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# 									Funding for International Partnerships Through the CHIPS Act							

FPC Briefing

Ramin Toloui, Assistant SecretaryBureau of Economic and Business Affairs

Nathaniel C. Fick, Ambassador at LargeBureau of Cyberspace and Digital Policy

Wednesday, March 15, 2023, 11:30 a.m. ET

Washington D.C. 

March 15, 2023

## 								Summary							

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In August 2022, President Biden signed the CHIPS and Science Act, to strengthen U.S. industries, bolster global supply chains, and protect vital national and economic security. The bill established the International Technology Security and Innovation Fund (ITSI), which provides the State Department with $500 million over five years to partner with key allies and partners to promote secure and trustworthy Information and Communications Technologies (ICTs) and to ensure a more secure and resilient global semiconductor supply chain.
 

**THE WASHINGTON FOREIGN PRESS CENTER, WASHINGTON, D.C.**

**MODERATOR:**  Good morning, everyone.  Welcome to the Washington Foreign Press Center’s briefing on the CHIPS and Science Act’s International Technology Security and Innovation Fund.  My name is Jake Goshert; I’m the moderator for this briefing.  As a reminder, this briefing is on the record.  We will post a transcript of the briefing on our website, fpc.state.gov, later today.  

For journalists who are joining us on Zoom, please take a moment now to rename yourself in Zoom to your name, your outlet, and your country.  

We have two briefers today.  The first will be Assistant Secretary of Bureau of Economic and Business Affairs Ramin Toloui, who will be followed by Ambassador at Large for Cyberspace and Digital Policy Nate Fick.  Following their opening remarks, I will open the floor for questions.  And with that, I’m going to turn it over to the assistant secretary.

**ASSISTANT SECRETARY TOLOUI:**  Thanks very much.  It’s a pleasure to be here this morning, a pleasure to be with Ambassador Fick.  And the reason we’re here to talk is to talk about the ITSI Fund.  Last year President Biden signed a historic piece of bipartisan legislation, the CHIPS and Science Act of 2022.  Through tax credits and more than $50 billion in direct investments, the CHIPS Act is aimed at securing American technological leadership through a renaissance in high-tech manufacturing and research and development.

The U.S. is not alone in its goal to strengthen global supply chain resilience with a particular focus on semiconductors.  Economies around the world are making investments in semiconductor production, and we continue to work closely with our partners on diversifying and growing the global semiconductor ecosystem.  

Why is this important?  Because semiconductors and telecommunications networks are critical sectors for economic prosperity and the well-being of people in the United States and around the world.  We learned during the COVID pandemic how disruptions in semiconductor supply chains had the potential to affect key sectors that impact everyone, in everything from cars to medical devices.  And that reliance on semiconductors will only grow over time as more and more sectors of the economy harness the power of digital technology to increase productivity and improve the quality of goods and services.

Global economic security and stability hinges on our ability to create robust and reliable semiconductor supply chains, prevent misuse or exploitation of semiconductor technology, and develop and deploy secure and trustworthy information and communications technology in networks and services.  

Recognizing that global cooperation is essential to realizing the goals of the CHIPS Act, Congress also appropriated in the Act $500 million over five years to the Department of State for the International Technology Security and Innovation Fund, or the ITSI Fund.  I’m delighted to announce that yesterday the State Department released the outline of its strategy for implementing the ITSI Fund.  This strategy has two parts relating to, first, semiconductors, and second, information technology and communication networks and services.  

On semiconductors, State will use the ITSI Fund to work collaboratively with our partners and allies on four priority areas of work that will strengthen the resilience, diversity, and security of global semiconductor supply chains.  The first area of focus is securing and diversifying the sources of critical material inputs that are needed in microchip fabrication.  This is the so-called upstream component of the semiconductor supply chain.  Semiconductor fabrication requires reliable access to critical minerals such as cobalt, aluminum, arsenic, copper, and rare earth elements.  We want to bring new, more diverse and resilient mining, refining, processing, and recycling capability online to supply global chip production, including in the United States.

The second area of focus is diversifying and ensuring the resilience of the later downstream elements and activities of the semiconductor supply chain – namely, the assembly, testing, and packaging of microchips that is needed to take those pieces of silicon and put them into the products that we use.  As the United States ramps up its own fabrication, we want to make sure that there is a diversity and robustness in these downstream elements of the supply chain, particularly in the Indo-Pacific and the Americas.

