CHIPS Act Key to Reshoring of Global Semiconductor Manufacturing Industry

Semiconductors are tiny electronic devices based primarily on silicon or germanium that are fundamental to nearly all modern industrial and national security activities. They are also essential building blocks of other emerging technologies, such as artificial intelligence, autonomous systems, 5G communications and quantum computing. For decades the U.S. manufacturing share for semiconductors or microchips as eroded from 37% in 1990 to 12% today according to the Congressional Research Service. What has been a multi-decade decline in semiconductor manufacturing has led to supply chain issues for U.S. goods. These issues were further exasperated as the world was thrown into the ongoing worldwide COVID-19 pandemic which resulted in a significant shortage of semiconductors coming into the U.S. creating supply issues for everything ranging from automobiles, consumer electronics, to refrigerators. These supply issues coupled with other geopolitical issues around the world has created renewed interest in increased manufacturing within the U.S. boarders.

President Biden promoted a $50B program to backshore semiconductor chip facilities. According to the NIST roughly $40 billion would be directed toward the construction or modernization of U.S. facilities for semiconductor fabrication, assembly, testing, advanced packaging or R&D. Funding would be applied to supporting multiple market segments and to meet the semiconductor needs of critical sectors, including both commercial requirements as well as those of the Department of Defense and broader intelligence community.  Another $10B would support critical R&D and infrastructure investments to help protect and extend U.S. technological leadership, including:

  • The establishment of a National Semiconductor Technology Center (NSTC), a hub of talent, knowledge, equipment and tool sets that will foster research into new materials, architectures, processes, devices and applications and — most importantly — bridge the gap within the United States between public and private sector R&D and commercialization. (See the Decadal plan.)
  • The establishment of an Advanced Packaging Manufacturing Program to strengthen semiconductor advanced test, assembly and packaging capability in the domestic ecosystem.
  • The establishment of one or more Manufacturing USA institutes targeting the manufacturing R&D needs of the semiconductor industry.
  • Increased investment and expansion of NIST’s metrology R&D in support of semiconductor and microelectronics R&D.

Responding to the President’s call to action and responding to a significant supply chain problem for American automakers and other manufacturers, legislation was introduced in Congress to help address the problem. Bipartisan legislation which would significantly increase U.S. investment in reshoring manufacturing of semiconductors, The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act was passed and signed into law in January 2021. The Act authorizes a series of programs to promote research, development, and fabrication of semiconductors within the U.S. The Act creates financial incentive programs, which could assist with the construction, expansion, or modernization of a semiconductor fabrication plant or “Fab” in the U.S. Although the programs have been created Congress has yet to pass the needed appropriations to fund them. In June of 2021, the United States Senate passed the United States Innovation and Competition Act (USICA), which appropriates $39 Billion in assistance for semiconductor plant construction over five years, and another $11.2 Billion for research and development. Since the bipartisan passage of the USICA in June of 2021, the appropriations have been held up in the U.S. House due to disagreements amongst the majority party Democrats on other items in the bill.

Proponents of the CHIPS Act and the subsequent appropriations legislation have pointed to the potential investments that could be made in the U.S. helping to strengthen the U.S. position as a leading manufacturer of semiconductors as well as supporting the nations supply chain and national defense. This prediction was on display recently with the announcement from Intel a global manufacturer of semiconductors announcing they will construct two new semiconductor fabrication or “Fab” facilities in Ohio, investing $20 Billion creating 3000 permanent jobs, 7000 construction jobs and supporting thousands of other jobs through additional suppliers and partners. This will be Intel’s first expansion and construction of a new semiconductor facility in 40 years. Additionally, according to the Semiconductor Industry Association nearly $80 Billion in new investments from the semiconductor industry have been announced in the U.S. through 2025.

What is clear is the need for Congress to pass the funding for the CHIPS Act to help secure these investments and the many others to come. The U.S. is positioned to come out of the COVID-19 pandemic with a clear view of the need to re-shore manufacturing of not only semiconductors, but many other products including medical devices and pharmaceuticals. If you would like to learn