In late July, the Chips and Science (CHIPS) Act passed in the US Senate and House of Representatives, an effort backed by Democratic Senators Mark Kelly and Kyrsten Sinema.
With a 64-33 bipartisan vote in the Senate, the bill had almost unanimous Democrat approval and is expected to be signed by President Joe Biden by August 9th. Only one-third of Republican Senators voted for the bill, and the two dozen House Republicans that originally favored the legislation rescinded their support on the eve of the final vote.
The bill itself provides $52 billion dollars in government subsidies to jumpstart domestic production of semiconductors, including investment tax credit for chip plants worth an estimated $24 billion. Semiconductors are a type of specialized microchip essential to modern electronics like dishwashers, computers, video games, cars, healthcare equipment, and weapon systems. The goal of the bill is to make the US self-sufficient in the semiconductor industry, a global market dominated by a small number of companies from which the US imports products.
For context, Taiwan, an island nation off the coast of China, produces 90 percent of the global market share of semiconductors, 50 percent of which are made by the Taiwan Semiconductor Manufacturing Company (TSMC).
In contrast, the US does not produce any. General microchip production in the US has declined from 40 percent to just 12 percent in the past few decades while China has ramped up its production from 2 percent to 16 percent in the same timeframe.
The lack of domestic production and over-dependence on foreign imports have led to supply chain issues in American markets that depend on semiconductors, such as Boeing. and the auto industry. General Motors reported that more than 90,000 unfinished vehicles were waiting for chips and other parts (i.e. trucks and SUVs).
Senator Mark Kelly said if the US lost access to chips made in Taiwan, the US Gross Domestic Product could shrink by 10 percent and cripple auto production.
President Biden has blamed the chip shortage for the high rates of inflation and soaring prices on used cars. The president has framed the issue as a national security concern, saying it is essential to ensure US production to provide consumer goods and military equipment.
According to Senator Mark Warner (D-VA), the CHIPS Act would help fund 10 to 15 new semiconductor factories. The legislation will additionally authorize more than $170 billion to boost US scientific research over the course of five years, making the US more competitive in the global market.
The bill is poised to set Arizona for success on the world stage. Currently, about 30,000 Arizonans work in the semiconductor industry with tens of thousands of new jobs expected to be generated upon the bill becoming law.
“Many of these jobs do not require a four-year degree,” Senator Kelly said. “Our bill ensures that the next generation of microchips are invented, tested and produced right here at home.”
Arizona State University President Michael Crow said the bill would make the greater-Phoenix area “the manufacturing center of the planet,” predicting job growth in the industry from Tucson to Pinal County and beyond.
Legislators have also made moves to coordinate with manufacturers in Taiwan. Accompanied by a delegation of five House Democrats, House Speaker Nancy Pelosi became the highest ranked official to visit Taiwan on August 2nd, where she discussed the draft of the CHIPS Act with TSMC chairman Mark Liu.
TSMC recently announced that it has completed construction of Fab 21 based in Phoenix, expecting to produce 5nm chips on American soil by 2024.
Greater Phoenix Economic Council CEO Chris Camacho says, “This is next chapter of Arizona’s economy before your eyes… The next chapter is centered on microelectronics hub development with many other industries that are not born yet.”