The Biden administration’s handling of America’s semiconductor strategy has been thrown into controversy after the Commerce Department declared that the nonprofit entity it set up to manage billions in chip research funding was never legally authorized to exist.
On Monday, officials said that the National Institute of Standards and Technology (NIST) will now take direct operational control of the National Semiconductor Technology Center (NSTC), sidelining the National Center for the Advancement of Semiconductor Technology (Natcast), which had been entrusted with the role.
At the heart of the storm is $7.4 billion in taxpayer money tied to the NSTC, a central piece of the $52.7 billion Chips and Science Act. Commerce officials said the arrangement with Natcast is invalid, describing it as a clear violation of restrictions that prohibit government agencies from creating private corporations.
Register for Tekedia Mini-MBA edition 19 (Feb 9 – May 2, 2026): big discounts for early bird.
Tekedia AI in Business Masterclass opens registrations.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register for Tekedia AI Lab: From Technical Design to Deployment (next edition begins Jan 24 2026).
According to the department, Natcast — created under Biden to manage and disburse the $7.4 billion — was an “effort to skirt clear legal restrictions prohibiting government agencies from establishing corporations.” Officials said the administration “stacked Natcast with former Biden officials” and shielded it from oversight, essentially turning it into a vehicle for distributing taxpayer dollars to political loyalists.
“From the very beginning Natcast served as a semiconductor slush fund that did nothing but line the pockets of Biden loyalists with American tax dollars,” Commerce Secretary Howard Lutnick said in a scathing statement.
The Commerce Department confirmed it will now reform and directly oversee NSTC operations as required under the $52.7 billion CHIPS and Science Act. That law was passed in 2022 to bolster U.S. semiconductor manufacturing and research in the face of fierce competition from China.
Natcast and the Commerce Department did not immediately disclose how much of the $7.4 billion has already been spent. Natcast, for its part, did not respond to fresh requests for comment. But just last week, the organization insisted it remained closely aligned with White House priorities, describing itself as “a linchpin to realizing a more prosperous, competitive, and secure leadership position for America,” according to Reuters.
The criticism of Natcast highlights an undercurrent of political and legal tension. Some Republican lawmakers have long accused the Biden administration of bypassing Congress in creating the non-profit, while critics say the model opened the door to favoritism and waste.
The Biden administration had announced ambitious plans for the NSTC, including a $7 billion research and development facility in Tempe, Arizona, expected to open in 2028, and another in Albany, New York, which opened in July. These facilities are meant to ensure the U.S. remains competitive in advanced semiconductor technologies.
The episode underscores how central semiconductors have become to Washington’s economic and geopolitical strategy. Chips power everything from smartphones to fighter jets, and as the U.S. looks to curb China’s technological rise, ensuring leadership in this space has become a bipartisan priority.
The tussle over Natcast also reflects a deeper debate about how America should structure its push for semiconductor dominance: whether through traditional public agencies with clear oversight, or through flexible public-private hybrids that critics warn can easily be co-opted.