The CHIPS and Science Act of 2022: What It Means for the Future of Manufacturing

by Doug Keeley

US Government Passes the CHIPS Act to Increase Semiconductor Manufacturing and Research

On August 9th, 2022 the US CHIPS and Science Act, now more commonly known as the CHIPS Act, was passed into law. The CHIPS Act was created in response to pandemic-induced shortages of semiconductors and other critical manufacturing supplies, causing widespread disruption to supply chains across the country. 

The goal of the Act is to improve America’s manufacturing capability of semiconductor chips and ensure that the country remains a global leader in technology. In addition, reshoring production of this crucial component to the U.S. will reduce our dependence on overseas manufacturers. 

The Act is broken down into two divisions: Part A: Domestic Manufacturing of Semiconductor Chips and Part B: Research and Innovation to drive the future agenda and address gaps in semiconductor R&D infrastructure and security.

Part A: Manufacturing in the U.S.

The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act is the main anchor of the CHIPS and Science Act. It authorizes over $52 billion worth of government incentives to increase the U.S. domestic supply of computer chips and the construction of semiconductor fabrication facilities and equipment within the United States. The CHIPS for America Fund will provide up to $39 billion in government loans and other financial assistance – including a 25% tax credit – to semiconductor manufacturers within the U.S.

Summary of the Investments and value creation of the CHIPS Act (Loseby, D.L. 2022) Source

According to 2020 data, the U.S. only produces 12% of the world’s semiconductor chips, a significant drop from 1990 when it produced 37%. In contrast, chip  manufacturing has significantly increased in Taiwan, South Korea, and China over the same time period*. As of 2020, the vast majority of the world’s  “advanced” chips were  manufactured outside of the United States, which is a noted concern of the US military. 

The CHIPS Act is expected to have significant positive impacts on the United States economy. The Semiconductor Industry Association, the leading U.S. semiconductor industry group, estimates that the CHIPS Act will add $24.6 billion to the U.S. economy and create 185,000 jobs over a five-year span. The bill has been praised by industry leaders, with John Neuffer, CEO of the Semiconductor Industry Association, stating that, “This underscores America’s commitment to semiconductor manufacturing and leadership. The CHIPS for America Act will help ensure a continued vibrant U.S. semiconductor ecosystem and position our nation for continued economic success and security.”

Part B: R&D and Emerging Technologies

Part B of the Act addresses investment in Research and Development (R&D) for critical and emerging technologies. This Federal funding initiative is the largest investment in public R&D and STEM (Science, Technology, Engineering, and Mathematics) education in U.S. history and involves partnerships with the National Science Foundation (NSF), the National Institute of Standards and Technology (NIST) and the Department of Energy’s Office of Science.

The Act sets aside another $20 billion to initiate a new NSF Directorate for Technology Innovation and Partnerships (TIP) to accelerate the commercialisation of new technologies in Artificial Intelligence (AI), robotics, materials science and manufacturing, quantum computing, telecommunications, and more.

In parallel, The Research and Development Competition and Innovation Act will be a catalyst for the following investments:

• $20B over five years to accelerate the commercialization of new technologies
• $61B to grow research, support U.S. universities, and expand the STEM workforce
• $2.3B for the Manufacturing Extension Partnership
• $131M towards the creation of a National Supply Chain database
• $829M to expand Manufacturing USA – a network of 2,000+ private sector partners, institutions, and stakeholders who collaborate on tech and manufacturing initiatives
• $6.9B to research priority areas such as AI, climate technologies, and cybersecurity
• $11.2B investment in the 10 applied energy offices of the DOE
• A 6% annual increase for all of the department’s core research programs
• $800M investment in applied manufacturing infrastructural improvements of 17 national laboratories (Source)

Looking Ahead: Change Takes Time

The CHIPS Act will provide crucial funding and foundational support to the US as they seek to reduce dependence on foreign manufacturers and emerge as a technology leader. Although plans to grow the manufacturing job market are in motion–these changes will take years to implement and build. In parallel, chip producers and manufacturers will need a technology solution to manage their supply chain and mitigate future stock and delivery issues. As the global technology supply chain becomes more complex, it’s critical to have the right technology solutions. 

To meet the growing demand, Chip producers need a solution to effortlessly manage supplier relationships, track product performance, and manage their supply chain. How can Ivalua help?

Build better, less risky supply chains: Use a 360-degree view of all supplier information and activity to inform processes, address issues and risks, drive innovation across every tier of the supply chain.

Increase Supply Chain Collaboration & Reduce Disruptions: Leverage collaboration across the supply chain to increase agility and transparency with material forecasts, available capacity confirmations, and Planned Orders.

CHIPS Act Resources:

• https://appleinsider.com/articles/22/10/24/tsmc-says-efforts-to-rebuild-us-semiconductor-industry-are-doomed-to-fail
• https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/
• https://www.whitehouse.gov/briefing-room/presidential-actions/2022/08/25/executive-order-on-the-implementation-of-the-chips-act-of-2022/
• https://science.house.gov/chipsandscienceact
• https://www.semiconductors.org/wp-content/uploads/2022/07/Pass-the-CHIPS-Act-of-2022-Fact-Sheet.pdf
• https://www.commerce.gov/news/press-releases/2022/09/biden-administration-releases-implementation-strategy-50-billion-chips