12 Days: Biden’s Signature CHIPS Act Spurs Investments and China Concerns

On the one year anniversary, the White House touted investment of one-hundred-and-66 billion dollars.

12 Days: Biden’s Signature CHIPS Act Spurs Investments and China Concerns
Illustration by DALL-E

December 27, 2023 — August 2023 marked the one year anniversary of President Joe Biden’s signature law, the CHIPS and Science Act. On that occasion, the White House touted $166 billion dollars of new semiconductor investments and manufacturing projects into the United States.

As both Biden and Commerce Secretary Gina Raimondo have been quick to note, American ingenuity invented the semiconductor. But today, the U.S. currently produces only 12 percent of the world’s supply, none of which are the most advanced. This is down from 40 percent in 1990.

The CHIPS Act provides $52 billion to incentivize chip companies to build factories in the U.S., aiming to reduce reliance on Asia for the crucial components used in everyday electronics. Over the summer, during the one-year anniversary, Biden administration officials touted investment commitments from companies like Micron, IBM and Wolfspeed.

The influx of cash is a relief for an industry disrupted by pandemic-related shutdowns’ impact on global supply chains. Automakers were especially impacted by the chip shortage, forcing production cuts and inventory reductions.

“The innovation and technology funded in the CHIPS Act is how we plan to expand the technological and national security advantages of America and our allies; these guardrails will help ensure we stay ahead of adversaries for decades to come,” Raimondo said.

White House takes a victory lap

In creating a 25 percent tax credit for capital investments in semiconductor manufacturing, the administration cited how companies have announced more than $166 billion in manufacturing in semiconductors and electronics, and at least 50 community colleges in 19 states have announced new or expanded programming to help American workers access jobs in the semiconductor industry.

In August, the Commerce Department announced the first round of grants under CHIPS to support the development of open and interoperable wireless networks, and the National Science Foundation and the Energy, Commerce, and Defense Departments announced progress toward establishing the National Semiconductor Technology Center.

Among the other milestones touted by the administration include:

  • Supporting U.S. Semiconductor Manufacturing through $39 billion in semiconductor manufacturing incentives.
  • The receipt of more than 460 statements of interest from companies for projects across 42 states interested in receiving CHIPS funding.
  • The Department of Commerce has also stood up CHIPS for America, a team of more than 140 people working to support implementation of all aspects of the CHIPS incentives program.
  • The Treasury Department’s proposed rule, in March, to provide guidance on the Advanced Manufacturing Investment Credit, that 25 percent investment tax credit.

Outstanding questions and labor shortage issues

There are also outstanding questions about whether the incentives in the law are sufficient to help level the playing field for U.S. companies versus lower building and operating costs in Asia.

The legislation requires companies receiving funds to commit to certain wage and labor requirements, including offering childcare benefits — measures some Republican legislators have criticized. Tensions between the U.S. and China also continue around supply chains for critical minerals needed for chip production.

For example, South Korea requested in May that the U.S. reassess the guardrail provisions it adopted in the CHIPS Act. South Korean companies Samsung and SK Hynix represent two of the world’s top manufacturers of memory chips and have invested billions of dollars in Chinese chip factories. The country is a leading chipmaker and also a major investor in the U.S.’s chip sector.

At Broadband Breakfast’s “Made in America” Summit on June 27, panelists raised concerns about workforce shortages in the country’s pursuit to become more independent in the sourcing of semiconductor chips.

In fact, they said, the industry could face a shortage of about 70,000 to 90,000 workers over the next few years.

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Maryam Rofougaran, cofounder and CEO of 5G chip manufacturer Movandi Corporation, pointed to a decrease in interest from high schoolers and college students in the field that is leading to a lack of skilled American workers in the development of the semiconductors.

Rofougaran called for immigration policies to be more friendly as America continues to look for highly skilled people in the semiconductor field, citing her own personal journey of immigration from Iran. “Immigration has been one of the greatest things for the U.S.,” she said.

Gene Irisari, head of semiconductor policy at Samsung, asked, “Where are all these workers going to come from? They can’t just come from the clusters where the semiconductor fabs are being created.

How will the CHIPS Act impact the AI race?

Indeed, in the chips race, China is both an ally and competitor. “China is a large supplier of raw materials needed for manufacturing and a large consumer of microchips,” said Shawn Muma, director of supply chain innovation and emerging technologies at the Digital Supply Chain Institute, speaking at the “Made in America” Summit.

But the CHIPS Act could also be a major front in the artificial intelligence race, with China’s ability to remain competitive depending on its ability to produce its own chips, as U.S. restrictions on the export of that product to the adversarial nation will hobble its ability to move forward.

“U.S. chip export sanctions are a huge roadblock” for AI development in China, said Qiheng Chen, a senior analyst at consulting firm Compass Lexecon, said at an August 2023 event by the Asia Society Policy Institute.

And former National Security Advisor Robert O’Brien said that United States needs to collaborate more with its allies to ensure semiconductor supply chain resilience.

Speaking at a Hudson Institute event in September 2023, the  former chairman of strategic advisory firm American Global Strategies said that it was necessary to collaborate with allies to onshore, moving plants onto domestic land, and “friend-shore,” moving plants into allying countries, manufacturing plants.

Failing to do so will subject the U.S. and its allies to additional risks in the future, he said.

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