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Introduction to the CHIPS Act

The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act represents one of the most significant industrial policy initiatives in recent U.S. history. Signed into law by President Joe Biden on August 9, 2022, this landmark legislation aims to revitalize American semiconductor manufacturing after decades of production moving overseas.

What the CHIPS Act Is

The CHIPS and Science Act provided the Department of Commerce with $50 billion for a suite of programs to strengthen and revitalize the U.S. position in semiconductor research, development, and manufacturing—while also investing in American workers. The legislation represents a strategic response to America's declining share of global chip production and growing concerns about supply chain vulnerabilities exposed during the COVID-19 pandemic.

At its core, the CHIPS Act is designed to address a critical national security and economic challenge. The act is intended to lure microchip manufacturing back to the United States after several decades of individual companies offshoring the technology. Semiconductors are essential components in everything from smartphones and cars to military equipment and advanced computing systems, making domestic production capacity a matter of both economic competitiveness and national security.

How It Was Passed

The passage of the CHIPS Act reflected rare bipartisan consensus in Washington around the need to strengthen America's technological competitiveness, particularly in relation to China. The legislation emerged from growing recognition that the United States had lost significant ground in semiconductor manufacturing, with most advanced chip production concentrated in Asia.

The law constitutes an industrial policy initiative which takes place against the background of a perceived AI Cold War between the US and China, as artificial intelligence technology relies on semiconductors. This geopolitical context helped build support across party lines, as lawmakers recognized the strategic importance of maintaining technological leadership in critical sectors.

The bill moved through Congress with backing from both Democrats and Republicans, who viewed semiconductor manufacturing as essential to national competitiveness. Key supporters argued that government investment was necessary to compete with subsidies offered by other nations and to ensure supply chain resilience for critical technologies.

Early Impact and Implementation

Since its enactment, the CHIPS Act has already begun reshaping the American semiconductor landscape. These projects include 16 new semiconductor manufacturing facilities and are expected to create over 115,000 manufacturing and construction jobs across the country. The Department of Commerce has been actively allocating funds to major semiconductor companies to establish or expand manufacturing operations on U.S. soil.

As a result, the U.S. is expected to triple its semiconductor manufacturing capacity (203%) from 2022 to 2032, the highest growth rate in the world. This dramatic expansion represents a fundamental shift in global semiconductor production patterns and positions the United States to reclaim a larger share of this critical industry.

The CHIPS Act stands as a testament to how strategic government investment can address market failures and national security concerns while creating economic opportunities. Its success will be measured not just in dollars invested, but in America's ability to maintain technological leadership in an increasingly competitive global landscape.

It has been an an interesting 3 years

Three years after the passage of the CHIPS and Science Act, America's boldest industrial policy bet in decades finds itself caught between impressive early victories and an uncertain political future. What began as a bipartisan response to supply chain vulnerabilities has evolved into something more complex: a policy that's working precisely as intended, yet facing existential threats from the very administration now overseeing its implementation.

The Winners Are Clear, But Are They American Enough?

The numbers tell a compelling story of selective success. More than $35 billion has been allocated across 16 states from the CHIPS Act's $53 billion total funding.[^1] The largest recipients of preliminary awards announced so far are the leading-edge chipmakers Intel, TSMC, Samsung, and Micron, though final funding amounts may differ from initial announcements.[^2] Yet this roster of winners reveals the fundamental tension at the heart of American semiconductor policy: our biggest beneficiaries aren't actually American companies.

