Biden is about to sign a law that would invest $53 billion in US chip manufacturing

The $280 billion CHIPS and Science Act, which includes the support for US semiconductor manufacturing, is a whole. One of the driving forces is fear of Chinese manufacturing might.

The CHIPS and Science Act of 2022, which will provide $52.7 billion in financing to US chipmakers over five years, will be officially signed into law by President Joe Biden on August 9 in a Rose Garden ceremony, according to a press release issued by the White House on Wednesday.

In order to compete with Asian processor producers like Taiwan Semiconductor Manufacturing Co. (TSMC) in Taiwan, Samsung in South Korea, and Semiconductor Manufacturing International Corporation (SMIC) in China, the law should benefit businesses like Intel and GlobalFoundries.

In order to help assure a supply of the electronic brains that are essential for vehicles, computers, weapons systems, dishwashers, toys, and pretty much any other device that consumes electricity today, the law is aimed to assist tech businesses in the US decrease the massive cost of chip manufacture. When a global chip shortage stopped shipments of many of these goods during the past two years, damaging businesses and causing automakers to close vehicle facilities, it became evident how dependent the US was on those processors.

Last Thursday, Congress passed the bill with a 243-187 vote in the House of Representatives and a 64-33 vote in the Senate. The majority of Democrats and several Republicans supported the bill.

The plan, according to Biden, “would boost our efforts to manufacture semiconductors here in America.”

China, the world’s top manufacturer and the United States’ main geopolitical foe, has lavishly invested in a plan to develop its own domestic chip sector. Many people are also worried about the fact that the world’s largest chipmaker, TSMC, is based on an island that China claims as its own territory. This worry has increased after Russia invaded Ukraine despite international protests.

TSMC continues to be crucial to US manufacturing even if the CHIPS Act is intended to increase US chipmaking. This week, when House Speaker Nancy Pelosi visited the island and attended a TSMC conference, Taiwan’s crucial position in geopolitics was on full show, according to The Washington Post. China protested to the visit and started a five-day military practise that included live firing.

investing in technology and science

One of the bill’s biggest supporters and a Democrat from New York, Sen. Chuck Shumer, dubbed the proposal “one of the greatest investments in research, technology, and manufacturing in decades” last week. He stated that it will reduce costs for customers hurt by inflation, unclog supply lines, strengthen US security, and generate well-paying employment.

Rep. Tim Ryan, a Democrat from Ohio, was among those who pushed for the bill’s approval on the House floor, warning that without the financing, China will become even more powerful. He said that China was outmanufacturing the US in areas including semiconductors, communications technology, electric cars, and batteries. “You observe the numerous boats in California’s coastline. They don’t originate in Kansas. They originate in China. We will keep losing if we don’t reinvest and bring these supply chains back here.”

Although the US was the birthplace of the semiconductor industry, consolidation forced dozens of high-tech firms, most recently AMD and IBM, out of the market. The largest US chip manufacturer was then Intel, but during the past ten years, it has struggled to upgrade its production techniques in order to stay up with Moore’s Law.

These battles opened the way for the emergence of TSMC in Taiwan and Samsung in South Korea, both of which operate foundries and produce CPUs for businesses like Apple, Qualcomm, AMD, Nvidia, and MediaTek. According to a report by the 2021 Semiconductor Industry Association, the percentage of chips produced in the US now is at 12 percent, down from 37 percent in 1990.

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Challenges from Chip

The CHIPS Act would provide funding to a number of equipment and material providers for the chip industry, but the individuals who actually etch microscopic electrical circuitry into silicon wafers to create processors are likely to benefit the most.

Pat Gelsinger, the CEO of Intel, praised the House and Senate decisions. “This investment will help to shape American innovation and leadership in the semiconductor sector in the future. We can’t wait to get started on developing #IntelOhio at full speed “A new Intel chip production facility was mentioned in a tweet by Gelsinger. As part of its campaign to get Congress to enact the CHIPS Act, Intel cancelled a groundbreaking event earlier in July. Intel is struggling financially as it seeks to recover after losing its technological edge to TSMC and Samsung.

An innovative chip production facility, or fab, can cost up to $10 billion. According to Intel, the CHIPS Act would reduce that cost by around $3 billion. It is spending a lot of money on brand-new fabs in the US, including $20 billion on an Ohio “megafab” that might potentially cost $100 billion.

Spending $52.7 billion should benefit US processor production, but you shouldn’t believe it means we’ll cut ties with Asia entirely. The Boston Consulting Group estimates that building a self-sufficient semiconductor supply chain in the US would cost between $350 billion and $420 billion. And that expense goes against the tendency of capitalism to favour providers with the lowest prices.

The CHIPS Act’s goal, however, is greater rather than total independence from Asian manufacturing. Additionally, TSMC and Samsung, which are also constructing new fabs in the US, could gain.

Sponsors revised the measure to include funds for the National Science Foundation, National Institute of Standards and Technology, and Commerce Department for fundamental and applied research in order to assist assure the CHIPS Act’s approval following weeks of political manoeuvring. The measure would allocate $280 billion for all work.

The chip sector is thrilled with the advancement after a year of partisan squabbling caused the measure to stall. The Semiconductor Industry Association issued a statement on Thursday urging the president to quickly sign the CHIPS Act into law. “The CHIPS Act will usher in a better, brighter American future built on semiconductors,” the statement said.

Ajit Manocha, CEO of trade association Semi, stated last week that the investment tax credit and subsidies provided by the CHIPS Act will be essential measures to “bolster the semiconductor supply chain located in the United States and maintain pace with industry incentives offered by other areas.”