By Sam Rauf, Senior Economic Development Manager

There are a multitude of headlines these days that seem to be circling around newspapers or appearing on your online feed. There’s COVID, supply chain issues, political discourse, the “Great Resignation”, and more. Amongst these headlines you may have also seen warning labels of the looming global chip shortage and what that means for production of certain goods. What is not as popular amongst these channels is the pending CHIPS Act legislation, which here at WCED we are keeping a close eye on.

The CHIPS Act could be a domestic boost to semiconductor manufacturing that as an industry produces the chips that power the technology used across all industries. Everything from the latest high-tech automobile to your smartphone to a “smart” kitchen appliance all need a chip to operate. As society continues to adopt technological innovation that spreads across every industry and grows, so too does the demand for chips.

So why could this legislation matter? Here is a quick summary on why it has our attention:

What is the CHIPS Act?

Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act would provide over $50 billion in incentives via income tax credits for chip manufacturing facilities and equipment to accelerate and spur leading-edge semiconductor production in the United States.

Those who support the bill point to the goal of growing and keeping semiconductor supply chains in the U.S. where our share of the world’s chip manufacturing has declined from 40% in 1990 to 12% in 2020 according to the Congressional Research Office. With most of that loss resulting from the rise in semiconductor manufacturing in Asia – mainly to China, Taiwan, and South Korea – some point to the bill as a national defense priority. China is already set to overcome Taiwan as the top producer of chips worldwide by 2025 after decades of significant investment.

Those in opposition of the bill view the incentives as a form of corporate welfare for companies in one of the most profitable industries in the world. It’s argued that if these companies want to protect themselves from supply chain bottlenecks and any future disruptions, they should be the ones paying for it.

What is the bill’s status?

The bill is described as having bipartisan support in Washington and was passed in principle in January 2021 by the U.S. Senate as part of the National Defense Authorization Act, but had no funding attached to it. The act was then included as part of the overall United States Innovation and Competition Act (USICA) umbrella that in sum totaled $250 billion with $52 billion allocated for the CHIPS Act.

The USICA passed in the Senate with a bipartisan 68-32 vote in June of 2021. The House then took action on it in February of 2022 by amending the USICA and passing their own America COMPETES Act of 2022 that included funding for the CHIPS Act. The Senate then amended the House’s America COMPETES Act in March and now the two legislative bodies are working to negotiate certain provisions as the mid-term elections approach this fall.  

What would its impact be on the industry and the economic development world?

If the CHIPS Act were to be passed, it would be tough to imagine a semiconductor company not wanting a slice of the $52 billion dollar pie – especially if they can take advantage of the R&D capabilities and talent in the U.S. at a subsidized competitive price compared to operating in Asia. For us in the economic development world, this could open the door to compete on a number of transformational projects for our communities. At present, WCED has several semiconductor-related projects we are leading.

Semiconductor operations are very capital intensive as the equipment in these facilities are large, complex, and consistently changing to stay on the cutting edge of innovation. While a large sum of money, the $50 billion dollars that could be incentivized to these companies through the CHIPS Act would go quickly in this industry if it is going to make the type of cost-leveling impact it is intended for. For example, in late 2021 Intel announced a $20 billion investment in Chandler, Arizona to build two new chip fabs as an expansion at their existing facility. The largest semiconductor producer in the world, Taiwan Semiconductor Manufacturing Company (TSMC), announced it would be spending $44 billion in 2022 alone to expand its manufacturing capacity to help with the global chip shortage.

The numbers and economic impact around some these projects are outside the realm of what we typically see, even for some of the transformational projects across the state’s megasites, that put some large semiconductor projects into a category of their own. While there are heavy utility demands and site development requirements to these projects that not all communities across the country could realistically compete for, the economic opportunity is unrivaled.  

While we are only a few months away from the mid-term elections and are currently in the political discourse that builds up to them, the CHIPS Act mainly has bipartisan support and is worth keeping an eye on.