Two years after CHIPS enactment, how to sustain America’s budding semiconductor resurgence

As we mark the second anniversary of the historic CHIPS and Science Act, one thing is clear. The world will continue to need more semiconductors to power the technologies of today and tomorrow, including artificial intelligence, smartphones, cloud computing, electric vehicles, and countless others.

For decades, the United States was producing a diminishing share of the world’s chips. Less domestic production made America more susceptible to supply chain disruptions, such as the global shortage of chips for cars and other consumer products during the COVID-19 pandemic.

But, two years ago, leaders in Washington took bipartisan action to address this vulnerability by enacting the CHIPS Act to spark greater U.S.-based semiconductor production and innovation through $52 billion in manufacturing incentives and research investments.

CHIPS was a bold, bipartisan bet that by making the U.S. a more cost-competitive location for chip fabrication and research, America could turn the tide of recent history and attract more semiconductor projects to strengthen our economy, national security, and supply chains.

So far, that bet is paying off and beginning to deliver a huge return on investment. Companies in the semiconductor ecosystem have announced more than 80 new projects across 25 U.S. states—totaling nearly $450 billion in private investments—since CHIPS was first introduced in 2020.

These projects are expected to create more than 56,000 direct jobs and support hundreds of thousands of additional jobs throughout the U.S. economy. The CHIPS Program Office reached preliminary agreements with 15 companies for 23 projects in 15 states, representing critical investments throughout the semiconductor supply chain.

The new company investments, incentivized by CHIPS, are on track to significantly expand American semiconductor production from companies based in the U.S. and those based abroad. In fact, the U.S. is projected to more than triple its semiconductor manufacturing capacity from 2022 to 2032—the highest rate of growth in the world during that period—according to a recent report by SIA and the Boston Consulting Group.

The report also forecasts the U.S. will grow its share of advanced chip manufacturing to 28% of global capacity by 2032 and capture the same percentage of total global capital expenditures (capex) from 2024-2032—both massive improvements over the current landscape. In the absence of the CHIPS Act, the report estimates the U.S. would have captured only 9% of global capex by 2032.

Achieving these projections would make the U.S. less vulnerable to supply chain disruptions for the countless industries that rely on semiconductors, including the automotive, medical device, and defense sectors. It would also help give America a leg up in developing the technologies of the future.

To achieve these goals, it is essential for the Department of Commerce to finalize the current project agreements and begin disbursing funds, commit the remaining incentives, and ramp up important research programs.

To be sure, the road to revitalizing domestic chip production and innovation is long and winding, and there will be bumps along the way. That is why government and industry must continue to work together to drive strategic action in four areas that will help ensure a strong and enduring semiconductor ecosystem in the U.S.: incentivizing further investment in the U.S., strengthening the workforce, advancing research and innovation, and promoting open markets.

First, CHIPS incentives, which have proved successful in sparking company investments in the U.S., should be extended and expanded. An example is the CHIPS “advanced manufacturing investment credit,” which allows companies to receive a tax credit for expenses related to their semiconductor manufacturing footprint in the U.S.

Congress should extend the duration of the existing credit and expand it to cover semiconductor design—the complex mapping of a chip’s intricate circuitry—and other critical areas of the semiconductor ecosystem. As part of the broader tax debate in 2025, Congress should pass legislation to extend the duration of the credit beyond the 2026 expiration date and enact bipartisan legislation introduced last week that would expand the credit to cover design expenses. 

Second, we must work to broaden the STEM talent pipeline feeding the semiconductor industry and the entire U.S. economy. As America’s semiconductor footprint expands in the years ahead, so too will demand for skilled workers in the industry.

In fact, the U.S. faces a projected shortage of 67,000 technicians, computer scientists, and engineers, in the semiconductor industry by 2030—and a gap of 1.4 million skilled workers throughout the broader U.S. economy. To address this challenge, the U.S. must adopt policies to build on the industry’s longstanding workforce development efforts, grow the pipeline of STEM graduates in America, and retain and attract more of the top engineers and scientists from around the world.

Third, we must invest ambitiously in research and innovation to maintain America’s lead in the key technologies of today and tomorrow. The U.S. semiconductor industry invests an average of one-fifth of its revenue into R&D annually, one of the highest shares of any industry. To supplement the industry’s R&D investments, CHIPS appropriated funding for semiconductor research initiatives, including the National Semiconductor Technology Center (NSTC) and the National Advanced Packaging Manufacturing Program (NAPMP).

These critically important programs must continue to come to life in a timely and effective manner. Additionally, CHIPS authorized—but did not appropriate—a larger sum of planned funding for basic scientific research. Congress should ramp up research funding to match the broader goals set forth in the CHIPS and Science Act.

Fourth, we must advance smart, strategic international partnerships and trade policies that boost global demand and open new markets for U.S.-made chips. With more chip production occurring on U.S. shores, it’s even more important for the industry to be able to reach its customers, about three-quarters of whom are overseas.

Unfortunately, our exports of chips to the world actually decreased last year. Ensuring greater access to markets around the world—and working collaboratively with partners and allies to strengthen global semiconductor supply chains—is essential to ensure the U.S. chip industry maintains its competitive edge, and to enable companies to continue investing in research and innovation here at home.

To lead the future, America must lead the world in semiconductors. Successful collaboration by government and industry has put America on the path to achieving an historic semiconductor resurgence and greater economic strength, national security, and supply chain resilience.

Now it’s time to finish the job!

-- John Neuffer, President and CEO, Semiconductor Industry Association (SIA), USA.