Semiconductors, also known as computer chips, are the tiny integrated circuits that power our digital world. They form the technological backbone of smartphones, computers, appliances, vehicles and even advanced weapons systems.
- In a Nusthell
- The Vital Role of Semiconductors
- America's Declining Semiconductor Dominance
- The Global Chip Shortage
- The Need to Rebuild America's Semiconductor Base
- The CHIPS and Science Act
- $5 Billion Targeted for Semiconductor R&D
- Encouraging Industry Expansion
- The Outlook for US Semiconductor Leadership
- Wrap Up
However, the global chip shortage over the past two years has exposed America’s over reliance on foreign suppliers. To counter this strategic vulnerability, the Biden administration recently announced a $5 billion investment in revitalizing domestic semiconductor research and production capabilities.
This funding injection comes under the auspices of the momentous CHIPS and Science Act passed in 2022 to maintain US leadership in semiconductor innovation.
In a Nusthell
- Cloud computing involves Internet-based data storage, servers, databases, networks, and software.
- Cloud storage stores files in a remote database that may be accessed from any Internet-connected device.
- Cloud computing is popular with individuals and businesses due to its cost savings, productivity, speed, efficiency, performance, and security.
- Public, private, or hybrid cloud computing services enable email, data storage, backup and recovery, application design and testing, data analytics, audio and video streaming, and on-demand software delivery.
- Cloud computing includes software as a service (SaaS), infrastructure as a service (IaaS) and platform as a service (PaaS).
The Vital Role of Semiconductors
Semiconductors have become ubiquitous in the digital era. These miniaturized transistors and electronic circuits are embedded into integrated chips that can perform multiple functions.
Advertisement
Their ability to conduct electricity under certain conditions but act as insulators in others enables them to process and switch signals on and off at incredibly fast speeds. This makes semiconductors integral to computing and virtually every modern technology.
The most famous four words in U.S. semiconductor history are Intel’s next generation processor. Keeping that leadership will require research, innovation, and manufacturing on U.S. soil.
Patrick Gelsinger, CEO of Intel
From enabling artificial intelligence algorithms to coordinating advanced power grids, semiconductors are essential to innovation. As they get smaller, faster and more powerful, they drive progress in diverse fields. The semiconductor industry has been described as the technological basis for the world economy. But the global chip shortage has shown the fragility of this crucial supply chain.
America’s Declining Semiconductor Dominance
The US established an early lead in semiconductor technology in the 1950s, with the pioneering research labs of Silicon Valley companies like Fairchild Semiconductor and Intel. This spawned a vibrant domestic chip manufacturing industry over subsequent decades. However, as chips became more commoditized in the 2000s, American companies offshored production to lower cost locations in Asia. Manufacturing migrated to Taiwan, South Korea and China.
Domestic chip production dropped from 37% of global output in 1990 to only 12% by 2021. The US now depends on East Asia for 75% of its semiconductors. This reliance on foreign foundries represents an immense strategic liability. A disruption in the overseas supply chain could critically impair American economic and defense capabilities.
The Global Chip Shortage
The risks posed by relying predominantly on offshore manufacturers came into sharp focus during the recent global chip crunch. As pandemic impacts caused demand to outstrip supply, acute shortages emerged across multiple industries. Carmakers cut production as scarce chips starved automotive plants. Consumer electronics, medical devices and cloud computing infrastructure were also hit hard. The crisis showed how quickly overseas semiconductor dependencies could threaten vital systems.
The Need to Rebuild America’s Semiconductor Base
In response to the chip supply crisis, bipartisan political momentum grew to bolster domestic research, design and manufacturing capabilities. This drive culminated in the Senate passing the momentous CHIPS and Science Act in July 2022, which was signed into law the following month. The legislation aims to fund a sweeping set of measures to reinvigorate America’s semiconductor ecosystem over the next decade.
The CHIPS and Science Act
The CHIPS and Science Act represents the largest ever US government investment in semiconductor technology. The key provisions include:
- $39 billion in manufacturing incentives – Subsidies to support new domestic chip fabrication plants.
- $11 billion for R&D – Funding for research programs to maintain US technology leadership.
- $2 billion for design – Investing in design infrastructure and capabilities.
- Workforce development – STEM education initiatives to build specialized engineering talent.
- Supply chain support – Working with allies to diversify sourcing and resilience.
This substantial investment aims to sharply expand domestic chip making over the next 10 years while also advancing research into next generation technologies like 2 nanometer processes.
$5 Billion Targeted for Semiconductor R&D
In February 2024, the Biden administration announced how $5 billion of the CHIPS Act funding would be immediately allocated. The investments include:
- $1.4 billion for research – Advanced semiconductor manufacturing and design programs.
