The Great Chip Fiasco: How We Got Here
Flashback to the pandemic’s peak: the world was in a chip shortage crisis that wasn’t just frustrating—it was financially devastating. The US lost a jaw-dropping $240 billion, with the automotive sector alone losing $110 billion in 2021.
We were caught off guard by how much our semiconductor supply chain had frayed. Before COVID-19, the US's once-stellar position in the semiconductor world had dwindled from a commanding 37% market share in the 90's to a mere 12.5% by the 2000s. With 87% of production shifting overseas and 63% of that in Taiwan, the shortage shone a spotlight on a harsh truth: the US had to make a change.
Enter the CHIPS Act: A Legislative Power Play
July 2022 saw the CHIPS Act pass with a mission to restore America’s semiconductor prowess. With a hefty $280 billion investment, the act promises:
$53 billion for semiconductor manufacturing grants
$13 billion for R&D and workforce development
$39 billion in tax credits for new chip fabs
Despite consuming over half of the world’s chips and holding 34% of the global supply, the US had been neglecting its own sector while foreign governments were aggressively investing.
The 2030 Vision: Reclaiming 20% of Global Chip Production
The CHIPS Act sets a bold target: to produce 20% of the world’s chips by 2030. Here’s a snapshot of the progress:
83 new or expanded semiconductor projects across 25 states
$447 billion in private funds and $52 billion from the CHIPS Act
Over $1 trillion private/public investment by 2030
56,000 direct jobs and 102,000 indirect jobs created
Big Players, Big Moves
The CHIPS Act’s incentives are pouring money into the giants of the industry:
Intel: will receive up to $8.5 billion in direct funding and a 25% tax credit for $100 billion in investments.
TSMC secured $6.6 billion in direct funding, $5 billion in loans, and 25% tax credits for $65 billion in investments
Samsung is getting $6.4 billion for a $45 billion chip factory
These investments are more than just financial boosts; they’re set to turbocharge local economies, spark job creation, and drive innovation in education and research.
States Getting in on the Action:
Several states are matching the federal enthusiasm with significant investments ranging from $338M in Texas, to $226M in California, $190M in Oregon, to $100M in Arizona between grants and tax incentives. Through these state incentives smaller firms (Robert Bosch Semiconductor Akash Systems) are benefiting as well.
The Road Ahead: Is This the Semiconductor Renaissance?
By the end of 2024, the US will have invested $83.4 billion in semiconductors. While this is a significant achievement, it’s just 13.3% of the global $624 billion market. The target of $131 billion by 2030 is ambitious, and the US has a long road ahead to reclaim its former dominance.
Industry leaders are optimistic but stress that the CHIPS Act is just the beginning. With Asia continuing to invest heavily in their semiconductor sectors—China, Taiwan, South Korea, and Japan combined have committed over $84 billion—the competition will remain fierce.
Looking Forward: What’s Next?
As we head into the remainder of 2024, expect:
$5 billion for the National Semiconductor Technology Center (NSTC) to drive R&D and training
$8.5 billion for Intel’s expansion across multiple states
$6.6 billion for TSMC’s Arizona facility
$6.4 billion for Samsung’s Texas plant
This type of investment activity is expected to continue throughout the decade creating new opportunities, mergers & acquisitions, and backward, vertical and horizontal integration throughout the industry.
So, did the CHIPS Act succeed?
The early signs are promising, but the full impact remains to be seen. As we continue to track this transformative legislation, one thing is clear: the semiconductor industry is back on the map, and the game is just beginning. Want to dive deeper into the future of semiconductors? Contact Biz Made EZ for the latest insights and developments!
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