The Chips for America Act is the centrepiece of competitiveness legislation in Congress that seeks to cut America’s reliance on foreign-produced chips by providing incentives for domestic foundries. However, direct funding for the chip industry can only go so far without addressing labour supply issues. Without addressing STEM talent shortages, the production of chips will remain slow. A recent Department of Defense report found that the shortage of STEM talent within the defence industrial base approaches crisis status.
Senate approves $52 billion in subsidies for semiconductor manufacturing
A bipartisan group of lawmakers pushed for the bill last month. The Senate passed a similar piece of legislation a year earlier but stalled in the House due to Democratic priorities. After receiving more than 500 amendments, the House bill is unlikely to make it to the president’s desk in its current form. The bill will then go through a reconciliation process with the Senate, which could take weeks or even months as midterm elections draw near.
The funding for chip manufacturing is included in the America Competes Act, a bill aimed broadly at countering China’s growing global influence. The Act includes roughly $50 billion in subsidies to chip companies to build factories in the U.S. The proposal has widespread support in the chip industry, as it would encourage fabless businesses to expand their operations here. But if the measure is not passed by the House, the industry may feel a need to push for more federal funding.
House has yet to pass the bill
In late January, the House unveiled its own version of the CHIPS Act, with similar funding (52 billion). However, it would eliminate $200 billion from USICA, which was allocated to regional technology hubs. While the House has yet to pass the CHIPS Act in its current form, it is likely to go through the reconciliation process with the Senate, which could take weeks to months. That means it may not make it to President Biden’s desk until the midterm elections.
Although the Senate has overwhelmingly backed the legislation, the House hasn’t yet done so. The House has not yet passed the bill, and a compromise is expected before the midterm elections. However, it contains provisions that are controversial, including increased tariffs on low-value Chinese imports. There is also a provision that requires American companies to have stricter labour and environmental rules than their foreign counterparts. Additionally, the House version calls for a shift in focus from technological research to basic research.
Impact on SMEs
The European Commission has put forth a package of policies to boost the European semiconductor industry, including the EU Chips Act. The proposed Act, which has already attracted much attention from policymakers, will make a substantial commitment to European semiconductor research and industrial innovation, including building a stronger relationship with the US and Japan. However, the impact on SMEs will depend on their unique circumstances. This article outlines some key aspects of the Chips Act that should be considered by SME leaders.
The Department of Commerce is taking new steps to improve data collection for the industry, including a voluntary survey of participants. Such surveys will be crucial in identifying chokepoints in the supply chain and offer data that firms can use to adjust their production processes and attract private investment. This survey will help the Department of Commerce understand which technologies are essential for the manufacturing process of semiconductors, and will be particularly useful in identifying where additional equipment will be needed.
Impact on end-users
The CHIPS for America Act, which was signed into law by the President of the United States in January, encourages the development of more domestic chip production capacity. As a matter of national security, Raimondo said that making chips in the United States is a top priority. She said she was in Davos this week where global leaders discussed the importance of “friend-shoring,” or working with countries that share the same values as the United States.
The European Commission believes that increasing semiconductor manufacturing in the EU and the U.S. will benefit the end-users and SMEs. Last February, Ursula von der Leyen, the European Commission’s chief executive, announced the European Chips Act. It aims to double the EU’s share in global semiconductor production to 20% by 2030. The EU is promoting entrepreneurship and encouraging startups to increase manufacturing capacity. It also promotes international partnerships and aims to foster a vibrant ecosystem for semiconductor manufacturing.