Nowadays, chips aren’t just found in computers, but in everything. Your games console, smart home, even your kitchen gadgets use semiconductor chips. Yet, the United States produces relatively few semiconductors, despite how common they are in industries and everyday life.
Around a quarter of all semiconductors are made in China. Today, only about 12% of semiconductors are made in the US, down from 37% in the 1990s. As you can imagine, this has economic and political implications, but let’s just say the US needs to invest more in semiconductors. And the CHIPS and Science Act will allow us to do just that.
What is the CHIP and Science Act?
President Biden signed the CHIPS and Science Act of 2022 into law on Aug. 9, 2022. CHIPS stands for Creating Helpful Incentives to Produce Semiconductors.
Originally $52 billion, this bill invests nearly $250 billion in semiconductors and other R&D. An extra $20 million goes to providing enhanced security for Supreme Court members and their families.
Two main goals of the CHIPS and Science Act of 2022 are to revamp existing programs and fund the biggest five-year R&D program in the country’s history.
What’s in the Bill?
Here’s what the CHIPS and Science Act does:
- A $39 billion investment to build and expand semiconductor factories;
- A $11 billion investment in semiconductor manufacturing research and workforce development;
- A $2 billion investment to accelerate defense spinoffs from chip-related research;
- Tax credit of 25% for semiconductor production
- A $1.5 billion investment in public wireless supply chains;
- $170 billion for advanced and emerging tech R&D. There’s also a provision that prevents chip companies from producing more advanced chips in China and Russia.
Over five years, the R&D money will go to a lot of federal agencies. It includes $20 billion for a new R&D directorate at the National Science Foundation, $61 billion for universities and other organizations, and $50 billion for advanced energy programs at DOE.
As part of the effort, the Department of Commerce will also create regional tech hubs to encourage job growth across the country. The National Institute of Standards and Technology (NIST) also gets a boost in funding, getting $9.68 billion over five years, which includes money for the Hollings Manufacturing Extension Partnership (MEP).
The Industries Affected by the CHIPS and Science Act
Here are the industries directly impacted by the CHIPS and Science Act
Biological Research
Here’s how the CHIP and Science Act will benefit biological research
- Provides funding for a new R&D program focused on biological and climate systems.
- Provides $100 million for the Low-Dose Radiation Research Program in 2026 and 2027.
- Invests $4 billion in earth science research for the National Oceanic and Atmospheric Administration (NOAA) through 2027.
- Provides funding for six bioenergy research centers to conduct plant and microbial systems biology research to accelerate biofuels, bioenergy, and biobased materials R&D.
Education
Besides research, the law also funds STEM-related higher education and workforce development.
Smaller, regional institutions will benefit most from this funding, since they’re most likely to be facing complex headwinds from the pandemic. The act also has a lot of provisions that make sure a lot of funding goes to historically Black colleges and universities, minority-serving institutions, community colleges, and institutions that haven’t received federal funding in the past.
Chip-Dependent Industries
The legislation also benefits industries that rely on chips like aerospace, automotive, communications, defense systems, information technology, manufacturing, and medical technology. The pandemic has caused chip shortages that have disrupted businesses-especially in the auto and consumer electronics industries.
As an example, shortages cost the global auto industry $210 billion in lost production and revenue in 2021. Since the last two years, businesses have been exposed to the fragility of the semiconductor supply chain and the havoc it can cause. A lot of the fragility comes from the concentration of risks from a few dominant suppliers. Having more suppliers and geographic diversity will benefit industries dependent on these types of chips.
Automotive Manufacturing
Due to the shortage of chips, some carmakers have reduced the number of options available for new models. Many of them have also been holding back on new development until they see how it affects chip production. But thanks to the CHIPS Act, US auto dealers and the US auto industry will benefit from fewer chips being sourced from overseas.
If there are more suppliers to choose from, chip shortages will eventually go away. Under the Biden administration’s CHIPS and Science Act, supply and demand will balance out over the next few years. This will cut down on turnaround time for vehicle production, resulting in happier customers, dealers, and automakers.
Car makers can now make safest, most refined, and most luxurious cars for the masses. By the time CHIPS Act kicks in, a bunch of new cars will be available with the latest features without worrying about chip shortages.
The Semiconductor Industry
Since 1990, the United States’ share of semiconductor manufacturing capacity has declined by 25%. This is largely due to shifting comparative advantage, like American chip designers specializing in high-value designs, and offshoring manufacturing to countries like Taiwan and South Korea, which have superior semiconductor manufacturing capabilities. Most of the chip manufacturing capacity in the world comes from East Asia.
Building advanced fabs in the United States is capital-intensive, so companies like Intel are dependent on government incentives to make investments. In the coming years, numerous fabs will be built in places like Arizona, Texas, and Ohio.
Looking Ahead
As we move to reduce dependence on foreign manufacturers and emerge as a technology leader, the CHIPS Act will provide crucial funding and support.
There are plans in motion to grow manufacturing jobs, but they’ll take years to implement. Meanwhile, chip makers and manufacturers will need a technology solution to manage their supply chains and resources to help them find microchips, semiconductors, and other microelectronics needed to build/manufacture consumer products.
That’s where PartStack comes in. We’re a semiconductor search engine that connects manufacturers with electronic component suppliers to complete ground-breaking projects. Ready to build something your end-users will love? Search for parts today.
Partstack’s editorial team is made up technical writers and engineering folks from around the world.
