Reuters]

However, it is reported that Secretary Raimondo, who has venture capital startup experience, is requiring this team to conduct project reviews similarly to Wall Street practices. Currently, about 460 companies have submitted letters of intent to apply for subsidies to the Commerce Department. Once a person in charge of each project is assigned, the team first evaluates the project's success potential and then checks whether it aligns with the Biden administration's political agenda. In this process, they are also cooperating with experts within the government in defense, economics, and other fields.

They are preparing measures not only for distribution but also to ensure that subsidies lead to the long-term development of the U.S. semiconductor industry.

The team led by Ringa, a former Goldman Sachs employee, is reviewing ways for semiconductor suppliers to raise funds domestically, such as obtaining loans secured by equipment, intellectual property rights, and infrastructure from insurers within the U.S. Meanwhile, the team led by Faisal, formerly of Blackstone, is focusing on providing subsidies aimed at encouraging foreign companies to invest in the U.S. in the short term, while preparing strategies for the long-term growth of the U.S. semiconductor industry itself.

Team leader Fisher said, "Markets do not always function perfectly," adding, "Other countries are trying to benefit from this, so we are trying to correct any misallocation of subsidies." He pointed out, "If we fail to find the right way to provide subsidies to encourage private sector investment, we will not succeed."

This content was produced with the assistance of AI translation services.