Biden signs CHIPS and Science Act into law

Article by Gadjo Sevilla | Aug 10, 2022

The news: President Joe Biden signed the Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act into law, releasing $52 billion to subsidize semiconductor production as well as billions in tax credits to kick-start chip manufacturing investments in the US.

“Today is a day for builders. Today America is delivering,” Biden said at the signing ceremony. He was joined by various tech executives, union presidents, and political leaders from both parties.

Why it’s worth watching: The CHIPS and Science Act is considered a generational piece of legislation that comes at a time of surging global competition, particularly with China. It carries with it the same urgency as the National Aeronautics and Space Act of 1958 which culminated in the Space Program and made America the first country to land on the moon.

Leading chipmakers TSMC, Intel, and Samsung, which planned massive investments in new chip fabs in the US, pushed for the bill to pass. Intel postponed its Ohio plant until the bill was secured.
Intel, Micron, Qualcomm, and GlobalFoundries renewed their commitments to growing US chip production at the signing ceremony.
Micron is investing $40 billion in memory chip manufacturing, while Qualcomm and GlobalFoundries are behind a $4.2 billion expansion of upstate New York facilities.
The legislation will also create a 25% tax credit for companies that invest in semiconductor manufacturing equipment or the construction of manufacturing facilities.
Aside from semiconductors, the bill includes an allotment of $200 billion for scientific research, especially into AI, robotics, quantum computing, and other technologies where countries like China have seized the lead.
$13 billion will go to education in STEM—including scholarships and fellowships, with a focus on increasing access to education in these fields in rural areas.

The challengers: At the very least, the CHIPS and Science Act puts the US on par with China and the EU in terms of government investments and incentives.

A similar $49 billion EU proposal is aimed at boosting chip production on the continent.
China President Xi Jinping plans to invest trillions of dollars in Chinese companies, infrastructure, and R&D to strengthen the country’s tech sector and reduce reliance on foreign suppliers.

Key takeaways: While it may take years to reap the benefits of the CHIPS and Science Act, the incentives to develop US factories and technologies could go a long way in securing commitments from industry leaders.

An increase in manufacturing means more American jobs and economic growth in towns and cities where factories are created.
The new funding will eventually help lower supply costs and prevent supply chain disruptions.
Various chip factories will be online in time to supply carmakers as they work to meet aggressive EV targets. Global chip shortages have limited new vehicle production.