A closer look at Biden’s Semiconductor Law and the Real Cost of Boosting America’s Chip Manufacturing

Semiconductor Law – A Turning Point for US Manufacturing

Biden’s sweeping 2022 law, hailed as a milestone for reinvigorating the U.S semiconductor industry, is now under the scanner. Aimed at diminishing the country’s reliance on foreign-produced computer chips, the law is projected to significantly amplify the U.S. domestic chip production. However, the hefty price associated with this expansion has raised some eyebrows.

The High Price of Domestic Chip Production

A recent report by Washington-based economic think tank, the Peterson Institute for International Economics, reveals staggering figures regarding the actual cost of this law. The massive $280 billion subsidy endowed by the CHIPS and Science Act is anticipated to create approximately 93,000 construction jobs. This is undoubtedly a boon in the short term, however, the real cost per job is worrisome.

The government’s financial backing ensures that a shower of employment opportunities will result from the expected manufacturing boom. However, each job created will require a sizable financial investment from taxpayers — averaging about $185,000 per year. This is twice the average annual salary of an American semiconductor employee. Therefore, the question arises whether this law delivers adequate value for money.

Alternative Strategies for Ensure Adequate Chip Supply

While passing the CHIPS legislation, Congress did not seem to contemplate any alternative strategies that could potentially have ensured semiconductor sufficiency at a fraction of the cost. The current law focuses on investing billions in setting up new manufacturing plants across the nation. However, alternative methods could have included developing a national semiconductor stockpile managed by the Federal Emergency Management Agency or incentivising U.S. tech industries and global chip manufacturers to maintain larger semiconductor inventories within the country.

Scrutinizing Spending in the Semiconductor Sector

The Commerce Department, in response to the Peterson report, asserts that it will remain vigilant regarding taxpayer money spending and CHIPS Act grants distribution. It promises to take a closer look at corporate investment plans to ensure that they are not exploiting incentives.

National Security as an Impetus for Chip Manufacturing in the U.S.

The shortage of semiconductor supplies, a critical fallout post-Covid, has disrupted the manufacturing of multiple products, most notably automobiles. The U.S. government viewed this as not just an economic issue but also a national security concern as it illuminated the country’s heavy dependence on foreign imports of chips, integral to both military and private corporations. As per a study by Boston Consulting Group in conjunction with the Semiconductor Industry Association, America’s share of global chip production capacity slipped from 37% in 1990 to a mere 10% in 2022.

A Threatened Semiconductor Supply Chain

With U.S. industries leaning heavily on chips manufactured in Taiwan, the supply chain could potentially be disrupted, if China were to initiate military action intended to reunify Taiwan with its mainland. Policymakers express concern over dependency on Taiwan Semiconductor Manufacturing Co., which supplies chips to prominent firms like Apple and Qualcomm, but is investing heavily in Arizonian chip plants.

The CHIPS Act’s Ambitious 2030 Plan

The CHIPS Act isn’t just about filling the short-term void in the domestic semiconductor industry. It carries an ambitious plan to escalate U.S.’s share of advanced chip production to 20% by 2030, up from a current share of zero. Peterson researchers, however, raise questions about the feasibility of this goal, which would necessitate additional government subsidies and overcoming obstacles like skilled labor shortages and electricity supply.

The Uncertain Road Ahead

As the future of the CHIPS Act remains uncertain with the incoming Trump administration and its stance on foreign chip tariffs, the question remains: Does the Act offer the best solution for the U.S. semiconductor shortfall, or should alternative measures be explored for a more cost-effective solution?

Originally Post From https://www.azfamily.com/2025/01/15/bidens-big-semiconductor-law-will-ramp-up-us-chip-production-high-cost-report-finds/

Biden’s Semiconductor Law Set to Boost US Chip Production Amid High Costs, Asserts Report