Intel's preliminary $8.5 billion award represents the clearest vindication of the CHIPS Act's domestic manufacturing ambitions.[^2] For a company that had ceded technological leadership to Asian competitors, this injection of public capital offers a lifeline to rebuild American semiconductor supremacy. Pat Gelsinger's IDM 2.0 strategy now has the financial backing to accelerate Intel's manufacturing roadmap by 2-3 years—a timeline that could mean the difference between relevance and obsolescence in the hypercompetitive chip market.[^2]

But the uncomfortable reality is that America's chip renaissance depends heavily on foreign expertise. TSMC's preliminary $6.6 billion award and Samsung's initial $6.4 billion commitment represent among the largest public investments in foreign-controlled manufacturing facilities in recent memory.[^2] We're essentially paying premium prices to recreate in Arizona and Texas what these companies already do more efficiently in Asia. The economics are stark: manufacturing costs in the U.S. run approximately 50% higher than in Taiwan, making these investments viable only through massive subsidies.[^2]

The Strategic Paradox of Success

The CHIPS Act has committed funding across 16 states and is expected to create over 115,000 manufacturing and construction jobs.[^1] By traditional metrics, this represents remarkable policy execution. Yet the deeper question remains: are we building genuine technological independence or merely expensive insurance policies?

The geographic distribution of investments reveals both the policy's political sophistication and its economic limitations. From Intel's massive Ohio expansion to Micron's Idaho facilities, the CHIPS Act has delivered tangible benefits to politically crucial swing states. But concentrating advanced manufacturing in a handful of locations creates new vulnerabilities even as it addresses others. A natural disaster, cyberattack, or supply chain disruption at these mega-facilities could prove as disruptive as the Asian dependencies we're trying to escape.

More troubling is the competitive landscape that's emerging. While Intel struggles to prove it can execute against its ambitious roadmaps, TSMC continues to extend its technological lead. The Arizona fabs will produce chips using older process technologies—impressive by American standards, but trailing-edge by global ones. We're spending billions to build yesterday's factories while tomorrow's innovations continue to emerge in Asia.

Political Uncertainty Threatens Long-Term Commitments

The CHIPS Act's greatest vulnerability may not be technological but political. Recent policy shifts and proposed changes to semiconductor policy reflect broader skepticism about government intervention in markets that could undermine the entire enterprise.

Reports suggest the current administration is reviewing existing CHIPS Act commitments and has signaled potential delays to some upcoming semiconductor disbursements, creating uncertainty precisely when momentum was building. Companies that have already committed billions to U.S. expansion based on promised federal support now face the prospect of shifting terms or delayed payments. This political instability undermines one of the CHIPS Act's core selling points: providing the long-term certainty that semiconductor investments require.

The irony is striking. The bipartisan 2022 CHIPS Act has helped attract substantial private sector investment commitments across the country, generating exactly the kind of private sector response that free-market advocates typically champion. Yet political opposition now threatens to derail this success story before it fully materializes.

The AI Wild Card: Rewriting the Semiconductor Playbook

The emergence of artificial intelligence as the dominant force in semiconductor demand has fundamentally altered the CHIPS Act's strategic calculus. What began as a manufacturing policy designed to address supply chain vulnerabilities has become inadvertently positioned at the center of the most explosive technology boom in decades.

The numbers are staggering: logic chip sales grew 81% in 2024, driven largely by AI applications, while global semiconductor demand for AI and high-performance computing is expected to grow over 15% in 2025. AI-based chips are predicted to see double-digit growth through 2030, creating a sustained demand surge that no policymaker anticipated when the CHIPS Act was crafted.[^3]

This AI-driven transformation exposes both the CHIPS Act's prescience and its limitations. The legislation's focus on advanced manufacturing capabilities has proven remarkably well-timed, positioning American facilities to capitalize on AI chip demand just as it explodes. TSMC is in discussions with Nvidia to produce Blackwell AI chips at its Arizona facility, suggesting that CHIPS Act-supported facilities will indeed serve the most cutting-edge AI applications.[^3]

Yet the AI boom also highlights the policy's fundamental dependencies. NVIDIA, the undisputed leader in AI chips, remains a fabless company entirely dependent on TSMC for manufacturing its most advanced processors. NVIDIA's stock has surged 115% while TSMC's gains are under 55%, illustrating how design capabilities can capture more value than manufacturing—a dynamic that complicates the CHIPS Act's manufacturing-first approach.[^3]

The competitive implications are profound. Intel's AI chip sales guidance was only ~$500 million for 2024, a fraction of NVIDIA's dominance, despite Intel being the largest CHIPS Act beneficiary. This suggests that federal manufacturing subsidies alone cannot overcome incumbent advantages in AI chip design and ecosystem development.[^3]

Most troubling is how AI demand has intensified the very geopolitical tensions the CHIPS Act sought to address. The concentration of advanced AI chip production at TSMC creates a single point of failure for the entire global AI ecosystem. Even with CHIPS Act investments, American facilities will produce only a small fraction of the world's most advanced AI chips, leaving U.S. technology leadership dependent on Taiwanese manufacturing indefinitely.

