Congress passed the CHIPS and Science Act on Thursday, a $280 billion package that includes $52 billion in funding available to companies that manufacture semiconductor chips stateside. It’s a bipartisan push to reestablish American leadership in a technology that’s increasingly vital to the US economy and its strategic goals.
Although chipmaking was pioneered in the US and Intel dominated the global market for advanced computer chips for decades, competition from Asian firms and Intel’s own missteps have seen that influence wane considerably in recent years. The proportion of chips made in the US has fallen from 37 percent in 1990 to 12 percent today. But while industry leaders are hopeful that the new funds will help fuel a resurgence, regaining an edge in chipmaking will require not just money, but spending it the right way.
The US needs to balance short-term investments that shore up capacity with spending aimed at mastering cutting-edge manufacturing, experts say, as well as longer-horizon research and development of next-generation technologies. Powerful, entrenched players like TSMC and Samsung also have a significant lead over their US counterparts in many respects. Meanwhile, China and other nations are also pouring small fortunes into domestic chipmaking. Catching up will be hard enough, much less leaping ahead.
The chips and science bill is a pared-down version of a previous bill that became mired in political fighting in 2020. It passed the Senate on Wednesday with a vote of 64 to 33, including yes votes from 17 Republicans, and was approved by the House today in a 243 to 187 vote that involved strong bipartisan support.
The bill includes $52 billion for companies that manufacture semiconductor chips, along with tax incentives designed to spur investments in chipmaking. It allocates a further $200 billion for scientific research into artificial intelligence, robotics, quantum computing, and other cutting-edge fields. President Joe Biden is expected to sign the legislation into law before Congress heads into recess in August.
The money allocated for chipmaking reflects the growing importance of chips in every corner of the economy from carmaking to home appliances, as well as the role that silicon has in driving progress in emerging areas such as AI, robotics, 5G, and biotechnology.
A protracted global chip shortage, triggered by pandemic spending and worsened by supply chain disruption, also helped spur the legislation. Shortages of certain often cheap but critical components has forced companies to shut down factories or redesign products to make use of fewer chips. Economic headwinds are suppressing demand for some components but others remain in short supply.
There is also a growing sense that the US is locked in a race for technological superiority and influence with China, a nation that has also poured billions into chipmaking in recent years. China currently lags behind the US and other nations in terms of cutting-edge chipmaking methods, and the US government has sought to restrict its access to critical manufacturing technology. Chips are also increasingly vital for military applications, enabling more advanced drones, missiles, and algorithms that promise to provide a battlefield advantage.
“There is a really deep interconnection between the chip industry and the US defense industry,” says Chris Miller, an assistant professor at Tufts University and the author of Chip War: The Fight for the World’s Most Critical Technology, a forthcoming book about the race between the US and China to dominate chips. “Both countries have been gearing up for a future of war that is heavily computing-driven.”
The legislation shows that risks posed by China are one of the few things that Democratic and Republican politicians can agree on. And it marks a shift in government from faith in the free market to the kind of industrial policy that has long been out of vogue. On Wednesday, US Commerce Secretary Gina Raimondo described the act as “a significant step toward securing America’s scientific leadership and revitalizing America’s ability to make the chips that keep our cars on the road and fighter jets in the air.”
Not all chipmakers have been fully behind the legislation, with some worrying that it could unfairly benefit the largest chip companies such as Intel that have lobbied heavily for money. Senator Bernie Sanders criticized previous drafts of the legislation, noting that companies in line to receive money had previously sent jobs overseas, a concern that persists in the final version.
“There are still questions about how the money will get dispersed,” Miller says. “We need to be sure to spend it in ways that move the needle and are not necessarily aligned with lobbying.”
The US needs to not only shore up its manufacturing capacity but also gain an edge in the most advanced techniques, says Jesus del Alamo, a professor at MIT who studies advanced semiconductor designs. “That requires investment in R&D and accelerating the flow of new technologies from the university labs,” he says.
This will leave leading chipmakers such as Intel, a company that has made numerous missteps in recent years, with critical decisions to make around which technologies to invest in. For example, a technology known as advanced packaging, which refers to a way of bolting together different types of chips, promises to create new possibilities for chipmakers. The approach was used by the Taiwanese company TSMC to create Apple’s most powerful chip to date, the M1 Ultra.
Del Alamo was the lead author of a 2021 white paper that argues government funding should include money for academic research into novel microchip technologies, programs that help universities spin out new chip companies, and resources to encourage training new students. He is involved with a coalition of universities and companies that plans to make specific funding proposals, given the significant funds earmarked for scientific research.
It’s important, Del Alamo says, for chips to remain a focus of the government beyond this funding. “In this game, the winner takes all,” he says. “Whoever comes out with the next most-advanced technology first takes a disproportionate amount of the profits, and that company can then invest a lot of money in R&D to keep on the leading edge.”