The third area of focus is strengthening the policy coordination with our allies and partners.  The goal here is to ensure complementarity in our respective approaches to industry incentives, as well as improve collaboration during supply chain disruptions.  

The fourth area of focus is protecting national security.  The goal here is to strengthen mechanisms to mitigate the risks, the national security risks that semiconductors can pose through collaboration with our international partners on export controls and licensing policies. 

No single country can onshore or conduct all the essential activities in the modern semiconductor supply chain.  Collaboration with our allies and partners is critical to realizing the ambitious goals of the CHIPS Act.  The United States looks forward to accelerating our work in this regard under the ITSI Fund.

Thanks very much for this opportunity to share some of these details with you, and I’d like to now turn it over to Ambassador Fick, after which I’d be happy to take some of your questions.

**AMBASSADOR FICK:**  Thank you, Assistant Secretary Toloui, and good morning, everyone.  It’s a pleasure to be here with you.  My name is Nate Fick.  I am the inaugural ambassador leading the State Department’s new Bureau of Cyberspace and Digital Policy, which is an effort on our part to elevate and integrate our approach to technology diplomacy across four key areas.  One is cyber security policy, a second is emerging technologies, a third – the one that we’re really here today to talk about – is information and communication technologies, and then the fourth area is digital freedom and human rights issues, which we view as the foundation on which the other three are built.

So to talk just for a moment about the ICT element of ITSI and the CHIPS Act, I think the overarching vision for us here is that it is incumbent upon the United States and allies to articulate a positive, compelling, attractive vision for the opportunities afforded by our shared technology future, and so secure ICT is obviously critical to that.  Secure and trustworthy global telecommunications networks are critical to enabling societies to take advantage of the incredible benefits of meaningful connectivity.  Countries and citizens need to be able to trust that ICT equipment and software that underpins so many of our essential services as governments and as individual citizens will not introduce risks that threaten national security, that threaten individual privacy, or that threaten human rights more broadly.

Countries must prioritize national security by putting in place policy and regulatory frameworks that fully exclude untrustworthy vendors from the entire ICT ecosystem, including not only wireless networks but also terrestrial and subsea cables, satellites, cloud services, and data centers.  And ITSI provides new resources to help our partners harness the benefits of this vibrant digital economy underpinned by secure and trustworthy ICT.  

ITSI will support programs across three work streams in the ICT space.  Our shorthand for them is develop, deploy, and defend.  I’ll walk quickly through each.  We seek to develop capacity via capacity building to help governments create enabling environments for investments in secure ICT ecosystems.  We seek financing, investment derisking, and other support to leverage private sector investments in deploying ICT networks, including Open Radio Access Networks – Open RAN.  And then in defending, we seek to work with partners and allies to help them prepare for and defend against malicious cyber activities.

So thanks very much.  We’re glad to be here today with you and welcome your questions.

**MODERATOR:**  Okay, so thank you both for your remarks.  We’re going to open it up for questions.  A quick reminder for journalists joining us on Zoom:  Please make sure your screen name includes your name, your outlet, and question – and country.  If you do have a question, just click the raise hand icon in Zoom, but we’re going to start with questions in the room if we have any questions in the room.

Yes, we’ll go first to Germany.  Please wait for the microphone and then state your name, your outlet, and your country before asking a question to either of the speakers.

**QUESTION:**  Yes, hello.  Michaela Kuefner from Deutsche Welle, Germany’s international broadcaster.  I just have a question – when you’re talking about supply chains for critical materials and particularly minerals, how far are there parallels to what is currently being debated and where the process just got kickstarted in relation to the IRA?

And you mentioned the focus of the Americas, but what does this mean for partners in Africa and what expectations do you have towards Europe?

**ASSISTANT SECRETARY TOLOUI:**  Thanks very much.  There is definitely connection with the critical minerals that are required for electric vehicles, battery technology, and the critical minerals in the semiconductor space.  There, of course, are differences, but there is overlap.  And at the State Department, we are participating in something called the Mineral Security Partnership, which includes not only partners in Europe, but also in African countries to advance this objective of ensuring that we have resilient and diversified supply chains not only in the critical minerals that are required for electric vehicles, but also in the critical minerals that are required in the area of semiconductors. 

