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It’s become a truism in the technology industry that the world runs on software. It’s a good line, but the truth is that software couldn’t run without semiconductors.
Microchips really are everywhere: in your car, your TV, your refrigerator, and any so-called “smart” device. Most chip manufacturing is concentrated in Asia; by some estimates, more than 90% of the most advanced chips are manufactured in Taiwan, and most of that is produced by a single company—Taiwan Semiconductor Manufacturing Corp. (TSMC). While the U.S. can claim to be the birthplace of the semiconductor, it currently accounts for only 12% of global chip manufacturing, down from 37% in 1990.
It’s against that backdrop that the U.S. signed the CHIPS and Science Act into law in 2022. The act authorizes $280 billion in new funding over the next 10 years for domestic research and manufacturing of semiconductors in the U.S.
The CHIPS Act’s goals are clear, as is the boost it provides to semiconductor manufacturers. But what type of impact could it have on the technology industry at large? What will it mean for company growth strategies? And how can companies across the sector reap the potential benefits?
How did we get here?
Semiconductors play an integral role in the U.S. economy. Chip shortages slashed nearly a quarter-trillion dollars from the U.S. GDP in 2021. The CHIPS Act’s goal is to drive innovation, bolster regional economic growth, and increase the domestic skilled labor market while reducing foreign dependency and mitigating external security threats.
Several grants have been awarded in the 20 months since the CHIPS Act has been in place, including:
As much as $8.5 billion in direct funding to Intel to build new facilities in Arizona, New Mexico, Ohio and Oregon
$1.5 billion in direct funding to GlobalFoundries to build new semiconductor facilities in New York and Vermont
Up to $11.6 billion in grants and loans to TSMC to build a third fabrication plant in Phoenix, Arizona
Up to $6.4 billion in direct funding to Samsung Electronics to expand its semiconductor manufacturing capabilities in central Texas
What does it mean for the industry?
While the CHIPS Act specifically targets the semiconductor industry, companies across the technology sector should be prepared to take advantage of potential trickle-down effects. The Semiconductor Industry Association expects the CHIPS Act to create about 42,000 jobs in the semiconductor industry by 2027, but the total jobs impact in the tech industry could be much larger. To create this pipeline of workers, it will be critical to emphasize science, technology, engineering, and math (STEM) education and workforce development activities.
To that end, the CHIPS Act authorizes new and expanded investments in STEM education and training from K-12 to postgraduate education. The act also highlights providing opportunities to people from marginalized, underserved, and under-resourced communities. If successful, these initiatives could help create a larger pool of potential tech industry workers.
Regional investment opportunities should also provide labor force benefits. Over $350 million in private investments have been announced across 25 states with more on the horizon. Birmingham, Alabama, Augusta, Georgia, and Champaign, Illinois, are just some of the cities designated as federal tech hubs through the CHIPS Act. For tech companies, that opens up opportunities to access talent and infrastructure in more geographically diverse areas.
There’s also the vast set of opportunities that will be driven by artificial intelligence (AI). It’s in the U.S.’ best interest to take the lead on this technology, and that hinges on having manufacturing control over the best AI chips on the market.
This is an example of where geopolitical concerns drive the focus on making the U.S. less dependent on foreign nations. While most advanced chip manufacturing takes place in Asia, a lot of the necessary high-tech machinery and software comes from the U.S. and Europe. In 2022, a U.S. ban prevented chipmakers Nvidia and AMD from exporting AI chips to China; the Commerce Department has since revised those rules. Along with reducing U.S. dependence on foreign manufacturers, maintaining control over advanced semiconductors—which is increasingly regarded as a strategic security asset—is a priority for the U.S. government.
We’re still in the early stages of what the CHIPS Act will bring. But the U.S.’ commitment is clear, and we should soon start seeing how the ripple effects will cascade across the tech landscape. For now, companies across the technology industry should examine how the CHIPS Act could benefit their growth plans and, eventually, their bottom lines.
This article originally appeared on Forbes Technology Council.