WASHINGTON — A comprehensive law established in 2022, which President Joe Biden promoted as a strategy to bolster domestic semiconductor manufacturing and diminish the nation’s dependence on foreign chips, is projected to significantly boost U.S. semiconductor production. However, a recent report from an economic research organization has indicated that this initiative comes with substantial costs and may not provide the most effective return on investment.
According to findings from the Peterson Institute for International Economics, the CHIPS and Science Act, which carries a price tag of $280 billion, is anticipated to generate approximately 93,000 jobs during the construction of semiconductor facilities across the country, followed by around 43,000 permanent positions once these facilities become operational. Nonetheless, the substantial government subsidies linked to the expected surge in chip manufacturing imply that each newly created job will cost taxpayers about $185,000 annually. This figure is notably double the average annual salary for semiconductor workers in the U.S., as highlighted in the Peterson analysis.
Researchers Gary Hufbauer and Megan Hogan expressed skepticism, stating that increased production might not equate to optimal security for the financial investment involved.
The report points out that when Congress enacted the CHIPS Act, it “did not consider alternative methods” for allocating billions of dollars to guarantee a sufficient supply of semiconductors domestically. Viable alternatives could have included forming a chip reserve managed by the Federal Emergency Management Agency or providing incentives for both American chip consumers and foreign manufacturers to maintain larger semiconductor stocks within the U.S.
In defense of the CHIPS Act, representatives from the Commerce Department referenced an earlier commitment to oversee the prudent use of taxpayer funds in distributing grants related to the Act. The department assured it would closely examine corporate investment plans to prevent companies from inflating their requests for significant incentives.
The CHIPS Act was championed by Biden and subsequently passed by Congress after semiconductor shortages emerged in the wake of COVID-19 lockdowns, leading to disrupted production in sectors such as automotive manufacturing. The Biden administration views the enhancement of domestically produced chips as a vital national security measure, as it will lessen the country’s reliance on foreign semiconductor imports, which are crucial for both military and civilian applications.
A separate study conducted by the Boston Consulting Group and the Semiconductor Industry Association revealed a dramatic decline in America’s global chip production capacity, diminishing from 37% in 1990 to merely 10% in 2022, as measured by volume rather than monetary value.
Concerns have been raised by policymakers about the heavy dependence of U.S. industries on chips produced in Taiwan, a source that could be jeopardized if the Chinese government were to initiate military action aimed at politically unifying the autonomous region with the mainland. The Taiwan Semiconductor Manufacturing Company, a leading supplier to major companies like Apple and Qualcomm, is making significant investments in chip manufacturing facilities in Arizona.
The CHIPS Act aspires to elevate the U.S. share of global advanced chip production from zero today to 20% by 2030. However, the Peterson report argues that achieving this goal would necessitate further government support and address challenges related to workforce shortages and energy supply. Additionally, it pointed out that countries like South Korea and Taiwan are offering lucrative tax incentives to their own chipmaking companies, reinforcing their dominance in the industry. As for the feasibility of reaching the 20% target, the researchers concluded with uncertainty, stating: “Maybe.”
Speculation about the incoming Trump administration’s stance on the CHIPS Act remains. Throughout the campaign, President-elect Donald Trump argued that imposing tariffs on foreign chip imports—rather than offering U.S. production subsidies—would have been more effective in attracting semiconductor manufacturing to the United States.
In their analysis, Peterson researchers underscored that, historically, tariffs in the European Union had not succeeded in revitalizing chip production in Europe, suggesting that similar measures in the U.S. might not yield better results. They stated, “There is no compelling reason why a comparable tariff would prove more successful for the United States.”
