American businesses have been dependent on Asian chipmakers like Samsung and TSMC for years, but the COVID crisis exposed just how fragile those supply chains really are. CPU releases have been canceled, phones have been delayed, even the auto industry is reeling from the lack of chips.
Now the Biden administration is pushing a bill that would pump $52 billion to support domestic chip production in the US. It's part of an even larger bill, called the US Innovation and Competition Act (USICA), which is looking to dump a honking $250 billion into multiple US science and tech markets. That is a lot of money for already-profitable tech companies like Intel and AMD. The key now is to make sure the money goes to real investment and not to executive compensation packages.
The USICA is on its way to becoming one of the largest single investments in US R&D and science. That comes as welcome news to folks impacted by the recent chip shortage, but the bill is intended not just to put a smile on the faces of US semiconductor companies, it's also looking to boost other scientific boundaries, like artificial intelligence (AI) and space exploration. But beyond that, what it's really meant to do is enhance America's ability to compete with China's economic and technology muscle.
Competing with China is one of the few issues on which we can reliably expect bipartisan support. The last China-compete bill was drafted by Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Todd Young (R-Ind.). But Schumer has no sour grapes about being eclipsed by USICA. Shortly after the Senate vote, he cheered the bill and said he intended to work with House Speaker Nancy Pelosi (D-Calif.) to make sure it passed the House, too.
"That’s one of the most major and significant pieces of legislation we passed in a long time, which is going to have a huge effect on the future of the American economy and American jobs," Schumer said. "It’s the largest investment in scientific research and technological innovation in generations. It sets the United States on a path to lead the world in the industries of the future."
Of course, not everyone thinks this investment is a good idea. The Foreign Affairs Committee of the National People's Congress says "The bill attempts to exaggerate the so-called 'China threat' to maintain the US' global hegemony, interfere in China's internal affairs under the pretext of human rights and religion, and deprive China’s right to develop through technology and economic decoupling."
Following the Money
Angry international posturing aside, USICA is promising to do several things specifically for US chip manufacturing. For one thing, it intends to allocate $10 billion for building research and development "technology hubs." And not only for building them, but also building them in places other than the coastal areas where they usually pop up. This is presumably to spread new job opportunities across a wider swath of the nation.
If you're wondering where the money is coming from, aside from taxpayer pockets, analysis by the law firm Sidely Austin says it'll be distributed over the next five years from a related set of government funds, namely:
- The CHIPS for America Fund, which will cough up the largest share at $50.2 billion. This fund is focused squarely on semiconductors since it provides assistance with commerce and R&D as well as providing money for end-to-end chip fabrication.
- The CHIPS for America Defense Fund is putting up $2 billion also aimed at R&D, but then focusing on building a new chip-making workforce in conjunction with private companies, universities, and any relevant federal agencies.
- Last is the CHIPS for America International Technology Security and Innovation Fund, which even though it has the longest name is putting up the least moola—$500 million to help various government agencies deal with foreign partners, international supply chain headaches, and security.
Awesome, But Will This Actually Work?
Do we need this bill? Hell, yes. Not getting a steady chip stream has inhibited a number of US industries, including PCs and laptops, but also graphic cards, smart cars, and especially IoT, which is trying to put chips into everything from smart speakers to refrigerators.
In the 90s, the US had 37% of the global chip-making market. Today, it's less than 12%. That's partially due to government subsidies dropping off. Losing that much share means we no longer have nearly the same manufacturing resources for chips, especially foundries and development labs. Rebuilding our semiconductor manufacturing resources, as well as those technology hubs the bill promotes, is going to take years, whether Biden drops $50 billion or $5 trillion. The benefits from this investment won't be realized until long after Biden leaves office.
That means we're still going to face a dearth of silicon for years to come. And aside from just putting a crimp in crypto-mining and your ability to buy a fast graphics card, it's also going to impact every other US technology market.
So the question is, will we actually see a long-term improvement in US chip-making or just the usual short-term bloating of corporate coffers and executive bonuses? Place your bets in the comments section.