**MODERATOR:**  Any other questions in the room?  Yes.  A reminder to state your name, country, and outlet. 

**QUESTION:**

Thank you.  I’m (inaudible) from South China Morning Post in Hong Kong.  I also have a question related with the mineral part.  So as the outline mentioned yesterday, the funding will support the U.S. and its allies and partners to diversify the chips supply chain from the mineral to downstream capacities and export controls. 

So does that mean – we’re wondering, does that mean the project is also — aims to build a chip industry ecosystem that completely equals China?  Because China right now, it is still the largest supplier of rare earths and also the largest market of semiconductor product.  And if so, how confident the U.S. is that can be done?   

**ASSISTANT SECRETARY TOLOUI:**  The key objective is to learn some of the lessons of the COVID-19 pandemic, which showed that supply chains globally are quite vulnerable to disruption, not only in the area of semiconductors and technology, but supply chains of various kinds.  And so I think that a strong consensus emerged, not only among governments but also in the industry, that more attention needs to be paid to diversifying those supply chains, to making sure that there aren’t bottlenecks, there aren’t particular parts of the supply chain which leave it vulnerable to disruptions. 

And so what we’re discussing today in the context of the ITSI Fund is the effort to try to diversify the global supply chains related to semiconductors, and to try to undertake activities that make both the upstream and the downstream components of the semiconductor supply chain more resilient to future shocks.  

**MODERATOR:**  Okay.  Any other questions in the room?  We’ll go back there for – no, you go ahead.   

**QUESTION:**  This is Yoojin from Kyunghyang Daily News.  And I’d like to ask more of a general question because the CHIPS Act has been touted as a very bold approach to rebuild supply chains and also facilitate the semiconductor manufacturing in the U.S., but also it has faced with criticism from allies and partners around the world, including South Korea and Taiwan and European Union because of the restrictive nature of the CHIPS Act funding guidelines.  So I’d like to know how the U.S. Government is trying to address those concerns, and any steps forward to assuage those concerns. 

**ASSISTANT SECRETARY TOLOUI:**  Well, I think it’s important to note that countries around the world have noted the vulnerabilities of supply chains, particularly in semiconductors.  And we’re seeing initiatives not only in the United States, like the CHIPS Act, but it’s under discussion in the EU, in Korea, in various countries.  What are the ways in which the semiconductor industry can be supported? 

And one of the objectives that we have in our diplomacy, and one of the areas that will be supported by the funds in the ITSI Fund, is the continued dialogues and the expansion of those dialogues with our key allies and partners to ensure that the approaches that we’re taking in semiconductors are complementary to one another, and that we are acting in a way that is going to achieve our shared goal of having more resilient, diversified, secure semiconductor supply chains in the future. 

Now, the Department of Commerce is responsible for administering the program of production incentives as part of the CHIPS Act.  And I should underscore, though, there that the access to the CHIPS Act funding and the applications of the various guidelines is something that is – applies equally to U.S. applicants and foreign company applicants.  And so it’s very important, and the Commerce Department has emphasized, that we welcome foreign investment.  And in fact, many of the investments that have been announced to expand semiconductor production capacity in the United States have been, in fact, from foreign firms.

**AMBASSADOR FICK:**  And if I can add something to that, I’ve been very recently in both Seoul and Brussels, having exactly this conversation.  And I think we have a shared understanding that we’re talking about coalitions and partnerships when we talk about supply chains, when we talk about research investment, when we talk about the talent base, when we talk about technology development.  The Export-Import Bank recently lowered the threshold of required U.S. content in an effort to help us take a more international approach in solving some of these challenges.  And clearly, in the ICT space, trusted vendors such as Samsung and Nokia and Ericsson in Korea and Sweden and Finland are big parts of the future.

**MODERATOR:**  Okay.  Let’s go back to Deutsche Welle.

**QUESTION:**  Yes, just one more question to Ambassador Fick, actually, because your role strikes me as rather unique.  I’m just wondering – because when I’m looking at what your plans are under the ITSI, it cuts across so many portfolios if I just think of my home country and also Europe.  So who are your national interlocutors when you go to Europe or elsewhere?  And what would the U.S. hope for its partners to do to make this kind of dialogue easier?

**AMBASSADOR FICK:**  Yeah, it’s an interesting organizational question.  I think every country is recognizing the increasing importance of technology in our foreign ministries, and we’re all taking slightly different approaches to how to address that.  

