WASHINGTON, April 1 (Reuters) -

California Governor Gavin Newsom and Senator Alex Padilla,

both Democrats, urged the Biden administration on Monday to

reverse its decision to cancel a subsidy program for building

and expanding semiconductor research and development facilities.

The U.S. Commerce Department said late Friday it would

scrap plans to fund the program from the $52.7 billion Chips and

Science Act due to "overwhelming demand" for funding awards to

subsidize chips production.

President Joe Biden, a Democrat who faces a close

re-election battle against Republican Donald Trump in November,

is aiming to boost domestic output as part of efforts to reduce

reliance on China and Taiwan.

Newsom and Padilla called on the agency to undo its

decision, arguing "without robust support for commercial R&D we

risk our global leadership and ability to outpace our foreign

competitors in the semiconductor industry."

The push comes as the department faces numerous demands for

chips funding.

"We urge the Department of Commerce to reconsider its

decision and ensure investment in commercial R&D through the

CHIPS Act to drive innovation and support the resurgence of

domestic semiconductor manufacturing," Newsom and Padilla added.

The Commerce Department said in response it was

"continuously evaluating programmatic priorities to maximize the

impact of available CHIPS funds," citing a recent decision by

Congress to dedicate $3.5 billion to make chip production

facilities safe for military use production.

The Commerce Department never disclosed the amount planned

for the R&D awards but a source told Reuters that department

officials had discussed awarding $2.5 billion or more.

Commerce Secretary Gina Raimondo said last month leading

edge chips companies have requested more than $70 billion but

they are dedicating $28 billion to those projects.

Another $11 billion is dedicated to research and

development, but that "cannot replace direct commercial

investments," Newsom and Padilla said.

Last month, Biden awarded Intel ( INTC ), nearly $20 billion

in grants and loans for chips projects. Some of that money will

go to Intel's ( INTC ) R&D hub in Hillsboro, Oregon.

In February, Commerce announced it was launching the $5

billion National Semiconductor Technology Center to create a

private-public consortium to conduct research and prototyping of

advanced semiconductor technology.

California-based semiconductor toolmaker Applied Materials

Inc ( AMAT ), which said last year it planned to spend up to $4

billion in a research center in the heart of Silicon Valley, had

been seen as a strong candidate for a research award.

California has invested billions of dollars through a R&D

Tax Credit and California Competes Program to support the growth

of semiconductor companies with large R&D operatives including

NVIDIA ( NVDA ), Applied Materials ( AMAT ), and Lam Research ( LRCX ), Newsom and Padilla

said.

(Reporting by David Shepardson and Alexandra Alper; editing by

Costas Pitas)