The AI revolution has thus transformed the CHIPS Act from industrial policy into inadvertent AI policy, with implications no one fully anticipated. Whether this proves to be the legislation's greatest vindication or its most glaring oversight remains to be seen.

The China Question Looms Large

Perhaps most concerning is how geopolitical tensions continue to complicate the CHIPS Act's implementation. Companies like Qualcomm and Intel find themselves caught between securing domestic manufacturing capabilities and maintaining access to their largest global market. China's retaliatory moves against Micron demonstrate how easily technological competition can escalate into economic warfare.

The restrictions on funding recipients expanding operations in China create a binary choice that may prove economically unsustainable. Proposed increases in tariffs on semiconductor imports and Chinese goods threaten to upend established supply chains, potentially forcing American companies to choose between domestic subsidies and global competitiveness.

A Policy in Search of Patience

The CHIPS Act's ultimate success will be measured not in factory groundbreakings or funding announcements, but in whether American companies can compete technologically with their Asian counterparts. That competition will play out over decades, not election cycles. Intel's process technology improvements, TSMC's Arizona production ramp, and the broader ecosystem of suppliers and talent—these developments require sustained commitment and patient capital.

Yet patience is precisely what American politics struggles to provide. The same political system that produced the CHIPS Act through bipartisan cooperation now threatens to abandon it through partisan division. The result is a semiconductor policy that's simultaneously too slow for political timelines and too fast for technological realities.

The Verdict: Incomplete but Irreversible

Three years in, the CHIPS Act represents industrial policy at its most ambitious and most fragile. The winners—Intel, TSMC, Micron, and a handful of equipment manufacturers—have secured advantages that will reshape global semiconductor competition for the next decade. The losers—smaller American players, Chinese manufacturers, and companies without significant U.S. presence—face a more challenging competitive landscape.

But the real test isn't whether specific companies win or lose; it's whether America emerges with genuine technological sovereignty or merely expensive manufacturing capacity. The early evidence suggests we're building the latter while hoping it evolves into the former.

The CHIPS Act's survival through the current political turmoil will determine whether this industrial policy experiment becomes a model for other strategic sectors or a cautionary tale about the limits of government intervention in global markets. Either way, the investments already committed are too large and too strategically important to abandon entirely. The question is whether we'll have the political will to see them through to completion.

In semiconductor manufacturing, as in geopolitics, half-measures often prove worse than no measures at all. The CHIPS Act has committed America to a path that requires sustained execution across multiple administrations and political cycles. Whether we have the institutional capacity for such long-term thinking may determine not just the fate of a single policy, but America's position in the global technology race for generations to come.

Sources

[^1]: U.S. Commerce Department and National Science Foundation, "CHIPS for America Program Updates," October 2024; U.S. Commerce Department, "CHIPS Incentives Program Strategic Vision for America's Semiconductor Ecosystem," August 2024.

[^2]: Industry Analyst Report: "The CHIPS Act Impact Assessment: Winners and Losers in the US Semiconductor Industry," May 2023. Note: Individual company funding amounts and investment commitments are based on preliminary announcements and industry analysis from this period; final terms may differ.

[^3]: Semiconductor Industry Association, "Global Semiconductor Sales Increase 19.1% in 2024," February 2025; IDC, "Worldwide Semiconductor Technology Supply Chain Intelligence," December 2024; SEMI, Manufacturing Dive, January 2025; Reuters reports on TSMC-Nvidia Arizona discussions, December 2024.

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