Guest Commentary: Is the CHIPS Act Worth It?

Greetings –?

The U.S. CHIPS and Science Act continues to show significant progress?two years after it was signed into law. Last month, the White House?recapped?the Act’s milestones, highlighting nearly $400 billion in investments from tech companies, creating more than 115,000 jobs on American soil.?

According to the White House, this investment positions the U.S. to produce nearly 30% of the world’s most advanced chips–a significant increase since President Biden took office.?Recently, we've seen a surge of headlines from semiconductor companies entering preliminary agreements under the CHIPS Act, showcasing their progress. While the news has been largely positive, there are also reports of delays in companies receiving the necessary funding, among other challenges.?

To gain a deeper understanding of what the CHIPS Act means for U.S. semiconductor manufacturing and assess how well the country is progressing, we've invited esteemed analyst Jack Gold of?J. Gold Associates?to share his insights, and to answer the ultimate question:?is the CHIPS Act worth it?

The CHIPS Act is primarily known for its effort to dramatically increase U.S. semiconductor manufacturing and to enable leading edge designs while also positively affecting the supply chain for consumer, commercial and defense products. Most of the focus has been on the major grants offered to semiconductor companies to build new manufacturing capacity in the U.S.?to help diversify the supply chain, including grants for new state-of-the-art facilities to Intel, TSMC, Samsung, Micron, TI, and others.?

But there are potentially game-changing investment incentives that go beyond the emphasis on new manufacturing capacity.?

A quick review:?

The CHIPS Act provides $52.7 billion for American semiconductor research,?development, manufacturing, and workforce development. This includes:

• $39 billion in manufacturing incentives, including?
• $2 billion for the legacy chips used in automobiles and defense systems,?
• $13.2 billion in R&D and workforce development,?
• $500 million to provide for international information communications technology security and semiconductor supply chain activities.?
• It also provides a 25% investment tax credit for capital expenses for manufacturing of semiconductors and related equipment.

Why Chips?

There is virtually no company or consumer today that does not need a significant amount of computing power. The world is run by and with silicon chips, and while the U.S. invented the semiconductor, there has been a great deal of invention taking place outside the U.S. over the past few years that in some cases have relegated the U.S. to a secondary and/or minor player. The future is built on chips, and if the U.S. does not regain a leadership position, it faces some significant economic and political challenges. The CHIPS Act is meant to change that trajectory.?But the CHIPS Act is not just about chips and will help in other ways as well.

Promoting U.S. technology Leadership in Communications

The CHIPS Act includes $1.5 billion for promoting and deploying wireless technologies that use open and interoperable radio access networks. This investment will?boost U.S. leadership in wireless technologies and their supply chains?for state-of-the-art 5G networks and its derivatives. It also has the potential to affect and indeed accelerate the progression to 6G technology for network deployments in the next 4-5 years.?

Advancing Leading-Edge Designs

Next generation computing functions like AI and Quantum computing are?critical infrastructure having many implications for both commercial and military operations. Along with the investment in leading-edge fabs, there is a substantial amount included for the development of advanced designs and technology functions that may not materialize for several years, and that many research labs often can’t fund on their own. This too is an underappreciated component of the CHIPS Act, and will enable many universities and independent research labs to generate potentially game changing technology through their R&D efforts, as well as foster co-investment for major R&D programs at commercial organizations. It will likely spawn some major new companies as well. Frankly it’s hard to underestimate the importance this will be to maintaining the economic leadership of the U.S. in the next decade or two.?

Workforce Enablement

A major component of the CHIPS Act is to provide funding for training the next generation of tech workers.?While much of it is targeted at workers in the chip industry, there is no doubt that there will be a positive spillover effect. Any investment in workforce training and enablement is good for the entire community, and ultimately generates both jobs and the growth of new businesses. Many training courses at community colleges and other educational facilities will see new investment crucial to maintaining our strategic edge. The U.S. has fallen behind many other countries in the amount of STEM graduates it produces, and this is an important path to correcting this trend.

Bottom Line

The CHIPS Act is a major expense that some have said may not be worth the cost. Yet with many countries, and particularly China, investing massive amounts of government funds and subsidies to accelerate overtaking the U.S. in technology leadership, it is imperative that the U.S. economy have the support it needs to innovate and thrive in the new world of competition. The U.S. has underinvested in this space for many years and it’s time to correct that mistake.?

Thank you to Jack for his insight.?I’m always open to connect and catch up on all things embedded. Feel free to email me or connect on?LinkedIn.?Additionally, if you’d like to get in touch with our featured guest, Jack Gold, you can also connect with him?on?LinkedIn.?

Regards,?

Allison D. ?

SVP, Account Services and West Coast Lead?