How Will the CHIPS and Science Act Impact the Semiconductor Industry?

17/10/2022 Semiconductor

Can Joe Biden’s latest act to provide $52.7 billion of subsidiaries to the US semiconductor market really allow us to compete with China? 

That’s the big question that everyone in the industry is asking at the moment… for good reason. It’s an important one. 

While it certainly seems like a whopping sum at face value (which could lead to revolutionary change), there are a couple of factors to consider:

  1. The subsidies will be split between multiple corporations.

  2. The intention is to fuel scientific research and innovation.

This will significantly affect the impact that the CHIPS and Science Act has over the next few years. Shall we take a look at a few?

(Source: Bloomberg)

The state of the worldwide semiconductor industry

As it stands, there’s no denying that China is the global power in the semiconductor industry. 

With a total market size of $186.5 billion (Source: The Diplomat), the manufacturing giant has a market around three times the size of America’s, which is valued at $63 billion. 

With semiconductor demand facing a drastic increase, it’s no wonder that Biden has started outlining a plan to bring attention back to the US. 

Today, the US is only producing around 10% of the world’s chips year-on-year, but, if output could be increased, it could bring significant economical benefits to the entire country.

“China has lobbied against the semiconductor bill. The Chinese Embassy in Washington said China firmly opposed it, calling it reminiscent of a Cold War mentality.” - Reuters

The issues the CHIPS and Science Act needs to address

There’s a (slight) issue with the monetary fund granted from the CHIPS and Science Act. 

It’s largely being directed towards large, heavily research-focused institutes, such as Intel, Micron, and GlobalFoundries (Source:

Although the bill has been an overall great sign indicating positive growth for the industry, it doesn’t seem to directly combat the main reason China has a near-monopoly on the production of global semiconductors… their infrastructure.

If the CHIPS and Science Act is going to create positive results, then some of this money will need to be diverted into increasing the total capacity of the US industry. This could be used to cover recruitment costs, expand warehouses, and purchase new technologies.

However, as CNBC reported following the legislation, 

“Building a chip plant is a long process, and attracting the talent needed to staff a new facility is not done overnight. Regulations, labor costs, and other roadblocks common in U.S. manufacturing are likely to further slow the process and the timetable for when U.S. companies can obtain these home-grown chips.”

The impact of the CHIPS and Science Act on America’s semiconductor industry
Even though the pandemic’s market shortage revealed the importance of supporting local, US-based semiconductor businesses, it will take some time for the CHIPS and Science Act to have a true effect. 

Plus, beyond this, we can all recognise that scientific research takes time. Even if new inventions and leaps of innovation are made, it may be a few years before the industry feels the direct and positive impact of these subsidies. 

However, it’s not all bad. The new legislation promises numerous benefits that might just make all the difference to our market.

1. Market certainty

The CHIPS and Science Act will bring longevity to the US market, reducing vast industry uncertainty stemming from the falling availability of resources. The technology developed due to these subsidiaries should lead to a decrease in wastage, higher efficiency, and more opportunities for semiconductor businesses.

2. Global competitiveness

Following news that other governments - particularly in Asia and Europe - have been assigning grants to chip companies, we predict that the US subsidies will boost the country’s global competitiveness. This hints at an incredible future for the industry, where companies can benefit from economies of scale and reduced costs.

3. International investment

Although smaller than China’s, the US semiconductor industry is not one that can be looked down on. The subsidiaries granted by Joe Biden are already encouraging further investment potential into the market, proving the legislation to be a true beacon of hope. It’ll be interesting to see the deals that are made over the next few years.

4. Talent stream

The latest press coverage of the semiconductor industry might lead to a surge in interest in open employment positions. As the market continues to expand, a consistent source of staff will prove essential to business survivability and set the foundation for future growth. The CHIPS and Science Act will reward intelligent and creative workers eager to contribute towards ongoing technological innovation.

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