Why the U.S. Is Investing in Chips and Semiconductors

You can find semiconductors and chips all around you—computers, phones, televisions, and countless other machines rely on semiconductors to function. Semiconductors were invented in the United States, but other countries have vastly outpaced the U.S. when it comes to investing in and producing them. Recent legislation promoting domestic semiconductor manufacturing aims to make the United States a bigger player in this sector.

This recent chips and semiconductors investment in the U.S. has the potential to make major waves in the tech manufacturing industry, from driving job creation to expanding research opportunities. To help you understand and prepare for these changes, this article breaks down what the CHIPS Act is, why it was created, what incentives it provides, and how it can influence the U.S. workforce.

What Are Semiconductors?

Semiconductors are substances that are partially conductive and partially insular, allowing them to effectively regulate electric current. They’re typically made of silicone or similar compounds mixed with other elements to create the ideal level of conductivity for each device.

Also known as integrated circuits, microchips, or simply chips, semiconductors are critical components for circuits and electronic devices due to their ability to manage the flow of electricity within those devices. The tech industry as a whole relies on advancements in semiconductor research, production, and manufacturing to power more efficient, innovative devices.

What Is the CHIPS Act?

The Creating Helpful Incentives to Produce Semiconductors and Science Act (CHIPS Act) is a 2022 law that aims to invest in semiconductor research and production within the United States. Its $280 billion budget focuses on bringing new leading technologies to market, developing the scientific workforce, and including products related to AI, advanced computing, and nanotechnology.

Here’s a breakdown of the CHIPS Act budget for the next 10 years:

• $200 billion to promote research and development
• $52.7 billion to fund manufacturing
• $24 billion to create tax credits for chip manufacturers
• $3 billion for other tech-development programs.

Of the $52.7 billion for chip manufacturing, a majority of the money is allocated for creating new, state-of-the-art manufacturing facilities in the United States.

Gaining CHIPS Funding

Chip developers and raw material suppliers can apply to gain funding through a variety of methods, including grants, federal loans, and guarantees of access to third-party loans. Companies interested in gaining funding from the CHIPS Act go through a rigorous application process that includes thorough oversight from the U.S. Department of Commerce. The approved funding will be allocated as companies achieve project goals.

The CHIPS program prioritizes projects that have a positive impact on their communities, a plan for commercial success, and detailed financial models. To encourage businesses to be realistic about their funding needs, the program requires participants to pay a percentage of any unexpected profits back to the government. Participating companies are also barred from making tech investments in certain other countries seen as top competitors, ensuring that the funds go straight to domestic projects.

The CHIPS Act also includes stipulations designed to support the workforce in the tech industry. For example, it requires companies seeking loans of over $150 million to offer childcare support for employees. Ultimately, the Department of Commerce is focusing on providing funding to semiconductor companies that invest in their employees’ education, training, and well-being.

U.S. Reasons for Semiconductor Investment

Semiconductors have become more and more integral to our day-to-day life, making them a high-value investment for the U.S. government. By investing in semiconductor production and providing valuable incentives to private companies, the federal government aims to become more involved in this rising industry. Here are some of the key reasons the U.S. is targeting the semiconductor sector with the CHIPS Act.

1. Reduce Reliance on Foreign Supply Chains

One of the main goals of the CHIPS Act is to build a more robust supply chain for microchips within the United States. Many of the semiconductors used in the United States are produced abroad, providing many opportunities for logistical issues and supply chain disruptions. Because semiconductors are so widely used in a variety of industries, supply chain issues can cause serious delays and economic challenges. By creating new domestic facilities, the federal government can create a more reliable, local supply chain with field service engineers, technicians, and other positions located domestically..

2. Increase Economic Competitiveness

By investing in technologically advanced chips, the U.S. government aims to promote its international economic position. Being one of the top producers of highly advanced chips would give the United States a major advantage in terms of future economic growth and prosperity in the tech industry. Making a major investment in research and manufacturing now has the potential to create essential infrastructure for future developments in the tech field.

3. Encourage Private Semiconductor Investment in the U.S.

Semiconductor technology is already a thriving, lucrative market. The federal government hopes to encourage private investors to invest in that market within the United States. By incentivizing business owners with tax breaks and extra funding support, the government aims to kickstart profitable programs that attract other investors. Once the CHIPS Act establishes the appropriate infrastructure, these companies have the potential to be attractive to private investors. By planning the funding over 10 years, the federal government has a realistic timeline for setting up self-sustaining systems that can operate without further incentives.

4. Promote a Skilled Workforce

The CHIPS Act has the potential to drive the creation of high-value jobs within the United States. Investing in semiconductors encourages business owners to hire for research and manufacturing positions, helping support local economies. Financially supporting semiconductor manufacturing companies also incentivizes Americans to pursue jobs in this sector. This encourages more people to enter STEM fields and gain valuable education on evolving technologies. Companies can invest in upskilling programs, too, to give existing workers the skills to help grow the industry,

The loans, grants, and tax breaks also allow employers in this field to invest in the development of their employees. With more resources, employers can ensure that they’re training top talent and keeping up with any new developments in the semiconductor industry.

The Future of the Semiconductor Industry

Employers in tech sectors can expect to see rapid developments and long-term changes from this recent investment in chips and semiconductors from the U.S. Although these grants and loans are highly competitive, their wide scope has the potential to impact countless tech businesses. The infusion of government funding into the semiconductor industry empowers researchers and manufacturers to greatly expand their operations and become a pioneer in this high-demand field.

If you’re connected to the semiconductor sector, you can anticipate these changes by preparing to train and expand your team. Working with a staffing company can give you the tools you need to quickly scale your operations and find the right talent for this highly-skilled field.