By Diana Roy
The CHIPS and Science Act seeks to revitalize the US semiconductor industry amid growing fears of a China-Taiwan conflict. Where is the money going, and how is the effort playing out?
In 2022, president Joe Biden signed into law the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act. The legislation directs hundreds of billions of dollars toward supercharging domestic production of advanced technologies such as semiconductors – also known as microchips or chips. Since its passage, private firms have announced nearly $400 billion dollars in additional investments in chips and other electronics. Arizona and several other states are poised to become semiconductor powerhouses, but the law’s implementation is facing delays, worker shortages, and other challenges.
What Does the Act Do?
The law commits roughly $280 billion – a mix of direct subsidies and tax incentives – to the tech sector. More than $70 billion of that is aimed at the chips industry, including investments in high-technology manufacturing, scientific research and development (R&D), and workforce development.
The US Commerce Department is distributing most funds to private industry over a five-year period. Smaller sums are channeled through the Departments of Defense and State to fund research and training and address global supply chain issues. Meanwhile, a semiconductor investment tax credit worth approximately $24 billion is in effect until 2027.
Why is the United States investing in Chips?
The CHIPS Act is part of a larger government effort to create jobs, revitalize domestic supply chains, and increase the US production of critical technologies.
Despite producing close to 40 percent of the world’s semiconductor supply in 1990, the United States now manufactures only about 12 percent [PDF], and none of the most advanced types. In contrast, more than half of all semiconductors and some 90 percent of the world’s most advanced chips are made in Taiwan, predominantly by industry giant Taiwan Semiconductor Manufacturing Company (TSMC).
Chips are crucial to modern life, powering a vast array of products including cars, computers, phones, and weapons systems. Supply disruptions during the COVID-19 pandemic shook the global economy, driving growing concerns that a potential China-Taiwan conflict could cripple Western access to the chips market. More broadly, there is a growing fear that lagging behind China in such critical technologies will undermine US national security and economic competitiveness.
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