The Revolution Rumbling Under America’s Feet: the CHIPS Act in Our Daily Lives
In the age where technology permeates every aspect of our lives, semiconductors are off the radar for most American civilians. Yet these minuscule bits of silicon, also called “chips”, were recently referred to by Secretary of Commerce Gina Raimondo as “the most important piece of hardware in the 21st century.” (Raimondo, 2024) Obscure as they may seem to the general public, chips have the power to affect multiple other industries, and by extension, the daily lives of many Americans.
Chips can be thought of as the traffic lights of the digital world, controlling the flow of electrical signals in our electronic devices and directing them to perform specific tasks. They are present in everything from cars to washing machines and medical devices. Yet, despite how crucial they are to every part of today’s society, chip production has become highly concentrated in only a couple of countries in the world, with Taiwan leading the pack at over 60% of the world’s production. Over the last twenty years, U.S. manufacturing capacity of chips has dropped from 37% to 12% of global production, and today, 73% of fabrication capacity is in East Asia (Miller, 2022).
This leaves the U.S. in a precarious position. During the Covid-19 pandemic, major supply chain delays drew attention to the pitfalls of globalization. Today, as national security becomes a growing concern, the U.S.’ full dependence on one or two countries for such a crucial piece of technology seems ill-advised. Recognizing these issues, the U.S. government took bold steps to bolster domestic production through the CHIPS and Science Act, the implementation of which was tasked to the Department of Commerce and signed into law by President Joe Biden in 2022.
The CHIPS Act allocates $50 billion to the Department of Commerce and focuses on four key objectives:
- Investing in U.S. semiconductor production
- Ensuring resilient supply chains
- Fostering U.S. leadership in semiconductor research and development (R&D)
- Cultivating a diverse semiconductor workforce
The funds from the Act will be distributed via direct grants to semiconductor manufacturers, workforce development programs, research funds for agencies like the National Institute for Standards and Technology, tax benefits, and other channels.
Why Do We Need Resilient Supply Chains?
When government officials talk about "resilient supply chains" in relation to semiconductors, they are referring to the U.S. economy’s capability to withstand and recover from disruptions, such as shortages or disruptions in the production or distribution of semiconductor chips.
Semiconductor supply chains are complex, involving various stages of manufacturing, assembly, testing, and distribution across multiple countries. In an imaginary world where America’s access to semiconductors was suddenly cut off, our daily life would quickly flounder. The production of fridges, microwaves, washing machines, air conditioners, and other household and office appliances would grind to a halt. Telecommunication systems would also falter, disrupting communication networks and financial transactions. Complex medical surgeries would become riskier without precision-guided machinery, while the production of medical devices and monitors would effectively cease. The economy, reliant on semiconductor-enabled technologies, would face a severe blow.
Building a resilient supply chain involves diversifying sourcing locations of everything from critical minerals to machine parts, increasing inventory levels of all needed supplies in the U.S., developing strategic partnerships with suppliers, and investing in advanced manufacturing technologies. In recent times, disruptions to the semiconductor supply chain have occurred due to various factors: natural disasters, geopolitical tensions, trade disputes, and the COVID-19 pandemic. These disruptions have highlighted the importance of building resilience into the semiconductor supply chain to mitigate risks and ensure continuity of supply. By enhancing resilience, companies and industries can better cope with unexpected challenges and maintain consistent access to semiconductor components critical for their operations. They are also then not beholden to other countries whose geopolitical risks may be unpredictable.
Why Americans Should Care
Why should the average American care about chip production? The answer lies in the ripple effects that resonate beyond the fields of computer science and engineering:
- Job Creation: Expanding semiconductor production will fuel job creation at every stage, including manufacturing, logistics, and supply chain management. The industry currently accounts for roughly 250,000 U.S. jobs directly; the CHIPS Act will increase this by about 32% (Awadelkarim, 2022). In a recent address at the Center for Strategic and International Studies, Secretary Raimondo stated that more than 50 community colleges across 19 states have already announced new or expanded programming to support semiconductor industry opportunities. At a time when the U.S. labor force participation rate is still well below what it was before the Covid-19 pandemic, this may help alleviate some of the economic struggles Americans face.
- Innovation and Economic Growth: Advancements in semiconductor production will enable more breakthroughs in the industries that use them most heavily, from consumer electronics to medical devices to renewable energy systems. This will allow new products and markets to improve quality of life and create opportunities for entrepreneurship and more new jobs. The growth will lead to a multiplier effect, generating demand for goods and services across sectors such as retail, construction, hospitality, and healthcare, benefiting workers and businesses throughout the economy nationally.
- Environmental Sustainability: Semiconductors play a crucial role in enabling green technologies and sustainable solutions. Innovations in semiconductor technology pave the way for energy-efficient devices, smart infrastructure, and renewable energy systems, contributing to environmental conservation and the fight against climate change.
It is essential to recognize that the United States is not out of the woods as funds for the CHIPS Act begin to find their semiconductor company targets. For one, the industry faces the looming challenge of a potential labor shortage. The Semiconductor Industry Association projects that while the semiconductor industry’s workforce will grow by nearly 115,000 jobs by 2030, only 48,000 will be filled based on current college degree completion rates. To ensure the success of the CHIPS Act and sustain America's semiconductor revolution, it will be necessary for the U.S. government to step up efforts to entice civilians into the semiconductor industry.
Nevertheless, the CHIPS Act could bring a new era of American innovation, reinforced economic strength, and technological leadership. The semiconductor revolution, while isolated to one industry on the surface, will touch the lives of every American over the next decade if successful.
Works Cited:
Awadelkarim, Osama, “Q&A: The CHIPS Act and strengthening the US workforce”, Penn State Materials Research Institute. August 12, 2022. https://www.mri.psu.edu/mri/newsmedia/news/qa-chips-act-and-strengthening-us-workforce
Miller, C. (2022) Chip War: The Fight for the World’s Most Critical Technology. New York: Simon & Schuster.
National Institute of Standards and Technology, “A Strategy for the CHIPS for American Fund”, U.S. Department of Commerce. September 6, 2022. https://www.nist.gov/system/files/documents/2022/09/13/CHIPS-for-America-Strategy%20%28Sept%206%2C%202022%29.pdf
Raimondo, Gina, “An Update on CHIPS Act Implementation,” U.S. Department of Commerce, February 26, 2024, https://www.csis.org/analysis/secretary-raimondo-update-chips-act-implementation
Semiconductor Industry Association, “Chipping Away: Assessing and Addressing the Labor Market Gap Facing the U.S. Semiconductor Industry.” July, 2023. https://www.semiconductors.org/chipping-away-assessing-and-addressing-the-labor-market-gap-facing-the-u-s-semiconductor-industry/