- $1.5 billion for partnerships – Public-private collaborations between industry, academia and National Labs.
- $150 million for workforce – Chip-focused STEM education and apprenticeships.
- New incubators and accelerators – For semiconductor startups across regional innovation hubs.
This injection of funding seeks to bolster America’s long-term leadership position in semiconductor technology through both breakthrough research and a robust workforce pipeline.
Encouraging Industry Expansion
The investments are already spurring major chipmakers to commit to new fabrication plants in the US, including:
- Intel – $20 billion facility in Ohio.
- Samsung – $17 billion plant in Texas.
- Micron – $15 billion factory in Idaho.
- GlobalFoundries – Expanding New York operations.
- TSMC – Building a $12 billion manufacturing site in Arizona.
Domestic production is projected to nearly double over the next decade as a result of the Act’s incentives. This will strengthen supply chain resilience.
The Outlook for US Semiconductor Leadership
The CHIPS and Science Act signifies the largest industrial policy initiative since World War 2. The scale of the investments reflect bipartisan recognition of semiconductor’s economic and national security importance.
Executed effectively, the influx of funding can reestablish US primacy in semiconductor manufacturing while also pioneering advances like 1 nanometer nodes, quantum computing and neuromorphic chips.
Dominance in chip technology underpins leadership in virtually every emerging technology, from artificial intelligence and robotics to biotechnology, green energy and advanced defense systems.
This magnifies the significance of ramping up investments in domestic semiconductor research, design and production capabilities. By incentivizing private sector capital expenditure and nurturing talent, America aims to out innovate its geopolitical rivals and usher in a new era of technology leadership over the coming decade.
Wrap Up
To summarize, semiconductors are integral to America’s economic competitiveness and national security. However, heavy reliance on overseas manufacturers has left the US vulnerable. The global chip shortage provided a wake up call on the risks of depending on foreign suppliers for this critical technology.
In response, the Biden administration and Congress have acted decisively to rebuild America’s semiconductor ecosystem through the CHIPS and Science Act’s historic investments. The new $5 billion funding allocation specifically targets research programs, workforce development and domestic manufacturing growth.
By reinvigorating America’s semiconductor design, engineering and production capabilities, these measures will strengthen domestic supply chains, foster breakthrough innovations and cement US technological leadership. With robust public private collaboration, America aims to usher in a new era of semiconductor primacy.
This focused investment in semiconductor self sufficiency is vital for national security and economic prosperity. It will enable exciting new technologies that drive progress in diverse fields. As chips become faster, cheaper and more powerful, they will unleash a new wave of American innovation across artificial intelligence, quantum computing, advanced manufacturing and much more. By running this technological race with determination and vision, America can retake pole position.
FAQs
Semiconductors are integral building blocks of computer chips that process and store information. Their ability to rapidly switch electric signals enables all modern digital technologies. Faster, cheaper, lower power chips drive technological innovation.
The US pioneered early chip innovation but companies shifted production overseas to lower cost locations in Asia from the 1990s onward. This caused domestic manufacturing share to drop from 37% to only 12% today.
Surging pandemic demand for electronics combined with supply chain disruptions led to acute shortages. Overseas dependencies left the US vulnerable.
Advanced manufacturing and design programs, public private partnerships, workforce development and new regional innovation hubs.
Intel, Samsung, Micron, GlobalFoundries and TSMC are all establishing new fabrication facilities in response to the CHIPS Act incentives.
More resilient supply chains, reduced dependence on foreign vendors and strengthened capacity to innovate next generation technologies.
Article sources
At Capital Maniacs, we are committed to providing accurate and reliable information on a wide range of financial topics. In order to achieve this, we rely on the use of primary sources and corroborated secondary sources to support the content of our articles.
Primary sources, such as financial statements and government reports, provide firsthand evidence of financial events and trends. By using primary sources, we are able to directly reference information provided by the organizations and individuals involved in these events.
Secondary sources, such as financial analysis and commentary, interpret and analyze primary sources. While these sources can be useful for providing context and background information, it is important to use corroborated sources in order to ensure the accuracy and reliability of the information we present.
We take pride in properly citing all of our sources, both primary and secondary, in order to give credit to the original authors and to allow our readers to verify the information for themselves. We appreciate your trust in our website and are committed to upholding the highest standards of financial journalism.
- AP News – Biden administration announces $5 billion commitment for research and development of computer chips
- The White House – FACT SHEET: Biden-Harris Administration Announces Over $5 Billion from the CHIPS and Science Act for Research, Development, and Workforce
- Ars Technica – US funds $5B chip effort after lagging on semiconductor innovation
