The United States of America finally passed the $52 billion CHIPS Act in August 2022 in an effort to lessen reliance on Asian countries for chip imports and to revitalize the growth of the country’s semiconductor production. In an effort to derail China’s plans to become the world leader in technology, the Trump administration has pushed the country to greater lengths than ever before. The United States has chosen to form a ‘Chip 4′ alliance with Taiwan, South Korea, and Japan to create a robust semiconductor supply chain that will keep China out. It is also seeking to get its European Union partners and India to join its league of anti-China measures.
In the previous two decades, the United States has seen a dramatic decline in its chip manufacturing share, while other nations, such as South Korea and Taiwan, have emerged as major producers of advanced chipsets. The United States’ defense and economy both rely heavily on high-tech chips, the vast majority of which are currently produced in Taiwan. Concerns have been raised concerning the security of the supply in light of China’s planned military invasion of Taiwan. China’s market has grown dramatically, and the country is currently producing chipsets that are less advanced but nonetheless helpful in electronics, automobiles, and other things. Currently, the United States manufactures 12% of the world’s non-advanced semiconductors.
The closure of factories during the surge of the coronavirus pandemic has created huge disruptions on supply chains and also the winter storm in Texas further damaged the country’s manufacturing cluster.” As many institutions, including government agencies, universities, and corporations, have started allowing employees the option of working from home, demand has increased dramatically. As a result, there was a dramatic increase in chip shortages and a corresponding drop in GDP. Recent lockdowns and the associated expenses have made it abundantly evident that semiconductors play a crucial role in today’s global economy.
The CHIPS and the Science Act, which was introduced after much debate, has since been shown to be highly unlikely to achieve its stated goals. The plan, which was launched with the backing of both houses of Congress, was developed to stimulate domestic chip production. Despite being a frontrunner in cutting-edge semiconductor design, the United States has seen its percentage of global chip production fall from 37% in 1990 to just 12% now. The US Department of Defense needs 1.9 billion of them annually, and officials have said the technology is critical to the country’s safety.
Funding For Semiconductor Manufacturing-US
The problem is now manufacturing chips in US consumer 25 percent longer duration and 50 percent more expensive than doing such in Asia. The domestic semiconductor manufacturers are now facing serious hurdles mostly due to government negligence, claim experts. According to a Bloomberg report, the red tape is a major impediment because from 1990 until 2020, the duration required to build new fabs increased by 38 percent. For instance, the Clean Air Act takes more than one and half years to give permission. Then, the review by the National Environmental Policy Act takes more than four and half years. A lot of unimportant federal laws will suddenly appear on the way and a lot of agencies must be consulted to approve the project.
Analysts told Bloomberg that such hold ups creates no confidence among private investment, increases project costs, and seriously restricts US manufacturers from competing in the international market.
Another grave hurdle is that the country does not have sufficient skilled workforce required for this sector, which researchers feel that the broken immigration system of late is responsible. A survey report highlighted that around 300,000 more skilled workforce is required to complete the ongoing fab ventures, leaving out the new ones, claims Bloomberg. Although TSMC and Intel announced their new projects in the country they are facing a lot of challenges to find proficient workforces for the same.
Most of the experts believe that these problems can be solved easily. For instance, there is a requirement to deploy fast track exemptions for semiconductor makers under the federal environment laws or better modify the law to give momentum to all such ventures and impede shallow laws. Visas must be escalated for proficient workforce, prioritize applicants with needed STEM abilities, and also increase green card allotments for foreign degree holders.
According to the market experts, various strategies can be formed and deployed in an effort to achieve chip sovereignty via the CHIPS act, but if the SMBs are not included then surely the act will fail to boost the chip economy in the country. The president has recently proclaimed who would lead the country’s export council where national security experts and CEOs of global firms were asked to spearhead, but not a single SMB company name was mentioned. According to a report by fortune.com, around 64 percent of new employment is generated by SMBs that contribute to 99.9 percent of overall trade in the US.
The fact that large corporations will receive the lion’s share of the act’s subsidies and funding means that a fair share must be set aside for small enterprises in order to spur innovation in fields like materials science, packaging, and mechanical design. Strategic alliances between multinational corporations (MNCs) and small and medium-sized businesses (SMBs) are crucial, and the United States government has emphasized the necessity of public-private partnerships.
When the CHIPS Act was ultimately passed, the government realized that a major roadblock existed in the tough scenario involving the supply of nation’s chips, which power most of the nation’s electronic products from smartphones, washing machines, cars, supercomputers, and defense items. The United States relies heavily on Taiwan as a source for the production of high-tech semiconductors. The US government is confident that raising the economics of the country’s chip manufacturing is a good idea because of geopolitical scuffles with China, the prospective tussle in the South China sea, and between North Korea and South Korea, all of which have a negative impact on semiconductor supply. However, the chip manufacturers need additional incentives to bring about the shift due to a few bureaucratic hurdles and substantial staff expenses.
Counterpoint Technology Market Research Research Analyst Matthew Orf stated that “around $200 billion worth of investments have been proclaimed to increase the chip production facilities when the CHIPS act was finalized.” Several large corporations, including Texas Instruments, Intel, TSMC, Samsung, and Micron, have declared their intentions to invest in the development of new foundries. The act has encouraged private actors to launch new initiatives, however enforcing its rules may prove difficult due to loopholes and regulations. This is primarily due to the abundance of rules and paperwork that accompany new ventures, which may temporarily halt their progress. Even while money has been set aside for job training and workforce education, a lack of trained workers will make it harder for the country to realize its goal of being a global leader in the semiconductor industry.
“Most importantly, the act did not investigate alternative explanations for the decline in the domestic semiconductor industry, which is primarily manufacturing. Experts agree that the high cost of labor and stringent regulations makes American manufacturing more complex than its Asian counterparts. Now the question is, “How will the nation’s semiconductor industry remain globally competitive if funding continues to dry up?” Work said.