Why Everyone Should Know About The CHIPS Act

Biden wants to supercharge semiconductor development and has set aside $50 billion for US companies to increase the production of chips.

What’s The Big Deal About Semiconductors?

A semiconductor is made of millions of transistors that process information for various technologies, like laptops, cellphones, and vehicle electronics. According to the Semiconductor Industry Association (SIA) global demand has risen 10-20% in the last few years and is projected to grow annually by 5% through 2030.

Since the 1940s, the semiconductor chip was made from a “wafer” of the semiconductor material, crystalline silicon or silicon crystals. Making the chips out of silicon enabled chips to be tiny enough to fit into the electronic gadgets we use today. However, electronics require high-grade silicon for these materials.

A rock quarry in Spruce Pine, North Carolina, is revered for producing the purest silicon, which is found in the ‘purest of quartz rocks.’ It takes 66,138,679 pounds of silicon to make billions of microchips each year.

In an article by Stephen Rothrock, he stated, “75% of the world’s chip production is located in East Asia. The US #semi industry cannot possibly compete when China is projected to have the world’s largest share of chip production by 2030 with government subsidies of $100 billion.” Rothrock also pointed out, “Incentives are needed to provide domestic chip fabrication capabilities to satisfy America’s national security needs, improve our supply chain resiliency, and reinforce IP protection around future R&D.”

In January, Intel held a high-profile event at the White House to announce a $20 billion facility in Ohio.

Although inflation is at a new 40-year high, and we are teetering on a recession, the US wants to significantly expand the supply of critical components in everything from iPhones to cars, seen inside the administration as a long-term necessity.

Taiwan and Semiconductors

According to the Washington Examiner, House Speaker Nancy Pelosi (D-CA) met with several of Taiwan’s chip industry leaders during her trip to Taipei this past Tuesday to promote closer ties and to work together in the semiconductor industry.

Political leaders have said America must double down efforts to relocate chip-making efforts back home and “friendshore” Taiwan as a key partner, especially since US semiconductor manufacturing fell from 37% in the 1900s to about 12% today. Perhaps Pelosi’s visit helped.

Taiwan is a major chip producer, home to Semiconductor Manufacturing Co Ltd (TSMC) the world’s largest contract chipmaker, which is also investing $12 billion in a new plant in Arizona. TSMC’s global share of fabrication in the semiconductor chip manufacturing space is 77.3% according to Statistica.

TSMC has already set up silicon-wafer production on the US West Coast, and a chip design and research center in Texas.

In July, Japan released a statement announcing it will allocate $5.2 billion to fund a new chip plant by TSMC with Sony Group Corp.

The CHIPS Act

The CHIPS Act will appropriate $54.2 billion for CHIPS and Public Wireless Supply Chain Innovation (ORAN).

This represents a fundamental paradigm shift as the Biden administration takes on the burden of directly subsidizing the strategic sector.

The CHIPS Act of 2022 also provides appropriations needed to implement the USA Telecom Act that was enacted in the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021. This program helps shore up the global telecommunications supply chain and limit the scope of  involvement globally of telecommunication companies with close ties to the Communist Part of China, like Huawei. Funds will be used to capitalize on U.S. software advantages, accelerating development of an open-architecture model (known as OpenRAN) that would allow for alternative vendors to enter the market for specific network components, rather than having to compete with Huawei end-to-end.

Quote from government document “The CHIPS Act of 2022″

Washington said that subsidies will only flow if manufacturers are making sure sensitive chip technology doesn’t end up in the hands of China.

Industrial policy is just another term for corporate welfare, and it’s making a comeback. Corporate welfare is a different name for the unlovely practice of a government granting subsidies, protective tariffs, and other privileges to politically influential industries or companies.

Nancy Pelosi, and her husband Paul, who was recently in court over a DUI, has been under fire for owning huge stakes in chip stocks. Paul Pelosi is said to still have substantial shares in two chip stocks, and the House Speaker bought $5 million in Nvidia stock on June 17th but sold it before the CHIPS Act was approved by the Senate. She lost about $314,000 from her stock purchase and sale. Nvidia supported the CHIPS Act.

The CHIPS act bill is sitting on Biden’s desk to sign next week when he emerges from his latest COVID-19 quarantine.

Editors Note: Although it’s a good idea to secure our own chip-making facilities, one must wonder the relationship between China, Taiwan, the US, and most importantly political leaders who could make sweet profits off of new deals. When did the government become interested in “helping” phone, laptop, and car manufacturers with their chips?

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