A recent report by an economic think tank in Washington highlights the potential impact of the 2022 CHIPS and Science Act on semiconductor production in the United States. The law, championed by President Joe Biden, aims to boost domestic manufacturing of computer chips and reduce reliance on foreign-made semiconductors.
The Peterson Institute for International Economics study indicates that the $280 billion legislation will lead to a significant rise in semiconductor production within the country. It is projected to create around 93,000 construction jobs during the establishment of chip factories and an additional 43,000 permanent jobs once operations commence.
However, the report raises concerns about the high cost associated with the government subsidies driving this manufacturing surge. Researchers estimate that each job created through the CHIPS Act will cost taxpayers approximately $185,000 per year, double the average annual salary of U.S. semiconductor workers.
The study suggests that alternative approaches were not thoroughly considered by Congress when passing the CHIPS Act. These alternatives could have included establishing a chip stockpile managed by FEMA or providing incentives for U.S. chip users and foreign producers to maintain larger semiconductor inventories within the United States.
The Biden administration and Congress acted in response to semiconductor shortages experienced during COVID-19 lockdowns, which disrupted various industries, including automotive production. The push for increased domestic chip manufacturing is also viewed as a national security imperative to reduce dependence on foreign chip imports critical for military and commercial applications.
Despite the goals set by the CHIPS Act to elevate the U.S. share of global chip production capacity to 20% by 2030, challenges remain. The report points out the need for additional subsidies, addressing labor and electricity shortages, and competing with generous tax credits offered by countries like South Korea and Taiwan to their chipmaking companies.
While the future of the CHIPS Act under the incoming administration remains uncertain, past proposals such as imposing tariffs on foreign chips as an incentive for domestic production have been questioned. The report highlights that historical attempts in the European Union using tariffs failed to revive chip production, casting doubt on the effectiveness of similar measures in the United States.
