On July 27, 2022, the American Senate passed – by a vote of 64 to 33 – a comprehensive and sprawling new bill that’s being referred to as CHIPS-Plus.
The legislation proposes to grant new subsidies and tax incentives to the American manufacturers of semiconductor chips. Importantly, it also contains a great deal of new law for the pure research sector.
The bill would authorize a new Technology, Innovation, and Partnership Directorate at the NSF as well as greatly expand the Established Program to Stimulate Competitive Research (ESPCOR). Both changes are hoped to spur the commercialization of cutting-edge research in the United States.
The bill now heads back to the House of Representatives for approval.
The Reason for the Season
So, why was this bill able to bypass the usual partisan gridlock that defines much of contemporary Washington? In a word: China.
Members of both parties remain deeply concerned that American semiconductor manufacturing capacity has dramatically receded over the last 50 years, falling to about 12% of global production. And, since semiconductors are such a critical part of such a large segment of modern consumer goods (everything from Playstations to new refrigerators), America finds herself dependent on semiconductors manufactured abroad.
Even worse, many of those semiconductors are made in Taiwan, a disputed and politically fraught territory ostensibly belonging to China but openly jockeying for independence. It’s pretty obvious why relying on products manufactured by a state with undefined status vis-a-vis China puts the US at significant political risk.
To make a long story short, many American legislators see the utility in encouraging the expansion and development of US semiconductor manufacturing capacity to precipitate the growth and security of a wide range of American industrial and military sectors.
Finally, the impact of technology itself on the accelerating growth of artificial intelligence cannot be ignored. In other words, the technology built today acts as a foundation and an accelerator for the technology being designed for tomorrow.
Those industries, regions, and markets that succeed in investing in the right kinds of technology in the present will be in a much better position than their competitors when it comes time to develop the next round of artificial intelligence technologies.
The Nuts and Bolts of CHIPS-Plus
The meat of the CHIPS-Plus bill, at least as it relates to semiconductor manufacturing, is the creation of a $50 billion CHIPS For America Fund. This Fund would be used for the purpose of developing domestic manufacturing capability, workforce programs, and research and development improvements in the semiconductor manufacturing industry.
The bill would also allocate half-a-billion dollars for the creation of a CHIPS for America International Technology Security and Innovation Fund, designed to facilitate the existence of safe and secure international supply chains for semiconductor chips.
Why the CHIPS-PLUS act is important?
The new legislation is of significant importance to both American and international semiconductor manufacturing companies. First, if the bill passes, American firms will likely see a direct inflow of large subsidies enabling research and development on new products, workforce development, and the building of new domestic semiconductor facilities in the United States.
Second, Chinese firms will find themselves at a comparative disadvantage for the first time in a while, thanks to the national security-related emphasis on chip and supply chain security in the bill. It is likely that a bill aimed at combating Chinese strength in the semiconductor industry in favor of domestically produced products will have a negative impact on China’s ability to produce semiconductors.
This is especially true when one considers that much of China’s tech sector is already viewed with suspicion and distrust. Huawei, for example, has been banned from supplying telecommunications equipment to much of the world’s critical telecom infrastructure for fear of security leaks and spying.
Top 100 Semiconductor Producers To Watch
Going forward, it would be wise to keep an eye out for marked shifts in the manufacturing footprints of semiconductor chipmakers. Will the CHIPS-Plus bill have it’s desired effect and shift manufacturing back to the USA? Or are the global economic winds that blew those factories and jobs overseas in the first place too strong to overcome?
In a similar vein, will we see foreign governments institute similar subsidies and incentives for their own, domestic semiconductor makers? This could ultimately result in a kind of stalemate, with the ultimate beneficiary being the stockholders of large chip manufacturers. Only time will tell.
And while the chip shortage persists, here’s a helpful list of the Top 100 Semiconductor Producers To Watch. If you want the full list of all 1,000 Semiconductor producers that includes top suppliers, ecosystem breakdown, and hundreds of data points – simply request a free trial.