The CHIPS Act was a controversial topic back then, and it still remains an important one to this day. Signed by President Biden on Aug 9, 2022, the law allocated $280 billion to domestic semiconductor research, from which $52.7 billion went to grants for chip manufacturing on US soil. The money has also been put into subsidies, tax benefits, and workforce training.
The act was a response to the global chip shortages of 2020-2023, as well as an attempt to contain China’s influence on the US tech industry.
Has it been successful? How does it affect the current tech market? In this post, we will look back on the reasons for signing this law and reflect on the effects it still has on the market.
Reasons & Importance
The CHIPS Act was one of the many measures taken by the US government to deal with the effects of COVID. Due to the 2020 pandemic, the US economy took a serious hit. Many businesses adapted by moving their operations online. However, that led to supply chain disruptions, exposing just how much the US depended on Chinese technology.
To curb China’s influence on the US tech industry and incentivize local minds, the CHIPS and Science Act was proposed and signed.
By directing money into the US tech sector, the administration attempted the following:
- Reduce prices
- Invest in science R&D
- Improve local chip manufacturing
- Strengthen the supply chain
- Train a diverse workforce
- Boost national security
The $52 billion in appropriations for semiconductor incentives put the US on the map next to global tech giants. The money was used to boost local microchip production and create hundreds of new jobs. The subsidies and tax benefits were actively used by US companies like Intel, Micron Technology and IBM.
The Law’s Effects
The law’s enactment has directed over $200 billion into the private tech sector. It gave birth to hundreds of projects all over the country. Funding was requested for building new tech hubs, R&D labs, chip fabrication centers and training workforce.
A year later, 760 grants have been awarded and 18 contracts in research and development have been signed, confirming the need for governmental funding to the US tech sector.
According to different estimates, the act has created approximately 40,000 new jobs. The wages in the semiconductor industry have also risen by about 25%.
- INTEL plans to use the $8.5 billion to build four new factories in four US states.
- Samsung received $4.74 billion in grants & $40 billion in investments for opening two new microchip plants in Texas.
- TSMC used the $6.6 billion grant and a $5 billion loan to build three plants in Phoenix.
- Micron will use the $6.1 billion grant to build two new plants in two US states.
With a control of the investments, the tech sector should be able to grow exponentially. Strengthening the local chip production will, in turn, eliminate the possibility of similar disruptions in the future.
Strengthening National Security in 2025
One of the aims of the CHIPS Act was to lessen the Chinese power over the US economy. While the law has definitely boosted the US private sector, China still has a strong influence on the American tech industry. The CHIPS and Science Act was highly effective, yet it was only the first step to strengthening the US presence in the global tech market.
The government recognizes this and has employed several strategies to continue what the CHIPS Act has started.
Washington has announced a set of rules meant to control the export and licensing of semiconductors and the equipment used to manufacture them. The rules are meant to limit the opportunity for sensitive information and technology to end up in the wrong hands.
Stopping China from producing chips is more than just a way to scare the population. The US focuses its efforts on ensuring cutting-edge semiconductor technology and AI is not used for creating weapons.
The US also works on diversifying the supply chain. Since most materials for manufacturing chips are found or processed in China, the US is collaborating with allies to find new sources and technology to produce chips.
The Act’s Technological Influence on the Current Market
The money allocated by the CHIP Act 2022 has persuaded all top four semiconductor producers to open plants on US soil. This has driven even more money into the tech sector, strengthening the US’s position on the global market.
Together with the Inflation Reduction Act (IRA), the CHIPS Act has indeed started to help reduce inflation by reducing the US’s dependency on importing tech from China. Some parts and materials necessary for making semiconductors are still sourced overseas. Still, the US is less dependent on them since placing its focus on developing local plants.
With more assembly, testing, and packaging being done locally, the prices for chips keep dropping. What’s even better is that US companies building chips help keep the buyers’ money inside the country.
Companies like Intel have invested over $34 billion in the local tech sector over the last five years. In Arizona, Intel yearly adds $9 billion to the state’s GDP. Arizona, Texas, and Idaho are just a few of the states that have felt the impact of this law. The massive investments have contributed to the development of infrastructure and the growth of the workforce in the local communities.
Conclusion
The COVID-19 pandemic has exposed just how deeply the US economy depended on the semiconductors produced in China. Chip shortages of 2020-2023 have forced the US government to take measures, with the CHIPS Act being one of them.
The White House saw the need to patch up a weak spot in the US economy and that’s what they did. The act has been subject to many criticisms, however, its merit cannot be denied.
Passing this law has essentially incentivized local semiconductor production. In law, it has created thousands of jobs, reduced prices for chips in the US and contributed to the end of worldwide chip shortages.
Many factories and science hubs are still under construction, which means the full effects will not be visible for a while. However, the money has already been allocated to many promising tech startups and initiatives. Granted at least part is successful, we are looking at a strong boost in the US economy, beginning in the technological sector. It's a complex topic for any student, and the option to pay for essay help is often a practical way to ensure a high-quality analysis.