$52 billion in chip subsidies could strengthen national security.
A push to shore up the U.S.’s independence in the semiconductor sector is making its way through the legislative process. The CHIPS for America Act, which would grant $52 billion in subsidies to the domestic semiconductor industry, is set for a final vote by the Senate this week to determine if it will move on to be debated in the House of Representatives.
If passed, the legislation would provide subsidies for chip manufacturers to build new factories in the U.S. as well as funding for semiconductor R&D.
The U.S. has fallen far behind on semiconductor production over the last few decades. Despite near microchip market dominance in the 1970s, today the U.S. holds just 12 percent of the global market. The majority of production takes place in four Asian nations: South Korea, Taiwan, Japan, and China.
The dependence on foreign chip production was brought into focus by the ongoing global supply chain disruption, which has held up auto production and manufacturing of other goods triggering the highest inflation in decades. The situation is hardly unique to the U.S. Other countries are also doubling down on chip manufacturing as they face high inflation and concerns about foreign dependence. The European Chips Act, introduced in February, outlines a similar strategy for the EU as CHIPS does for the U.S.
The CHIPS Act, which advanced by a 64-32 cloture vote on Tuesday, has a fair chance of passing in the final vote later this week. Despite large bipartisan support, some conservative Republicans are opposed to the hefty price tag. Meanwhile Vermont Senator Bernie Sanders says that chipmakers should have to give the government stock or equity in exchange for the subsidies given the billions of dollars these corporations make in profits every year.
The CHIPS Act would allot about $100 billion to programs at the National Science Foundation for semiconductor research and to startups working on semiconductor technologies. There’s also a push for universities to get some of the funding.
Even if the CHIPS Act passes, there will be barriers to a speedy pathway to U.S. semiconductor independence. One challenge is that the U.S. will still be competing with other nations’ subsidies to attract semiconductor companies to do business domestically. Another hurdle is that ongoing supply chain hindrances could mean further construction delays for fab plants. Finally, the current labor shortage means that chip makers might have to work harder to fill positions in order to ramp up production.
