The CHIPS Act: Finally, the United States Government Gets Serious about Strategic Investment

​The CHIPS Act (Creating Helpful Incentives to Produce Semiconductors), signed into law in August 2022 by President Joe Biden, represents a landmark investment in America's semiconductor manufacturing capabilities. The United States government sought to bolster domestic semiconductor production to enhance economic competitiveness and national security in response to growing global competition, particularly from China and Taiwan. With the pandemic and subsequent supply chain disruptions highlighting vulnerabilities in semiconductor availability, the CHIPS Act was designed to make the United States less reliant on foreign semiconductor production and reclaim technological leadership in this vital sector.

Architect's Rendering of the Intel Ohio Plant

At its core, the CHIPS Act sets aside $52.7 billion in funding, primarily focusing on encouraging semiconductor research, development, manufacturing, and workforce training within the United States. While semiconductors are small, their importance is vast: they power everything from smartphones and cars to military defense systems and artificial intelligence. The act aims to ensure that the United States remains a central player in the global semiconductor market by addressing critical bottlenecks in the supply chain.
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The most significant chunk of the funding, $39 billion, has been allocated to support semiconductor manufacturing facilities (fabs). This funding provides direct subsidies to chipmakers that build, expand, or modernize facilities in the United States. Grants, loans, and loan guarantees will be provided to companies that commit to building fabrication plants or other critical semiconductor infrastructure. The goal is to create a robust domestic production base that reduces dependency on foreign producers, particularly in East Asia.

TSMC Facility in Arizona Under Construction

Major companies such as Intel, TSMC (Taiwan Semiconductor Manufacturing Company), and Samsung have announced significant new projects in the United States following the passage of the CHIPS Act. Intel, for instance, plans to spend $20 billion on a new facility in Ohio. TSMC has committed to a $12 billion facility in Arizona. The hope is that this wave of investment will create thousands of high-paying jobs and establish the United States as a global leader in chip production.

Another central portion of the funding, $13.2 billion, is focused on semiconductor research and development (R&D). This funding is intended to support innovation in next-generation semiconductor technologies, helping to maintain United States leadership in cutting-edge chips and systems. The investment will fuel projects in both public and private sectors, with funds dedicated to national labs, academic institutions, and private companies working on advanced semiconductor research.

Creating the National Semiconductor Technology Center (NSTC) is one major initiative under this R&D allocation. The NSTC will facilitate collaboration between government, industry, and academia, focusing on new semiconductor materials, manufacturing processes, and designs. The initiative is expected to drive innovation in advanced areas like quantum computing, artificial intelligence, and 5G/6G technologies, where semiconductors play a critical role.

The semiconductor industry requires a highly specialized workforce, and addressing the talent gap is crucial for sustaining growth in the sector. To this end, $2.7 billion has been allocated for workforce development. The funds will go toward training programs, apprenticeships, and educational initiatives to develop the next generation of engineers, technicians, and scientists.
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Partnerships between semiconductor companies, universities, and technical schools will be critical to the success of this workforce initiative. For instance, Intel has already committed $100 million to create semiconductor education and research programs at United States institutions to prepare a skilled workforce capable of expanding the industry.

Samsung Facility in Texas Under Construction

The CHIPS Act also allocates $500 million for international collaboration and security initiatives. The United States recognizes that it cannot fully isolate itself from global semiconductor supply chains, and this funding will support partnerships with allied nations to ensure a more secure and resilient semiconductor ecosystem. This includes working with countries like Japan, South Korea, and European Union members to strengthen supply chain security and coordinate research efforts.

Many CHIPS Act funding has already been earmarked for specific projects and companies. Here are some of the critical recipients:

• Intel: As one of the world's largest semiconductor companies, Intel has received significant backing from the CHIPS Act to build a new $20 billion facility in Ohio. This facility, dubbed "Silicon Heartland," is expected to create around 3,000 jobs directly and tens of thousands more indirectly through construction and supply chain demands.
• TSMC: The Taiwanese chip giant TSMC is building a $12 billion semiconductor fab in Phoenix, Arizona. This facility will focus on producing cutting-edge 5nm chips in high-performance computing and AI applications. The United States government's support of this project is a significant step toward reducing the country's reliance on overseas manufacturing.
• Micron: Micron, a major United States memory chip maker, announced plans to invest $100 billion over the next two decades to build a state-of-the-art facility in upstate New York. The CHIPS Act funding will ensure this project has the necessary support to come to fruition.
• Samsung: In addition to its massive global operations, Samsung is expanding its footprint in the United States by constructing a $17 billion facility in Texas to produce advanced semiconductors. This is part of a broader push by the company to strengthen its presence in the United States market.

The CHIPS Act is vital to securing the United States semiconductor supply chain. It financially boosts domestic manufacturers and incentivizes international companies to set up production in the United States. The goal is to bring more semiconductor production onshore, mitigate the risk of global supply chain disruptions, and safeguard national security interests by reducing reliance on foreign sources.
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In the long run, the CHIPS Act aims to revitalize United States leadership in semiconductor innovation while generating significant economic growth and job creation. However, its success will depend on how effectively the funds are deployed and whether the United States can sustain momentum in a highly competitive global market.