Semiconductors are now finding a rightful place in all areas such as national security, information technology, aerospace, and so forth. What is sad is that the semiconductor shortage during the pandemic has not only emphasised its importance, but led to major decisions being taken worldwide.
Be it the India Semiconductor Mission launched in April 2022 or the European Chips Act 2022, heavy investments are clearly seen in the semiconductor industry. Joining the league, the United States(US) has passed the, “Creating Helpful Incentives to Produce Semiconductors” ACT 2022. This in simple words is known as the CHIPS ACT 2022 that has been passed by the Congress in order to reinforce the country’s chip supply chains.
Keeping the political view aside, this step taken by the country is an attempt to regain its semiconductor leadership that dropped in the 1990s from a share of 37% to 12% (currently). When compared to China, the current semiconductor manufacturing leader; building a manufacturing facility in the US is roughly around USD$15 billion -USD$20 billion, whereas for the former it takes half the price. Overcoming this, the bill is set to provide strong incentives to construct, upgrade, and expand new and existing facilities, strengthening the supply chain.
As per the bill, USD$52 billion is being provided for manufacturing grants and research investments. A 25% investment tax credit (ITC) to incentivize semiconductor manufacturing in the U.S. is also done.
The lack of supply has made manufacturers use chips, forcing them to cut production. The federal funds won’t solve those shortages in the short term but will incentivize big construction projects by Intel, Taiwan Semiconductor Manufacturing Company (TSMC), Micron, GlobalFoundries and others that aim to build chip factories in the coming years.
With a total cost of $79.344 billion for over 10 years, this act was signed by President Biden alongside major proponents including Sen. Maria Cantwell (D-Wash.), Sen. Todd C. Young (R-Ind.) and Senate Majority Leader Charles E. Schumer (D-N.Y.). (Demetrius Freeman/The Washington Post). This is said to be one of the largest industrial development programs the federal government has ever administered.
The President, just before signing the petition said, “Today is a day for builders. Today, America is delivering. I honest to God believe that 50, 75, 100 years from now, people will look back on this week, they’ll know that we met this moment.”