How the US is reinforcing to build their own semiconductor manufacturing by building the CHIPS Act.
Why did America build the Chips Act for the manufacturing of the Semiconductors?
US companies have been leading in the chip technology world for decades, but as the chip technology surges, it needs more semiconductor manufacturing. And the US was holding the capacity of semiconductor manufacturing for just 37% in 1990, which also dropped to 12% in the 20's. Other foreign countries have spent immensely in semiconductor manufacturing, especially Asian countries like China and Taiwan. Therefore, the US has to solely depend on the other countries for semiconductor manufacturing specially on China & Taiwan. Addressing this issue, the US wants to hold the superpower position in the semiconductors and strengthen their competition from other countries in the world.
Covid-19 raised a critical question: Why does the US have to depend on the overseas for everyday items to the heavy scale machines? The United states is still a superpower when it comes to the manufacturing powerhouses, but from the hindsight, the situation appears different when the demand got increased from the supply of semiconductors. For instance, the global semiconductor market saw a spike of 6.5% in 2020. Considering the gap in the supply and demand, US-China Conflicts and dependency on the Asian markets has created the federal; lawmakers of the USA to reinforce domestic semiconductor manufacturing to gain the strengthen the economy and job creation under the American leadership by introducing the CHIPS ACT.
The Shortage of the Semiconductors also questions various aspects, such as semiconductor plays a critical role when it comes to hardware and electronics which is enabling advances in communications, computing, military systems, healthcare, transportation, clean energy, and many other. In the longer term, chips will play a giant role which creates the emergency of how the country will become a superpower in the name of chips! But it can be other than just the shortage of semiconductors, the geopolitical tensions with China have bolstered the supply chain which only few countries have in the whole world. The top factories that manufacture the chips are mostly based in Taiwan and Korea, and therefore, the US is increasing the manufacturing production of semiconductors in their american soil to hedge against geopolitical events.
But there are some manufacturing strategies which are addressed by the Intel's CEO in the open letter he wrote to President Joe Biden. In February, Biden signed an executive order to review the proposal and risks regarding the CHIPS Act. The Biden administration has surged over $50 billion in th CHIPS funds for the semiconductor industry and $2 trillion infrastructure for the semiconductors industries. Therefore, the US firm Intel has announced to spend over $20 billion to create two new chip factories in the US.
Meanwhile, the coronavirus hit has drived more shortage of semiconductors due to the halt in the export-import from other nations.The pandemic has escalated the demand for personal electronics from laptops to games consoles . But a halt in production and heightened demand for chips in various sectors has triggered a shortage. This has created the emergency to build the domestic manufacturing factories. Intel is not the only company which is investing in the American semiconductor CHIPS Act, but the 13 largest US Companies are taking advantage of getting the subsidy from the US government.
What are obstacles to overcome by the US administration to get back on the feet of Semiconductor manufacturing?
Firstly the America needs new fabrication plants and also the maintain the old ones in which one can focus in the important areas: processors, memory, chips and others. And maintenance and building the new ones, the government need huge amount of funds which biden government allocated but US chips companies pays little tax which can become the drawback to incentivize the CHIPS Act. Nextly, the government has to focus on the Research and department to get the more students, research centres and teachers included in the Semiconductor manufacturing to get the most out of it.