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

Amid the debate about how the United States can bring more manufacturing of semiconductors back to the country and worries it has become a national security concern, a surprising group of well-connected billionaires has quietly assembled to influence the way Washington approaches this thorny challenge.

Over the past several months, without attracting much notice, Eric Schmidt, the former 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 venture capital fund to invest in chip-making across the country. The group also includes 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 effort 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 become clear: Late last month, the White House directed the fund to lead 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 United States, Japan, India and Australia.

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

But the Schmidt-Thiel-backed organization is also raising more than a few eyebrows, and questions: What is it the billionaires want? Will they steer government dollars toward companies they’ve invested in or will benefit from?

Mr. Schmidt has been criticized for having too much influence in the Biden and Obama administrations; Mr. Thiel was seen as having the ear of former President Donald J. Trump.

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

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

In a statement to DealBook, Mr. Schmidt said: “As all of our national security commissions have shown, government, industry, academia and philanthropy must work together if we want free and open societies to lead this next wave of innovation for the benefit of all. America’s Frontier Fund is an important bridge in that effort.”

‘A first mover advantage’

At stake is U.S. primacy in the global innovation race that it led in the 20th century, thanks in great part to American chip breakthroughs — and all the attendant benefits. The risk 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 perhaps even ideology, someday dominating in the world.

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

In 2020, according to the Semiconductor Industry Association, the United States accounted for only “12 percent of global semiconductor manufacturing capacity.” That year, the revenues of the South Korean electronics giant Samsung overtook those of the American chip pioneer Intel. In 2021, Intel did the unthinkable: The company said it would outsource more production to Asia, most notably to Taiwan Semiconductor Manufacturing, an approach that some questioned amid pandemic supply chain struggles and that some believe led to the departure of Intel’s chief executive at the time, Bob Swan.

Mr. Swan’s replacement, Pat Gelsinger, secured more than $43 billion from the company’s board last year to build new chip fabrication plants, including a $20 billion investment in two new factories in Ohio. Mr. Biden has pointed to those developments as examples of how to boost American manufacturing and revive local economies while fighting to reclaim the country’s chip-making title.

But progress has stalled on measures that would help fund these efforts. Last year, Congress passed the Creating Helpful Incentives to Produce Semiconductors Act, known as CHIPS, but the bill remains unfunded as lawmakers debate the details of the Bipartisan Innovation Act, which would provide over $50 billion for semiconductor production efforts, including for the kind of tech development that a venture fund like America’s Frontier Fund is hoping to invest in.

In a speech last month, a frustrated Mr. Biden urged lawmakers to “pass the damn bill.” 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 did not say when that might happen.

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

It is clear that building up chip capacity is a priority for the United States, and that the people backing the fund have the expertise and deep ties to drive action in Washington and on Wall Street. But whether this public-private effort can bring back manufacturing in a country long reliant on Asian factories will require more than a slight shift in broader business operations and a lot of government dollars.

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