Biden’s CHIPS Act Boosts U.S. Semiconductor Production, but at a High Cost/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The CHIPS and Science Act, a cornerstone of President Biden’s semiconductor manufacturing agenda, will significantly increase U.S. chip production, creating thousands of jobs. However, a report from the Peterson Institute warns of high taxpayer costs—$185,000 per job annually—and questions whether alternative approaches might have been more effective in securing semiconductor supplies.
CHIPS Act and U.S. Chip Manufacturing: Quick Looks
- Cost Analysis: The CHIPS Act is projected to cost $185,000 per job annually, twice the average semiconductor salary.
- Job Creation: Estimated to create 93,000 construction jobs and 43,000 permanent positions.
- Strategic Goal: Aims to increase U.S. share of advanced chip production to 20% by 2030.
- Challenges: Skilled labor shortages, high energy demands, and global competition from Taiwan and South Korea.
- Trump’s Stance: Incoming administration may prefer tariffs over subsidies to boost chip production.
Biden’s CHIPS Act Boosts U.S. Semiconductor Production, but at a High Cost
Deep Look:
Boosting U.S. Semiconductor Production
President Biden’s CHIPS Act, passed in 2022, allocates $280 billion to revitalize U.S. semiconductor manufacturing. The initiative aims to address supply chain vulnerabilities exposed by COVID-19 and reduce dependence on foreign chipmakers, particularly Taiwan, whose supply chain could be jeopardized by tensions with China.
A study by Boston Consulting Group highlighted the decline in U.S. semiconductor manufacturing, with its global share falling from 37% in 1990 to just 10% in 2022. The CHIPS Act seeks to reverse this trend and reclaim a competitive edge in advanced chipmaking.
High Costs Per Job
- Taxpayer Costs: Each job created will cost $185,000 annually—double the average salary of semiconductor workers.
- Alternative Approaches: The report suggests Congress could have explored other options, such as:
- Creating a chip stockpile managed by FEMA.
- Offering incentives to encourage higher inventories from chipmakers.
National Security Concerns
Policymakers have expressed alarm over U.S. reliance on chips from Taiwan, home to Taiwan Semiconductor Manufacturing Co. (TSMC), which supplies industry leaders like Apple and Qualcomm. TSMC is already investing heavily in U.S. facilities, including new plants in Arizona, but the stakes remain high as tensions with China escalate.
Challenges to Meeting Goals
The CHIPS Act sets an ambitious target: to increase U.S. production of advanced chips from 0% to 20% by 2030. The Peterson report highlights key obstacles:
- Global Competition: South Korea and Taiwan are offering substantial tax credits to their chipmakers to maintain dominance.
- Resource Constraints: The U.S. faces shortages in skilled labor and electricity to support large-scale chip production.
- Uncertain Success: Achieving the 20% goal would require additional subsidies and resources.
Potential Changes Under Trump Administration
President-elect Donald Trump has expressed skepticism about subsidies and favors tariffs as a more effective strategy to bring chip production back to the U.S. However, the Peterson report points to past failures in Europe, where tariffs failed to revive semiconductor manufacturing, casting doubt on Trump’s proposed approach.
Economic and Policy Implications
While the CHIPS Act represents a significant investment in U.S. technology infrastructure, the Peterson Institute urges policymakers to evaluate its long-term cost-effectiveness. As global competitors continue to strengthen their positions, the U.S. must weigh the benefits of subsidies against the risks of falling behind in semiconductor innovation.
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