Here in the United States, obviously, we don’t have a ministry of communications or a ministry of innovation.  Some take that approach.  But generally speaking, I do have counterparts in most European countries, in many Asian countries, in many Latin American and African countries at this point who have cyber security, ICT, or emerging tech in the portfolio in their foreign ministries.  My German colleague actually has been one of the first with whom I’ve been able to build a good collaborative relationship.

**MODERATOR:**  Any other questions in the room before we go to Zoom?  Okay.  We’ll go to Zoom.  We’ll start with Bingru Wang.  If you could please unmute yourself and if you’re able to turn your camera on, that would be great.  So, Bingru.

**QUESTION:**  Yes, hi.  Can you hear me?

**MODERATOR:**  We hear you.

**QUESTION:**  Okay.  Thank you so much for the briefing.  My question is – it’s more general.  I’m sure you have seen the recent objection from the Chinese foreign ministry regarding the CHIPS Act.  How – what’s your reaction to the Chinese response saying that the United States has maintained its tech hegemony and it deprived China’s right to development?  

And second question:  During two sessions, China proposed its version of CHIPS Act.  Are you concerned that by launching the chip war with China, it may advance China’s capability and self-sufficiency of semiconductor production?  Thank you.  

**ASSISTANT SECRETARY TOLOUI:**  I think that your question points to the fact that countries around the world, as I mentioned, are making investments in the semiconductor supply chain.  And of course, different countries, depending upon how they’re situated, are making different kinds of investments, are focused on different parts of the supply chain.  But this is something that countries around the world are contemplating right now and some are acting on.

I think what is very important about the CHIPS Act is really what we are here to discuss today, which is the fact that our Congress, in appropriating the CHIPS Act funding, was not only focused on the manufacturing in the United States and fabricating in the United States, but specifically set aside $500 million for the purpose of deepening these international connections, recognizing that this is a global semiconductor supply chain, and to achieve our shared objective of having a resilient semiconductor supply chain in the future that will be more resistant to the kinds of shocks that we experienced during COVID-19, that it requires that sort of international cooperation.  And certainly, we are very committed to that.  We at the State Department will be playing a leading role in conducting that diplomacy to give effect to this component of the CHIPS Act.  

**MODERATOR:**Okay.  And we’ll stay in Zoom.  We’ll go to Alex from Turan News Agency in Azerbaijan.  Alex, please unmute yourself, and if you’re able to turn your camera on. 

**QUESTION:**Hi, Jake, thank you so much.  This Alex Raufoglu from Turan News Agency.  I have a couple questions, but before that I want to stay on the previous questions about criticism briefly.  I understand you’re trying to be careful not to engage in back and forth with partners, but a lot of the criticisms we keep hearing from – particularly from South Korean Government is that this might impact, as well as make the U.S. less attractive as an investment option.  I just wanted to get your reaction to that, but then I have two more questions, if you don’t mind.  

**ASSISTANT SECRETARY TOLOUI:**In terms of the attractiveness of the United States as a destination for investment, I think that the recent announcements of investments of various kinds – whether that’s in semiconductors or clean energy, et cetera – really underscores the attractiveness of the United States as a destination for investment.  And as I mentioned, and it is incredibly important in the context of the CHIPS Act, that the program that the Commerce Department is administering of production incentives is something which is available to firms –not just American firms, but foreign firms.  And the set of requirements and guidelines that the Commerce Department released at the end of February describe the application process and the constraints that would apply to applicants both foreign and domestic.  And so that’s very important.  

And as I mentioned, a lot of the significant investments that have been announced in the last several months are from foreign firms, and we very much welcome that because this industry by its nature is a global industry and it requires this connectivity across borders.  And the CHIPS Act is designed in a way that explicitly recognizes this through the $500 million that the – that Congress particularly identified for the purpose of deepening these international partnerships which are necessary to achieve our common goal of a secure, resilient, global semiconductor supply chain.  

**QUESTION:**Really appreciate that.  Very helpful.  I was also hoping you could, please, fill us in a little bit more about how the CHIPS Act funding will secure global information and communication technology networks; particularly, how much of it will be focusing on increasing the resilience against malign actors?  In my part of it, I cover South Caucasus, Eastern Europe.

