The United States is trying to win back more chip production to make its supply chains more resilient and avoid semiconductor shortages. Semiconductors are the platform where so much of the country’s innovation is built, and this innovation is the engine that powers economic growth, competitiveness, and national security.
Two years into effect, the historic CHIPS and Science Act, signed into law by President Joe Biden, is designed to provide incentives for companies to boost the domestic manufacturing of semiconductor chips critical to US-based supply chains, reversing the US' diminishing capacity in making semiconductors.
According to the Council on Foreign Relations, America’s share in manufacturing semiconductors — the components critical for operating computers and electronic devices — has fallen to 12% today from 37% in 1990. As a result, the US has been aiming to boost domestic semiconductor output and reduce reliance on China and Taiwan.
In the early days, the United States pioneered the invention of the first computer chips. However, starting in the late 1960s, parts of the supply chain gradually shifted overseas, driven by cost-saving incentives. Supported by subsidies, Asian companies soon emerged as leaders in manufacturing affordable and more technologically advanced chips than their Western counterparts.
Without a doubt, the world will demand more semiconductors in the years to come to power AI, smartphones, cloud computing, electric vehicles, and other advanced use cases. Thanks to the expected RoI from the CHIPS Act, the US is projected to more than triple its semiconductor manufacturing capacity from 2022 to 2032—the highest rate of growth in the world during that period, based on a recent report by the Semiconductor Industry Association (SIA) and BCG.
Since CHIPS was first introduced in 2020, companies in the semiconductor ecosystem have announced more than 80 new projects across 25 US states, totaling nearly USD 450 billion in private investments. These projects are expected to create more than 56,000 direct jobs and support hundreds of thousands of additional jobs throughout the US economy.
Moreover, new company investments, incentivized by CHIPS, are on track to significantly expand American semiconductor production from companies based in the US and internationally.
US Semiconductor Industry’s Progress
For the first time in five years, the SIA claimed that the revenue in the Americas (USD 15.4 billion) exceeded that of China during July 2024, as the overall market grew by close to 20% year-on-year. This momentum is a result of ongoing efforts across the government and private sector to strengthen the US semiconductor industry landscape.
Supporting the construction of three new semiconductor fabs — two in Sherman, Texas, and one in Lehi, Utah — the Texas Instruments will have a USD 1.6 billion investment boost for the US production of "mature node" semiconductors. This is part of the CHIPS Act of 2022 funding.
Furthermore, semiconductor manufacturing requires space and facilities for execution. According to CoStar's data, the US office and industrial property leasing among semiconductor makers have risen 33% since the CHIPS and Science Act's enforcement. Property values near semiconductor plants have surged by as much as 48% over the past five years in some markets. Both San Jose, California, the biggest city in the tech-heavy region referred to as Silicon Valley, and Austin, Texas, accounted for half the total of the US office space leased for semiconductor firms.
Silicon wafers are the main key manufacturing components that GlobalWafers is producing. This year, the company began the construction on a USD 5 billion silicon wafer production facility in Austin, Texas, which is set to create 1,500 jobs. Once fully operational, the facility will be one of the largest electronics production sites in the US and among the biggest manufacturing plants globally.
On the other hand, in a move set to bolster domestic semiconductor production, Polar Semiconductor invests over USD 500 million from federal, state and local incentives (including CHIPS), to expand and modernize its facility in Minnesota with new automation and AI capabilities to become globally competitive through economies of scale.
The US Department of State and the Government of Mexico have launched a joint effort to enhance and diversify the global semiconductor industry. This initiative is part of the International Technology Security and Innovation (ITSI) Fund, created by the CHIPS Act of 2022. Additionally, the US is collaborating with India's Semiconductor Mission, under the Union Electronics and IT Ministry, to explore further opportunities for expanding the global semiconductor ecosystem through the ITSI Fund. These partnerships aim to build a more resilient, secure, and sustainable semiconductor value chain worldwide.
Companies such as Micron, Qualcomm, Broadcom, SkyWater Technology, and Wolfspeed are leveraging CHIPS Act funding to establish new manufacturing plants or enhance their current facilities for producing next-generation semiconductor components. These efforts align with the integrated device manufacturer (IDM) and specialized semiconductor models, aimed at serving diverse customer needs while also ensuring a reliable second source of supply from a manufacturing standpoint.
Building on Nokia’s efforts as the first telecom company to manufacture fiber-optic broadband network electronics products and optical modules in the US for use in the Broadband Equity, Access and Deployment (BEAD) program and the first technology Buy America compliant vendor, Nokia is taking another important step with the Northeast Microelectronics Coalition (NEMC) Hub collaboration to further contribute to its semiconductor expertise to US technology leadership, economic growth and job creation.
US-China Rivalry in Chips
In October 2022, the US implemented a series of export control measures to limit China’s access to advanced AI chips containing US technology. These measures were aimed at curtailing China’s modernization efforts and safeguarding US national security. A year later, in October 2023, the US Department of Commerce’s Bureau of Industry and Security (BIS) updated these rules to maintain the effectiveness of these controls, close loopholes, and ensure durability.
The rules were further tightened in March 2024, coinciding with the suspension of licenses for several US suppliers providing chip-making materials and components worth millions of dollars to China’s Semiconductor Manufacturing International Corp (SMIC). Additionally, the US is reportedly developing a list of advanced Chinese chip factories that will be barred from accessing American technology, a move aimed at improving compliance with existing sanctions.
In response, China has taken countermeasures to reduce reliance on American technology. Earlier this year, China introduced guidelines to replace American processors, such as those from AMD and Intel, with Chinese-made chips for government computers. The new rules require government offices and Chinese Communist Party entities to use "safe and reliable" systems, which include processors and operating systems developed by Chinese companies like Huawei and Phytium—both blacklisted under US export control regulations. The guidance also recommends replacing Microsoft’s Windows operating system and other foreign-made software with domestic alternatives.
The Biden administration continues to introduce new export controls targeting critical technologies, such as quantum computing and semiconductor components, as China advances in the global chips market. Following extensive discussions with international partners, the US Department of Commerce has recently issued regulations that cover quantum computers and components, advanced chip-making tools, and high-bandwidth chips essential for AI applications, citing “national security and foreign policy reasons.”
Despite these actions, some industry leaders, like the CEO of Dutch semiconductor equipment maker ASML, argue that the US' recent measures to restrict advanced chip technology exports to China are driven more by economic motives than security concerns. With the stronger bilateral tension between the East and West, companies must brace themselves to further impact their businesses.
Long-Term Impact
According to S&P Global Market Intelligence, the CHIPS Act is reshaping US semiconductor manufacturing with substantial government subsidies, driving an anticipated 85% increase in investment by 2024 compared to 2019. Despite these incentives, projects funded under the Act have faced initial challenges such as demand uncertainty, permitting delays, and environmental reviews.
To secure long-term technological leadership over China, experts argue against extensive trade restrictions. Instead, they advocate targeted protection for sensitive technologies while fostering the US tech industry through global engagement. This strategic approach, emphasizing R&D and international cooperation, aims to outpace competitors without unnecessary regulatory hurdles.
While some propose a self-sufficient US chip supply chain, a BCG and SIA study estimates show that this requires USD 1 trillion and could potentially lead to raising chip prices. Thus, the practicality remains uncertain amid global interconnectedness. However, Secretary of Commerce Gina Raimondo remains optimistic, envisioning the US as a hub for new chip architectures by decade's end.
Achieving these ambitions hinges on navigating economic and political challenges, illustrating the complex path ahead for US semiconductor policy and global competitiveness.
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