The US Throws $52 Billion at Chips—but Needs To Spend It Wisely

Congress passed the CHIPS and Science Act on Thursday, a $280 billion package that includes $52 billion in funding available to companies that manufacture semiconductor chips stateside. It’s a bipartisan push to reestablish American leadership in a technology that’s increasingly vital to the US economy and its strategic goals.

Although chipmaking was pioneered in the US, and Intel dominated the global market for advanced computer chips for decades, in recent years competition from Asian firms and Intel’s own missteps have seen that influence wane considerably. The proportion of chips made in the US has fallen from 37 percent in 1990 to 12 percent today. But while industry leaders are hopeful that the newfunds will help fuel a resurgence, regaining an edge in chipmaking will require not just money, but spending it the right way.

The US needs to balance short-term investments that shore up capacity with spending aimed at mastering cutting-edge manufacturing, experts say, as well as longer-horizon research and development of next-generation technologies. Powerful, entrenched players like TSMC and Samsung also have a significant lead in many respects over their US counterparts. Meanwhile, China and other nations are also pouring small fortunes into domestic chipmaking. Catching up will be hard enough, much less leaping ahead.

The Chips and Science bill is a pared-down version of a previous bill that became mired in political fighting in 2020. It passed the Senate on Wednesday with a vote of 64 to 33, including 17 Republicans, and was approved by the House today in a 243 to 187 vote that included strong bipartisan support.

The bill includes $52 billion for companies that manufacture semiconductor chips, along with tax incentives designed to spur investments in chip making. It allocates a further $200 billion for scientific research into artificial intelligence, robotics, quantum computing, and other cutting-edge fields. President Joe Biden is expected to sign the legislation into law before Congress heads into recess in August.

The money allocated for chipmaking reflects the growing importance of chips in every corner of the economy from carmaking to home appliances, as well as the role that silicon has in driving progress in emerging areas such as AI, robotics, 5G, and biotechnology.

A protracted global chip shortage, triggered by pandemic spending and worsened by supply chain disruption, also helped spur the legislation. Shortages of certain often cheap but critical components has forced companies to shut down factories or redesign products to make use of fewer chips. Economic headwinds are suppressing demand for some components but others remain in short supply.

There is also a growing sense that the US is locked in a race for technological superiority and influence with China, a nation that has also poured billions into chipmaking in recent years. China currently lags behind the US and other nations in terms of cutting-edge chipmaking methods, and the US government has sought to restrict its access to critical manufacturing technology. Chips are also increasingly vital for military applications, enabling more advanced drones, missiles, and algorithms that promise to provide a battlefield advantage.