Written by Daniel Marsh
More than three years have passed since the beginning of the Coronavirus pandemic in early 2020. While COVID no longer dominates public life, with society reopened to normal, pre-pandemic activity, the disruption caused by the virus has exposed a number of vulnerabilities, specifically within the global economy. Businesses and factories shut down, workers were laid off, and prices for goods and services jumped dramatically. In the US alone, 23 million people lost their jobs, and inflation rose to its highest level in decades (Leith, 2023). Electronic goods saw particularly sharp price increases; as white-collar jobs transitioned to remote work, the demand for computers and other electronics spiked (Leswing, 2021). As demand for electronics rose, so did demand for semiconductors, also known as “chips,” which are necessary components of most consumer electronics and other goods such as automobiles. Yet semiconductor supply fell dramatically during the pandemic, as manufacturing plants shut down and global supply chains were interrupted. American companies largely rely on semiconductor production in East Asian countries like China and South Korea, which implemented particularly harsh pandemic control measures, severely damaging manufacturing output (Leswing, 2021). Furthermore, as political relations with China have worsened, American national security experts have worried about becoming dependent on Chinese goods to power critical sectors of the economy. Thus, on August 9th, 2022, President Biden signed the bipartisan CHIPS and Science Act into law, remarking that the law was vital to ensure the US “lead[s] the world in future industries and protect[s] [its] natural security.” (Biden, 2022)
Over the next 10 years, the CHIPS Act authorizes $280 billion in spending, with approximately $52 billion going directly to improving domestic semiconductor manufacturing (Badlam et al., 2022). As of 2022, the US produced just 12% of the world’s semiconductors, making American corporations highly dependent on foreign manufacturing. Much of the $52 billion will be spent on tax incentives that encourage American companies to build new semiconductor manufacturing plants directly in the US, with $11 billion that aid further research and development of semiconductor technologies (USAFacts, 2023). And yet, the bulk of the money spent by the CHIPS Act will not directly impact semiconductors but will be given to various federal agencies to bolster general scientific research. The National Science Foundation will receive 81 billion dollars from the bill, more than double its previous budget. That money will be used to enhance STEM education and broaden the STEM workforce, among other initiatives (Shivakumar et al., 2022). The Department of Energy will also receive a significant amount of money for research and development in areas including quantum computing, fusion energy, and other clean-energy technologies such as carbon capture (Shivakumar et al., 2022). Altogether, the CHIPS Act is a major investment in science and technology that has the potential to jumpstart American manufacturing and greatly enhance research and development.
In the year and a half since the passage of the CHIPS Act, manufacturing companies, aided by the government, have invested $157 billion in new factories and semiconductor plants (Conness, 2024). Twenty-eight new plants have been opened, creating over 25,000 jobs in towns across America (Conness, 2024). Yet despite the surge in investment, the rollout of the CHIPS Act has been rocky. In Arizona, a $40 billion investment by the semiconductor giant TSMC has been delayed, with the company not expecting any chips to be produced until 2028 (Clark and Swanson, 2024). While the company faces an array of issues, including a lack of skilled workers and falling semiconductor demand, TSMC has struggled to receive promised federal funding (Clark and Swanson, 2024). Though the CHIPS Act allocates billions of dollars in grants to semiconductor companies, much of that funding has been delayed, with the government slow to dispense grants. In recent weeks, however, the government has started awarding grants at a rapid pace, with the TSMC Arizona plant receiving nearly $7 billion, Micron receiving $6.1 billion for factories in Idaho and New York, and additional funding going to Samsung, Intel, and a few smaller companies (Ngo and Clark, 2024).
The surge in spending comes as Biden and other Democratic candidates ramp up their campaigns, with the November election less than seven months away. Biden has sought to highlight his aggressive economic agenda, trying to overcome stubbornly low approval ratings and poor consumer sentiment. In swing states, where elections are decided by mere thousands of votes, the effects of even one new factory opening could sway an entire election. Arizona, where the two TSMC plants are set to open, was decided by just over 10,000 votes in the Presidential election four years ago. Ruben Gallego, the presumptive Democratic nominee for Senate, has been quick to praise the CHIPS Act investment, while Biden traveled to the state to tout the accomplishment (Mui and Bordelon, 2024). In Ohio, incumbent Democratic Senator Sherrod Brown has campaigned extensively on the CHIPS Act, which is responsible for two new semiconductor plants, thousands of new jobs, and billions of dollars in investment (Weisman, 2024). Whether the CHIPS Act will play a defining role in the election is still unclear, yet in the coming months as more funding is allocated, factories are opened, and jobs are created, the economic and electoral impact of the CHIPS Act will continue to grow.
References
Badlam, J., Clark, S., Gajendragadkar, S., Kumar, A., O’Rourke, S., & Swartz, D. (2022, October 4). The Chips and Science Act: Here’s what’s in it. McKinsey & Company. https://www.mckinsey.com/industries/public-sector/our-insights/the-chips-and-science-act-heres-whats-in-it
Biden, J. (2022, August 9). Remarks by President Biden at signing of H.R. 4346, “The CHIPS and Science Act of 2022.” The White House. https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/08/09/remarks-by-president-biden-at-signing-of-h-r-4346-the-chips-and-science-act-of-2022/
Clark, D., & Swanson, A. (2024, February 19). Plans to expand U.S. chip manufacturing are running into obstacles. The New York Times. https://www.nytimes.com/2024/02/19/technology/semiconductor-chip-factories-delays.html
Conness, J. (2024, March 27). Inflation Reduction Act (IRA) + CHIPS and Science Act (CHIPS) Manufacturing Investment Announcements. Jack Conness. https://www.jackconness.com/ira-chips-investments
Leith, L. H. (2023, December). What caused the high inflation during the COVID-19 period? . U.S. Bureau of Labor Statistics. https://www.bls.gov/opub/mlr/2023/beyond-bls/what-caused-the-high-inflation-during-the-covid-19-period.htm
Leswing, K. (2021, February 10). Why there’s a chip shortage that’s hurting everything from the PlayStation 5 to the Chevy Malibu. CNBC. https://www.cnbc.com/2021/02/10/whats-causing-the-chip-shortage-affecting-ps5-cars-and-more.html
Mui, C., & Bordelon, B. (2024, March 20). Biden boosts Intel with massive CHIPS payout in swing state Arizona. Politico. https://www.politico.com/news/2024/03/20/in-arizona-biden-drops-8-5b-on-intel-will-it-help-his-campaign-00148079
Ngo, M., & Clark, D. (2024, April 18). Micron Will Receive $6.1 Billion to Build Semiconductor Plants. The New York Times. https://www.nytimes.com/2024/04/18/technology/micron-semiconductor-award-chips-act.html
rawpixel. (n.d.). President Joe Biden tours the General Motors’ Factory ZERO Facility. https://www.rawpixel.com/image/9652844/image-people-factory-public-domain
Shivakumar, S., Arcuri, G., Tomoshige, H., & Glanz, B. (2022, August 11). A Look at the Science-Related Portions of CHIPS+. CSIS. https://www.csis.org/analysis/look-science-related-portions-chips
USAFacts. (2023, October 5). What’s in the recently passed Chips Act? https://usafacts.org/articles/whats-in-the-recently-passed-chips-act/
Weisman, J. (2024, March 22). Sherrod Brown Embarks on the Race of His Life. The New York Times. https://www.nytimes.com/2024/03/22/us/politics/sherrod-brown-ohio.html