During the State of the Union (SOTU) address, U.S. President Joe Biden called on Congress to finalize the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act.
The CHIPS for America Act will provide more than $52 billion to invest in domestic U.S. chip manufacturing and research. The bipartisan bill, introduced by Chuck Schumer (D-New York) and Todd Young (R-Indiana), aims to enhance the competitiveness of the U.S. by promoting American science and technology leadership.
The Senate passed the bill in June of 2021 and the U.S. House of Representatives passed its version of the bill in February of 2022. While both houses of Congress have passed the bill, both branches will have to revise the bill and negotiations will likely be needed to hammer out the details.
"Intel's CEO, Pat Gelsinger, who is here tonight, told me they are ready to increase their investment from $20 billion to $100 billion,” Biden said during the SOTU. “That would be one of the biggest investments in manufacturing in American history. And all they're waiting for is for you to pass this bill....Send it to my desk. I'll sign it."
Intel has already pledged to build two new fabs in Arizona with a $20 billion investment and a separate $20 billion investment in two fabs in Ohio. Intel may spend as much as $100 billion over the next decade to build a “megafab” that would total eight fabs as long as the incentives are there to help the company.
Why it is important
Chipmakers, trade organizations and government officials are seeking to boost chipmaking domestically because of the ongoing chip shortage that is impacting the supply chain due to the COVID-19 pandemic.
The pandemic revealed flaws in the aggregation of semiconductor manufacturing, which is mostly located in Taiwan, China and Korea. According to the Semiconductor Industry Association (SIA), the U.S. manufactures about 12% of all chips made globally, this is down from about 37% in the 1990s.
If the supply chain remains the same or the situation worsens, this will more than likely decline to 10% or less in the coming years as more manufacturing capacity is built in other countries to meet demand.
The decline is due to substantial incentives offered by foreign governments, placing the U.S. in a competitive disadvantage for attracting new construction of chip manufacturing fabs. While other governments have invested substantially in research initiatives, the U.S. tax incentives for R&D lag.
To fight against potential problems that may crop up in the future — whether it be a future pandemic or other geopolitical issues — the goal is to diversify where semiconductors are manufactured to curb the impact on the supply chain.
SIA echoes Biden’s call
John Neuffer, president and CEO of the SIA, released a statement calling on Congress to finalize the CHIPS for America Act and thanked Biden for his strong support for the competitiveness legislation.
“These CHIPS Act investments have broad, bipartisan support from members of Congress, America’s governors and mayors, national security experts, business leaders, and the American public,” Neuffer said. “Funding the CHIPS Act will spur hundreds of billions of dollars in private investments, create hundreds of thousands of American jobs, and help secure America’s supply of semiconductors for many years to come. We also urge swift enactment of a strengthened FABS Act that includes tax credits for semiconductor manufacturing and design to complement the CHIPS funding as part of a holistic, robust strategy for U.S. semiconductor leadership.”
Neuffer said that semiconductors are the foundation of the economy in America and are vital to the economy, defense systems and will determine the future of technology.
“With other governments around the world taking ambitious action to strengthen their own semiconductor capabilities, the time has come for leaders in Washington to fund the CHIPS Act and enact a strengthened FABS Act to keep America at the forefront of chip technology,” he said.
The act will combine grants, tax credits and research investments to U.S. domestic semiconductor production and innovation. The act will be a complementary approach to strengthening America’s semiconductor capabilities over the long term, the SIA said.
