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Technology Executive Council

After the CHIPS Act: U.S. still has a long road ahead to rival Asia in semiconductor manufacturing

Key Points
  • After three years of stops and starts, Congress passed a $52 billion package designed to boost semiconductor manufacturing in the U.S. and improve competitiveness with China.
  • President Joe Biden is expected to signed the bill into law.
  • While top tech executives say a consistent supply of chips is crucial for technology advances like 5G and in medicine, not all are convinced that domestic manufacturing is critical to their business.

In this article

US Speaker of the House Nancy Pelosi, alongside members of Congress, holds the CHIPS and Science Act, providing domestic semiconductor manufacturers with $52 billion in subsidies to cut reliance on foreign sourcing, after signing it during an enrollment ceremony on the West Front of the US Capitol in Washington, DC, July 29, 2022.
Saul Loeb | AFP | Getty Images

The global semiconductor shortage that has left consumers waiting on coffee makers, computers, cars and medical devices — anything with a computer chip — might have an end in sight.

After three years of stops and starts, the U.S. House of Representatives passed a $52 billion package last week designed to boost semiconductor manufacturing in the U.S. and improve competitiveness with China. The bill passed the Senate with broad bipartisan support, and will now go to President Joe Biden to be signed into law.

The bill, known as the CHIPS-plus or Chips and Science Act, addresses concerns expressed by both parties that the U.S. needs to bring the production of these vitally important components back home and rely less on Asia-based manufacturers. Supporters, including companies such as Intel and Global Foundries, argued that the bill was necessary since other countries subsidize their semiconductor industry, making it hard for U.S. companies to compete without help.

Last month, Commerce Secretary Gina Raimondo, speaking with CNBC's Jim Cramer, emphasized just how critical it is for the U.S. to begin making more chips at home and why passage of the CHIPS Act was central to that happening.

"Mark my words, if Labor Day comes and goes and this isn't passed by Congress, companies will not wait, and they will expand into other countries," she said. "The U.S. will lose out."

The bill, of course, doesn't preclude U.S. chip makers from also producing in Europe and elsewhere, but it does provide financial incentives to make manufacturing facilities in the U.S. more attractive. Intel has already pledged to build a $20 billion chip plant near Columbus, Ohio. The facility is expected to employ 3,000 workers along with 7,000 temporary construction jobs. 

The package making its way to Biden's desk has a few components, including $39 billion that would give direct financial assistance to companies building chip manufacturing plants at home. A separate $11 billion is earmarked to advance chip manufacturing research and workforce training, and a $2 billion slice is set aside to move lab innovation into military and other applications.

Creating the technology of tomorrow

Maryam Rofougaran, CEO of 5G startup Movandi, said passage of the bill will provide a reliable, consistent source of chips for companies like hers that are "pushing the envelope and creating the technology of tomorrow."

"As the CEO of a 5G chipmaker, I know firsthand how critically important it is to have stable, reliable manufacturing partners and a resilient supply chain," she says. "Making chips in the U.S. will help the companies get them consistently and it will create good-paying jobs which is good for the economy."

Yet, not every business leader is as focused on where advanced chips are made as much as they are getting a consistent supply. Mike Jette, vice president of telecom, media and technology for supply chain software and consulting firm GEP, says supply continuity rather than U.S.-based manufacturing, is what he's hearing is most critical for companies.

"The folks that are putting these chips into the products they make are more concerned with getting a consistent supply than where they're made," he says. "Yes, chip buyers are desperate for fabs outside of Taiwan, and they'd love for the supply to be coming from the U.S., but everyone knows this is a multi-year journey. Supply consistency is what's most important."

And as big a win as this is for the U.S. semiconductor industry, the impact could take years to be felt.

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.

Geoff Martha, CEO of medical device company Medtronic, told CNBC's Sara Eisen on "Closing Bell" that while he is encouraged by the passage of the bill, he thinks "it will take several years to get this capacity online." A growing majority of the products that Medtronic makes contain chips.

Even so, Martha believes funding for R&D afforded by the bill's passage will help usher in a new era of med-tech. "Semiconductors are at the center of that," he said.

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