President Joe Biden signs landmark bill to encourage chip makers to build more semiconductor manufacturing capacity in the US
US President Joe Biden on Tuesday signed the landmark and bipartisan CHIPS and Science Act of 2022, in a major American industrial strategy move.
The move is being touted by the administration as the final part of “an industrial strategy to revitalise domestic manufacturing, create good-paying American jobs, strengthen American supply chains, and accelerate the industries of the future.”
The signing of the bill was the last ratification needed after just over a year of developing the legislation to overcome the chip shortage problem that arose during the Covid-19 pandemic of 2020 and 2021.
Chips and Science Act
It was back in May 2021 when US Senate Democratic Leader Chuck Schumer first unveiled the revised bipartisan legislation then known as the US Chip Act, which set aside $52 billion to significantly boost American semiconductor production and research over five years.
The legislation spent the best part of a year locked in internal US politics, before the US Senate in March approved it.
The Chips and Science Act then awaited approval by the US House of Representatives, which last month passed the legislation, with bipartisan support (in a 243-187 vote).
Twenty-four Republicans joined 218 Democrats in backing the measure.
The ‘Chips and Science’ act is a rare major foray into US industrial policy by America politicians, and the bill provides about $52 billion in government subsidies for US production of semiconductors.
It also includes an investment tax credit for chip plants estimated to be worth $24 billion.
The legislation will also authorise $200 billion over 10 years to boost US scientific research to better compete with China.
However the US Congress would still need to pass separate appropriations legislation to fund those investments.
“Today, I’m signing into law the CHIPS and Science Act, a once-in-a-generation investment in America itself, a law that the American people can be proud of,” said the President at the signing. “I called for elements of this law when I first came to office. I want to thank everyone – everyone here – who helped make it possible.”
“You know, the CHIPS and Science Act supercharges our efforts to make semiconductors here in America – those tiny computer chips smaller than a fingertip that are the building blocks for our modern economy, powering everything from smartphones, to dishwashers, to automobiles,” the President said.
“In fact, there are as many as 3,000 semiconductors per vehicle made today,” said the President. “Three thousand per vehicle,” he said. “America invented the semiconductors. They powered NASA’s mission to the Moon.”
“Federal research and development brought down the cost of making them and build a market and an entire industry,” he said. “As a result, over 30 years ago, America had 40 percent of the global production of these chips. And then something happened: American manufacturing, the backbone of our economy, was hollowed out, and we let semiconductor manufacturing go overseas.”
“And as a result, today, we barely produce 10 percent of the semiconductors – despite being the leader in chips design as well as research,” said the President. “And, as we saw during the pandemic, when factories that make these chips shut down, the global economy comes to a screeching halt, driving up costs for families and everyone – not just here, but around the world.”
“One third of the core inflation last year was due to the higher price for automobiles – for automobiles and a shortage of semiconductors,” said President Biden. “Folks, we need to make these chips here in America to bring down everyday costs and create jobs.”
President Biden then touted investments that chip companies are making.
Qualcomm on Monday agreed to buy an additional $4.2 billion in semiconductor chips from GlobalFoundries’ New York factory, bringing its total commitment to $7.4 billion in purchases through 2028.
The White House also touted Micron announcing a $40 billion investment in memory chip manufacturing, which would boost US market share from 2 to 10 percent, an investment it said was planned with “anticipated grants” from the chips bill.
President Biden also made clear that it was a matter of national security for the US to make its own chips.
“Earlier this year, I went down to Lockheed’s factory in Alabama where they’re making the Javelin missiles that we’re supplying to Ukraine to defend themselves against Putin’s unprovoked war,” said the President.
“And it’s crystal clear we need these semiconductors not only for those Javelin missiles, but also for weapons systems of the future that are going to be even more reliant on advanced chips,” he added. “Unfortunately, we produce zero percent of these advanced chips now. And China is trying to move way ahead of us in manufacturing these sophisticated chips as well.”
“It’s no wonder the Chinese Communist Party actively lobbied U.S. business against this bill,” he concluded. “The United States must lead the world in the production of these advanced chips. This law will do exactly that.”