The CHIPS Act of 2022 – Shaping the New Semiconductor Market.
On July 28, 2022, congress passed the CHIPS and Science Act of 2022 to strengthen the domestic manufacturing of semiconductor chips in the U.S.
The $280 Billion CHIPS Act shall provide $52 Billion specifically to boost U.S. semiconductor manufacturing, development, and research. The $52 Billion package is divided into –
- The $39 billion to companies building chip manufacturing plants in the U.S.
- The $11 billion to assist the chip manufacturing research and workforce training.
- The $2 billion to prompt lab innovation into the military and other applications.
The Act aims to compete with China and reduce U.S. dependency on South Korea and Taiwan for crucial semiconductor technologies. The U.S. share of global semiconductor manufacturing has declined from 37% in 1990 to only 12% in 2020.
With these grants coming from the Chip Bill, the U.S. semiconductor companies like Micron have begun announcing a $40 billion investment in memory chip manufacturing. This has boosted the U.S. market share from 2% to 10%.
U.S. Chipmakers like Qualcomm, which specializes in mobile phone chips also agreed to acquire an extra $4.2 billion worth of semiconductor chips from Global Foundries’s New York manufacturing facility.
Intel has committed to building a $20 billion chip plant near Columbus, Ohio. It has been estimated that 40,000 new job openings in the U.S. semiconductor market.
The Chip Act of 2022 doesn’t prevent U.S. chipmakers from producing outside the country but also doesn’t encourage the same.
At present, there is a global chip shortage crisis affecting more than 169 industries. Global Chip buyers are desperate and would love the fresh chip supply from the U.S. but that’s a long road ahead. This is because building a chip plant is a long process, and new chip facilities require time for hiring talented and skilled staff.
Other factors like regulations, labor costs, and roadblocks common in U.S. manufacturing are likely to further slow down the process. As big as an achievement this is for the U.S. semiconductor market, the impact could take a decade to reflect.
But the U.S. dominance in the global semiconductor market is inevitable. In the future, large U.S. corporations like Texas Instrument, and Intel shall take a huge market share. This will affect Asian companies, especially China. We would also see a huge manufacturing cost difference between Asia and the US.
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