Biden Moves to Bring Microchip Production Home

 

The COVID-19 pandemic highlighted the world's heavy reliance on a few countries, primarily in Asia, for semiconductor manufacturing. The resultant supply chain disruptions caused severe shortages affecting various industries, from automotive to consumer electronics. Cars, smartphones, and even household appliances saw production delays, revealing the critical role that semiconductors play in modern technology.

The Covid pandemic sharpened bipartisan fears in Washington about U.S. reliance on microchips produced overseas — primarily in China or Taiwan. As factories shut down in Asia and supply chains snarled, U.S. automakers and other manufacturers were unable to get the chips they needed, idling their plants and spiking prices for cars and other goods.

Beyond economic implications, there are significant national security concerns associated with outsourcing semiconductor production. The U.S. Department of Defense and various intelligence agencies rely on these components for advanced military systems and cybersecurity operations. Dependence on foreign manufacturers, particularly in regions with potential geopolitical conflicts, poses a risk to national security.

In a significant move to strengthen the United States' technological infrastructure and economic security, President Joe Biden announced initiatives aimed at bringing microchip production back to American soil. This strategic decision comes in response to the global semiconductor shortage and the growing geopolitical tensions that have exposed the vulnerabilities in the U.S. supply chain.

To address these challenges, the Biden administration has pushed for the "Creating Helpful Incentives to Produce Semiconductors for America" (CHIPS) Act. This bipartisan legislation, signed into law in 2022, became known as the CHIPS and Science Act, which offered more than $50 billion to subsidize the construction of new microchip facilities in the U.S. and boost research and development across a series of national research facilities. It was a remarkable endorsement of industrial policy, government support for selected industries, that U.S. lawmakers had largely shunned for decades.

As part of this initiative, several major investments and partnerships have been announced. Intel, for instance, unveiled plans to build two new semiconductor factories in Arizona, a project estimated to cost $20 billion. This investment is expected to create thousands of jobs and position the U.S. as a leader in advanced chip technology.

Similarly, Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chipmaker, has committed to constructing a $12 billion facility in Arizona. This move signifies a critical step towards diversifying and localizing the supply chain for semiconductors.

More than a dozen new tech research hubs are also planned based on the CHIPS Act’s funding. The administration recently announced its first actual CHIPS Act grant — $35 million to defense contractor BAE to expand a facility that supplies Air Force fighter jets.

Bringing microchip production home is anticipated to have far-reaching benefits for the U.S. economy. It will not only create high-paying manufacturing jobs but also stimulate growth in related industries such as research and development, supply chain logistics, and engineering. Additionally, the presence of domestic semiconductor manufacturing capabilities is likely to attract further investments from global tech companies seeking stability and security in their supply chains.

The CHIPS Act was a landmark move for Biden’s new industrial policies that sought to decrease U.S. reliance on China and boost manufacturing at home. Its passage showed that lawmakers in both parties are now willing to spend huge sums to ensure the manufacturing of essential goods like microchips happens in the U.S. and certainly not in China. The administration is set to continue rolling out CHIPS Act grants in 2024.

Despite the optimistic outlook, the path to reshoring semiconductor production is fraught with challenges. Building advanced manufacturing facilities is a capital-intensive process that requires significant investment and time. Additionally, there is a shortage of skilled labor in the semiconductor industry, necessitating focused efforts on education and workforce development.

Moreover, global supply chains are complex and interdependent. Complete self-sufficiency in semiconductor production is unlikely, meaning that international collaboration and trade will continue to play a crucial role. The U.S. must balance its domestic production goals with maintaining strong relationships with key allies and trading partners.

President Biden's initiative to bring microchip production back to the United States marks a pivotal moment in the country's economic and technological strategy. By investing in domestic semiconductor capabilities, the U.S. aims to mitigate supply chain vulnerabilities, enhance national security, and foster economic growth. While challenges remain, the commitment to revitalizing American manufacturing holds promise for a more resilient and prosperous future.

References

Fisch, Asa (2024). Chip-Making Giant TSMC Gets $6.6 Billion for Arizona Project. https://www.wsj.com/tech/taiwanese-chip-making-giant-tsmc-gets-6-6-billion-for-arizona-project-f75e9de4

Shepardson, David. (2020). Taiwan's TSMC Plans $12 Billion U.S. Chip Factory.” *Reuters*, Retrieved from https://www.reuters.com/article/usa-semiconductors-tsmc-statement/taiwans-tsmc-announces-plan-to-build-12-billion-us-factory-idINP8N2CS028/

30 Things Joe Biden Did as President You Might Have Missed. (2024). Retrieved June 3, 2024, https://www.politico.com/news/magazine/2024/02/02/joe-biden-30-policy-things-you-might-have-missed-00139046