The Impact of the CHIPS Act

The Impact of the CHIPS Act

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Semiconductor chips are devices that conduct less electricity than perfect conductors like copper but more electricity than insulators like rubber. These devices are usually composed of silicon and can serve a variety of purposes like in memory chips and microprocessors. Computer chips can be found in nearly every electronic device today, with smaller chips being highly valuable.

Currently, the largest semiconductor chip maker is Taiwan Semiconductor Manufacturing Company (TSMC) which is responsible for manufacturing a majority of the globe’s semiconductor chips. Due to the coronavirus pandemic, the world is still facing a chip shortage. When the pandemic first broke out, many factories had to stop production and thereby disturbed the global supply of semiconductor chips. The pandemic also affected labor, which in turn influenced the chip industry’s workforce. These issues combined with a higher reliance on electronic products resulted in an ongoing shortage of semiconductor chips.

Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act

On Thursday, July 28, the United States Congress passed the CHIPS Act with the bill awaiting President Biden’s signature. The CHIPS Act is designed to support the domestic semiconductor industry, including about $50 billion in subsidy funds to improve semiconductor research and production. Another benefit of the bill awards semiconductor manufacturing property investors with a provisional 24% tax credit.

The passing of the CHIPS Act is meant to address global concerns like innovation,  competition, and supply issues. For example, China is currently the largest producer of semiconductors in the world. In contrast, the U.S. ‘s semiconductor industry has been declining. A reason for passing the bill is to raise the U.S.’s competitiveness with China, at least to equal footing. Another factor may be the global supply chain in industries that were disrupted by the sudden global health crisis. The U.S. hopes that this bill will diminish reliance on foreign semiconductor chip manufacturers as well as create jobs for American workers.

Pros and Cons

One of the CHIPS Act’s biggest benefits are the incentives offered by the federal government. For example, American semiconductor companies, chiefly Intel, gain significant funding for chip research and development. A goal of the bill is to strengthen the U.S.’s hold on semiconductor chips, especially amid political tension with China.

On the other hand, some have criticized the legislation’s passing. For instance, Americans believe that the bill does not consider issues such as semiconductor chips being used in products like circuit boards and other components which are still manufactured in foreign nations. Other disgruntled people believe that the bill is just enabling corporations without any short-term benefits to the general public. Also, it’s unlikely that the benefits of the Act will be immediately apparent since semiconductor fabrication plants will take time to build. However, there is an added benefit that if newly created semiconductor foundries manage to equal or go above planned manufacturing capacity, electronic devices could be less expensive in the future for general consumers.

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