CHIPS Act

CHIPS Act
Shorttitle	CHIPS and Science Act
Longtitle	An act to provide for the implementation of the United States–Mexico–Canada Agreement, and for other purposes.
Colloquialacronym	CHIPS Act
Enacted by	the 117th United States Congress
Effective date	August 9, 2022
Public law url	https://www.congress.gov/bill/117th-congress/house-bill/4346
Cite public law	Pub. L. 117–167
Leghisturl	https://www.congress.gov/bill/117th-congress/house-bill/4346/actions
Introducedin	House
Introducedby	Eddie Bernice Johnson (D–TX-30)
Introduceddate	July 2, 2021
Passedbody1	House
Passeddate1	February 4, 2022
Passedvote1	222–210
Passedbody2	Senate
Passeddate2	March 28, 2022
Passedvote2	68–28
Signedpresident	Joe Biden
Signeddate	August 9, 2022

CHIPS Act. Officially known as the CHIPS and Science Act, this landmark United States federal law was signed by President Joe Biden in August 2022. It represents a major industrial policy initiative designed to revitalize domestic semiconductor manufacturing and bolster American research competitiveness. The legislation emerged from bipartisan concerns over supply chain vulnerabilities and strategic competition with China.

Background and legislative history

The impetus for this legislation stemmed from a severe global semiconductor shortage that crippled industries from automobiles to consumer electronics during the COVID-19 pandemic. This crisis highlighted the United States' declining share of global chip fabrication capacity, which had fallen from 37% in 1990 to about 12%. Concurrently, geopolitical tensions with the People's Republic of China and its substantial investments in technologies under the Made in China 2025 plan raised alarms in Washington, D.C.. Legislative efforts coalesced around earlier bills like the United States Innovation and Competition Act and the Endless Frontier Act, championed by senators including Chuck Schumer and Todd Young. After extensive negotiations between the Senate and the House, the final version passed with strong bipartisan support.

Provisions and funding

The act authorizes approximately $280 billion in new funding over ten years. The centerpiece is $52.7 billion in direct financial incentives for semiconductor research, development, and manufacturing, including $39 billion in subsidies for building or expanding domestic fabs. A significant portion, $24 billion, is allocated for a 25% investment tax credit for chip plants. Furthermore, it provides $200 billion for scientific research through agencies like the National Science Foundation, the Department of Energy, and the National Institute of Standards and Technology. It establishes new technology directorates and expands regional innovation programs. The act also includes "guardrail" provisions prohibiting fund recipients from expanding advanced chip manufacturing in China or other countries of concern for a decade.

Goals and strategic objectives

The primary objective is to reduce critical dependencies on Taiwan and South Korea for advanced chips, particularly those produced by giants like Taiwan Semiconductor Manufacturing Company and Samsung Electronics. By onshoring production, the United States aims to secure its military and economic security against potential disruptions in the Taiwan Strait or other geopolitical flashpoints. A secondary goal is to reinvigorate the nation's science and technology ecosystem to compete with China in fields like artificial intelligence, quantum computing, and clean energy. The legislation seeks to create high-tech jobs, rebuild American industrial commons, and ensure the Pentagon has a secure supply of state-of-the-art components.

Implementation and administration

The Department of Commerce, specifically its newly created CHIPS Program Office, oversees the distribution of manufacturing incentives and grants. The National Institute of Standards and Technology plays a key role in setting standards and administering research funds. The first major awards were announced in early 2024, with multi-billion dollar agreements going to companies like Intel, Taiwan Semiconductor Manufacturing Company, Samsung Electronics, and Micron Technology for projects in Arizona, Ohio, Texas, and New York. The White House and the Secretary of Commerce have been actively involved in announcing these investments and negotiating the stringent terms attached to the funding.

Economic and geopolitical impact

The act has triggered a historic wave of private investment in the United States, with companies announcing over $200 billion in new semiconductor projects since its passage. This is revitalizing regions across the country and creating construction and engineering jobs. Geopolitically, it is a core component of the Biden administration's strategy to constrain China's technological advancement, closely aligned with export controls enforced by the Bureau of Industry and Security. The act has also spurred similar subsidy programs among allies, including the European Union's European Chips Act and initiatives in Japan and South Korea, leading to a global race for semiconductor sovereignty.

Criticisms and challenges

Critics, including some members of the Republican Party and free-market advocates, argue the act constitutes costly corporate welfare and risks creating market distortions. Some economists warn of potential oversupply and inefficient allocation of capital. Implementation challenges include navigating complex environmental reviews under the National Environmental Policy Act, a shortage of skilled technicians, and lengthy construction timelines for advanced fabs. There are also concerns that the strict "guardrail" provisions could complicate the global strategies of firms like Samsung and TSMC, potentially fracturing the global technology ecosystem. The long-term success of the investments remains dependent on sustained government commitment and global market conditions.

Category:2022 in American law Category:United States federal legislation Category:Semiconductor industry