Taking a Byte out of the CHIPS Act

Is the CHIPS and Science Act worth it for the United States to eventually manufacture all of our own chips, which will give us more control on our economy and decrease the likelihood of shortages? Or will the act backfire and create more conflict with China?

A Summary

The CHIPS and Science Act is an immense piece of legislation that aims to create a stronger and more competitive America in the semiconductor market. In early 2022, a report from the U.S. Department of Commerce disclosed a 17% increase in the demand for chips in just three years. This increase in demand, with low supply, has caused a shortage of semiconductor chips, whether manufactured in the U.S. or overseas.

It has become common knowledge that getting a rental car in the US has been difficult post-COVID. That is because of a shortage of semiconductors that occurred everywhere around the world. As a result, the prices on new vehicles rose exponentially. Additionally, older car parts became scarce, which caused a delay of repair on a large number of old cars. While cars are the number one sector that have been hit the hardest by the chip shortage, consumer electronics such as laptops and smartphones are in second place. You may have noticed that computers and smartphones have also become more expensive; as the semiconductor shortage has intensified, the supply for electronic devices such as these have gone down, resulting in price increases. Following electronics are LED light fixtures; this may not seem like a large issue, but the industry slowdown has halted the construction and remodeling of many homes. In last place are power sources, such as turbines and solar panels. Less chips means less clean energy from the wind and sun, which is negative for the environment.

The Importance

The U.S. government decided that something needed to change. According to Pete Aguilar, a Representative from California, “The House of Representatives passed the CHIPS and Science Act realizing that only 12% of the semiconductor chips that go into our cell phones, our automobiles, our military equipment, only 12% are made in the United States.” 

In order to get that percentage to 100%, the bill authorizes the spending of $52 billion. A large amount of the money would go to the semiconductor industry to incentivize these companies to make more chips on American soil. 

This act is larger than just cars and electronics. In fact, Aguilar states that manufacturing chips in the U.S. will increase our national security. When we rely on other countries to manufacture chips that will be in our electronics, that puts our data at risk. This risk is intensified by the fact that Taiwan produces over 90% of the world’s chips. With China bent on taking over the island nation, losing those chips without domestic producers ready to pick up the slack could be detrimental to the United States. Aguilar believes we need to take this situation in our own hands and solve this problem with legislation. Coming out of COVID and getting back into the swing of normal life, it is the perfect time to pass this Act. Joe Biden agrees and he will most likely be signing the act next Tuesday.

On an International Scale

Many news sources have been releasing articles saying how the CHIPS Act will ultimately stop the trade between the U.S. and China for chips, halting the Chinese chip manufacturing business. This will affect their business for the next future decades. 

This act will provide independence for America; however, the downside is that it will also pour gas on the already burning relations between the U.S. and China. Every decision has pros and cons, and it is now up to Biden to make the best call.