Big Win for Defense Production Act Budget Allocation in FY24 Budget

Estimated reading time: 5 minutes

One year ago, President Biden issued a determination that chips and packaging are critical for national security. Since that time, much work has been done to continue the conversation in Washington, elevating the importance of the entire chips value chain, and including printed circuit boards and substrates, without which chips cannot operate.

On the heels of two recent and substantial DoD award announcements, the U.S. FY24 budget allocations were announced after much strain and struggle, and a whole lot of advocacy work on behalf of our industry. FY2024 passed with a whopping $874.2 billion approved in defense spending, including $587.9 million for all Defense Production Act (DPA) purchases. Per a recent IPC blog post by Rich Cappetto, senior director of IPC North American government relations, “IPC now calls on the U.S. Department of Defense (DOD) to proceed with allocating the full $85 million it had budgeted for PCBs and advanced packaging as it implements the FY24 spending package.” In this interview, Rich discusses this big budget win, the difficult process to get there, and what to expect in the coming months. 

Marcy LaRont: Rich, we've seen some encouraging announcements recently, including a significant budget victory when it comes to the Defense Production Act and the FY2024 budget.

Rich Cappetto: Yes, this was an important week. It was the one-year anniversary of the presidential determination that President Biden issued on March 27, 2023, identifying printed circuit boards, advanced packaging, and IC substrates as a critical need for national security. That action unlocked the DPA funding to invest in the industry. There are some good things happening.

LaRont: I know there had been concern and criticism that funds from the DPA were being held back, but that now seems to have been resolved. Can you speak about that process?

Cappetto: While the President can issue a determination saying something is a need for national security, ultimately Congress must appropriate the dollars to follow through on that determination. As you may have seen, this year, it was particularly difficult to get the budget passed by Congress. There were a number of partial fundings, a continuing resolution (CR), which kept the government going at the previous year's budget rate. When that happens, it's hard to execute big projects. You simply don't have all the funding available. So, the department can't commit to new activities. In the fall, we saw two awards made to IPC members: one for GreenSource Fabrication and one for Calumet; that was significant progress. We cheered that progress by the DoD, but then they were in a holding pattern because the FY2024 funding wasn't resolved. That's really the state of affairs, and why it took a while over the last year to get that funding out the door.

LaRont: Once an award decision is made, how long does it typically take for an awardee to receive DoD funds?  

Cappetto: I don't have a solid answer. Typically, when they negotiate these agreements, milestones and disbursement schedules are detailed in the individual agreements.

LaRont: Given this is a federal award, how much are the states involved?

Cappetto: With many programs, not necessarily particular to the DPA, the federal government likes to see coordination at the state and local level as well to know that the investments will be supported with additional, complementary investments from different levels, including private investment. We see that with CHIPS Act funding, for example. I believe Calumet and GreenSource are also receiving some state-level backing, but I am not familiar with the details of their individual awards.

LaRont: Talk more about why 2024 appropriations on the DPA are so exciting.

Cappetto: It took a while, but we were we were thrilled to see the FY24 final funding package come through with the robust amount for the DPA: $587 million. That was not a foregone conclusion. IPC had been advocating for several months, pushing for higher funding for that account. The President's 2024 budget requested a much higher amount, but both the House and Senate bills that passed previously had cut that back considerably, so what ended up being negotiated and passed was pretty close to that high watermark IPC was advocating for. It helped the industry use its voice. Fifty-four executives signed on to a letter jointly with the PCBAA that we sent to the House and Senate Appropriations Committees and House and Senate leadership, and we continued following up on that letter with meetings and calls, making sure legislators knew the importance of keeping that account funded.

LaRont: Right now, we find ourselves in the run-up to a presidential election year in the U.S. Politics are as divisive and complicated as it gets. Thanks to the semiconductor folks, electronics manufacturing has finally garnered real attention and focus in Washington. Are there concerns or particular challenges going into the next several months? Are we afraid that we could lose ground?

Cappetto: That's right, and for practical reasons. Congress is constantly changing. Every two years, you get a new crop of members. So, you always have to keep them informed about the issues that are important to the industry. While there is a cause to celebrate the passage of the FY24 appropriations bill, there's also a cause to be concerned about the FY25 budget that was proposed, which will start hearings soon. It cuts the DPA account pretty heavily and doesn't request any new dollars for advanced packaging and printed circuit boards. So, IPC will be working especially hard there, and we will be calling on our members to lend their voices in support of making sure that funding carries through to FY25 because those investments are still needed.

LaRont: We know that these efforts should be completely bipartisan, but are there concerns about an administrative change since Biden is the president behind the legislation pushing our agenda forward?

Cappetto: I don't think so. The previous administration was relatively supportive of the idea of building a secure supply chain and a resilient industrial base. Each party has their pressure points where they like to see policy go a little bit more one way or the other, but I do think there is hope for bipartisanship around this because a lot of Americans felt firsthand the pain that results when the supply chain breaks down. You're seeing the representatives they've elected follow through. They are open to acting to prevent that from happening again. The specific tactics and details of what can be achieved might change, but we will still advocate for silicon-to-systems. If there is a change in the administration, you’ve got to step back, reassess your strategy, and then move forward, maybe with a different approach.

Nolan Johnson: There's been plenty of positive feedback and some areas for concern. Regarding advocacy and awareness, are we gaining momentum?

Cappetto: I've been involved with this just over the past year, but I would say that tension on industrial policy is much different from what has been seen in previous decades. We're in a moment now where we have to make the most of the opportunity and the attention that is on our industry, which seems to be at an all-time high.

Johnson: So, keep the pedal to the metal in advocacy and industry member involvement.

Cappetto: Absolutely. I think that is our biggest strength. Our companies and their voices are very impactful. As much as we can have them participate in these efforts, it helps.

LaRont: Qhat has you most excited or optimistic about the future? What are you really enjoying about your job right now?

Cappetto: It's exciting to be part of IPC because it is so focused on growth and the future. We've invested in a lot of talented people over the past few months in standards, education, advocacy, and solutions. In particular, the Education team is building talent pipelines and career paths in the industry. I grew up in Michigan at a time where manufacturing was struggling. IPC’s work to provide industry-backed, stackable, and portable credentials that can lead to good careers especially hits home for me. I’m so proud to share that when I meet with people, and they’re usually shocked that this work is so far along with real results. It's more than just talking on paper; it's real training and real certifications for tens of thousands of people. As someone still breaking in my new shoes at IPC, I can definitely say IPC has a workhorse ethos, and I love that. I am proud to be part of it and am looking forward to all that’s next over the coming months.