Biden administration announces $50 billion strategy for domestic microchip production

On Sept. 6, the Department of Commerce announced a $50 billion plan focused on boosting U.S.-based manufacturing of semiconductor microchips entitled the CHIPS for America program. The program is funded by the CHIPS and Science Act, legislation which was signed into law by President Joe Biden on Aug 9.

“CHIPS for America will ensure continued US leadership in the industries that underpin our national security and economic competitiveness,” Commerce Sec. Gina Raimondo said in a statement. “Under President Biden’s leadership, we are once again making things in America, revitalizing our manufacturing industry after decades of disinvestment and making the investments we need to lead the world in technology and innovation.”

The National Institute of Standards and Technology (NIST), an agency of the Commerce Department, explained in a summary of the strategy that “The semiconductor industry’s geographic concentration in Southeast Asia leaves the United States vulnerable to major disruptions from climate events, geopolitical tensions, and global pandemics.”

The department’s implementation strategy calls for three different initiatives involving investment in semiconductor chip manufacturing. The largest set of funds, $28 billion, will go toward efforts to establish production of leading-edge memory and logic chips within the United States, which, according to the department, does not currently make any of the microchips in that market segment.

The government will also give out grants, subsidize loans, or loan guarantees for companies working on domestic production of those chips. The department said that the initiative will prioritize investment projects that involve small, minority-owned, women-owned, and veteran-owned businesses, as well as businesses located in rural areas.

Approximately $10 billion will be used to help create new manufacturing facilities for mature and current-generation chips. The department said such chips are currently in use throughout the defense industry, as well as automobiles, computer, medical devices and other forms of IT technologies.

Another $11 billion will go into research and development, including into creating a National Semiconductor Technology Center. The department said it envisions this spending to take the form of collaboration between academia, allied countries, and industry over a long-term period.

According to data from the Semiconductor Industry Association, China has seen its share of the global semiconductor market grow from 3.8% to 30.6% in the last five years, following investments by the Chinese government in domestic manufacturing and research.

During the outbreak of the COVID-19 pandemic from 2020-21, the supply chain for chips from Asian manufacturers was severely impacted. This resulted in disruptions in multiple markets — including car production, smartphones, PCs, and other product sectors.

There are also ongoing concerns about the availability of chips from Taiwan, one of the world’s leading chip manufacturers, as that nation finds itself in the middle of disputes between the United States and China.

Since Biden signed the CHIPS Act into law, multiple companies have announced plans to spend billions on U.S.-based manufacturing, requiring thousands of new hires to construct and operate them.

On Sept. 1, Micron announced that it is building a $15 billion semiconductor plant in Idaho as part of $40 billion the company said it will be using for domestic chip production. In August, Qualcomm announced its plan to double its chip purchases from New York-based chip manufacturer corporation GlobalFoundries, resulting in $7.4 billion in purchases through 2028.

Both Micron and GlobalFoundries openly credited the Chips and Science Act with playing a role in the investment decisions.

Opinion polls have found that the public supports the government encouraging domestic chip production. In a Politico/Morning Consult poll from March 25-27, 65% of respondents said they would support related legislation, including 68% of Democrats, 62% of Republicans and 63% of independents.

Published with permission of The American Independent Foundation.