Bipartisan Members of Congress Introduce Bill to Reshore Semiconductor Manufacturing

By Monique Mansfield
Jun 11 2020 |
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CHIPS for America Act aims to advance American technology, create jobs and ensure national security.

Sens. Mark Warner (D-Va.) and John Cornyn (R-Texas) joined Reps. Doris Matsui (D-Calif.) and Michael McCaul (R-Texas) to introduce legislation this week to bring semiconductor manufacturing back to the United States.

Aptly titled the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, the legislation aims to increase federal incentives to help stimulate advanced chip manufacturing, create American jobs, ensure long-term national security and more.

Semiconductors are a vital component in the manufacturing of high-end technology products and are critical to U.S. military and economic strength. They can be found in everything from smart phones and fitness trackers to surveillance technology, drones, and advanced navigation technologies used by the military.

But much of America’s semiconductor manufacturing base has long been sent overseas, especially to Taiwan, which began offering special incentives in the 1980s to lure manufacturers to open factories on its shores.

Big companies like Apple and Qualcomm Inc now rely on Taiwan Semiconductor Manufacturing Co (TSMC) for the manufacturing of their most advanced chips, for example. In fact, Taiwan now houses more than half of the overall market for contract manufacturing chips and has an even stronger hold on the most advanced chips; China is right behind them.

Because of this shift, the U.S. share of semiconductor fabrication decreased by 50% between 1980 and 2012. But at what cost to American security?

The relocation of semiconductor manufacturing to Asia has made America’s military more vulnerable, as advanced weapons systems and other military applications often use commercially available semiconductors — not to mention that many of the chip factory jobs went to Asia, too.

As the New York Times reported on Wednesday, the semiconductor industry will only gain in significance in the coming years “because it is a foundational technology that can give nations an edge in innovation.” Reporters Ana Swanson and Don Clark continue:

“China has been shoveling billions into developing its own chip industry, which has long been dominated by the United States and has helped propel a boom in 5G technology, artificial intelligence and robotics. … China still lags in the production of the most advanced semiconductors, but its technology is improving quickly.”

While the United States still leads in top-notch technology and innovation, we’re losing ground in that area, too. There’s evidence China “is using subsidies, targeted investments and cybertheft to try to gain a technological edge.”

There’s also an economic factor at play. Semiconductors remain one of America’s largest exports, but the United States only accounts for about 12% of global semiconductor production capacity. This has caused a major trade deficit in advanced tech products like cell phones, for instance. That has cost the United States millions of jobs, including in manufacturing.

The trade deficit in computer and electronic parts is particularly large, and approximately 1,340,600 jobs were lost to China in that area.

But as the CHIPS for America Act shows, there’s growing bipartisan agreement that the United States needs to shore up this critical manufacturing. One of the biggest challenges is funding, as building a chip factory can cost up to $15 billion.

The CHIPS for America Act would offer $22.8 billion in aid to help semiconductor manufacturers build factories in the United States.

The bill focuses primarily on domestic manufacturing by establishing a trust fund for $750 million over 10 years to provide federal grants to match state subsidies to encourage new factories. It also creates a 40% refundable income tax credit for semiconductor equipment, $10 billion in federal funds to match state incentives to build factories, and $12 billion in research and development funding.