And finally, you also mentioned human rights factor in your introduction speech.  How much of the people living in the – under dictatorships, let’s say, fighting against – fighting for their rights in the countries such as Iran or living in a conflict zone such as in Ukraine, will be able to benefit and when from this program?  Thank you so much. 

**AMBASSADOR FICK:**  Sure, I’m happy to answer that.  So as I described, the ICT portion of CHIPS has three pillars: develop, deploy, and defend.  And I think each of them plays a role in answering the questions you asked.  So the notion of developing is quite simply capacity building and awareness building around the world about the importance of secure infrastructure and secure ICT; then the deployment itself – the financing and the actual deployment tender support – the kind of operational hand-in-hand support to get trusted infrastructure deployed across that whole spectrum of technologies.  

So again, I want to emphasize not only wireless networks but also the other architectural elements of secure communications globally, whether that’s cable and fiber or satellites in – increasingly importantly in the next generation – and data centers as everything virtualizes.  And then finally, getting support – trusted infrastructure deployed is the necessary first step, but then there’s an ongoing cyber security capacity building and execution challenge to continue to defend it.  And our view is that that is the backbone on which trusted communication to support and empower people and enable the free exercise of their human rights online is all built on.

**MODERATOR:**  All right.  Any other questions in the room or in Zoom?  Yes, back there again, please.

**QUESTION:**  So I’m aware that there was a senior officials meeting, the Fab 4 countries, just last month.  If you have any updates on the Fab 4, where it’s going, what’s the focus at the moment, and whether any kinds of participation to the export control mechanisms has been discussed within that meeting too.

**ASSISTANT SECRETARY TOLOUI:**  As I mentioned, there are a number of different ways in which the State Department is seeking to advance our diplomacy with respect to cooperation on semiconductors.  We have a number of bilateral dialogues that this is included in, and it’s also included in some formal dialogues such as the U.S.-EU Trade and Technology Council, or TTC.  

One – and one of the things that we are trying to do in all of these dialogues is – well, there are a couple of key objectives that we have.  And the first objective is to share information about our respective programs to try to incentivize production and make sure that what the United States is doing is well understood by our partners and that we have an understanding of what our partners are doing.  And the purpose here is because, again, of this recognition that we have a global semiconductor supply chain, and we don’t want – in particular with our partners and allies – our policies to be working at cross purposes.  And we also want to avoid a situation where we have something like a subsidy race, where there are large transfers to the private sector that aren’t advancing our goal of creating a more diverse and secure semiconductor supply chain in the future.

And the second – one of the other key objectives that we have in these discussions is to try to deepen the cooperation we have in identifying potential supply chain disruptions.  And we’re calling this sort of an early warning exercise.  So how can we, through collaboration – our government-to-government collaboration and in addition through dialogues with the private sector – try to identify potential interruptions that could affect the productive process in other industries.  So, for example, during the COVID-19 pandemic, there were disruptions in the semiconductor supply chain that then came back and affected the auto industry or the medical device industry. 

And so through the variety of discussions we have with the – our European partners, our partners in Asia, these are the two key objectives that we have to advance.   

**MODERATOR:**  Any last questions in the room or on Zoom?  Seeing none, I will hand it over to the assistant secretary and the ambassador for any closing thoughts you might have.

**AMBASSADOR FICK:**  I’m not sure we have any except a thanks, and we look forward to continuing to engage on this over the months and years ahead as implementation continues not only in the United States but across a broad consortium of allies and partners.  Thank you.

**MODERATOR:**  Okay.  So I’d like to thank both of our briefers for joining us today and giving their time, and to all of the journalists joining us in the room and on Zoom.  Before we close the briefing, one reminder:  We do have another briefing this afternoon at 2:30 on the deepening security cooperation between the U.S., UK, and Australia.  If you’re able to join us, we’d love to see you for that briefing.  If you have questions, you can see my colleagues in the back of the room or send us an email.  And with that, we will conclude today’s briefing.  Thank you so much.

**ASSISTANT SECRETARY TOLOUI:**  Thanks, everyone. 

**AMBASSADOR FICK:**  Thank you.

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Bureau of Cyberspace and Digital PolicyBureau of Economic and Business AffairsBureau of International Security and NonproliferationCyber IssuesCyber SecurityDistrict of ColumbiaForeign Press CentersForeign Press CentersNew YorkScienceScience, Technology, and InnovationScientific and Technological Cooperation

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