WASHINGTON — A sweeping 2022 law, touted by President Joe Biden as a way to revive U.S. manufacturing of semiconductors and reduce the country’s reliance on foreign-made computer chips, will “sharply increase production” of semiconductors in the U.S. But it will do so at a high cost and might not deliver the best bang for the buck, said a report issued Wednesday by an economic think tank in Washington.
Researchers at the Peterson Institute for International Economics calculated that the $280 billion CHIPS and Science Act will create about 93,000 construction jobs as chip factories go up in the U.S., and 43,000 permanent jobs once they’re in operation. But the government subsidies behind the expected chip manufacturing boom mean that each job created will cost taxpayers about $185,000 a year — twice the average annual salary of U.S. semiconductor employees, the Peterson report found.
“More production might not provide the best security for the money,” wrote researchers Gary Hufbauer and Megan Hogan.
The report notes that in passing the CHIPS Act, Congress “did not consider alternative ways” of spending billions of dollars to ensure the U.S. had adequate chip supplies. Other options could have included creating a chip stockpile run by the Federal Emergency Management Agency or providing financial incentives for U.S. chip users and foreign chip producers to keep bigger inventories of semiconductors in the U.S.
In response to the report, the Commerce Department pointed to an earlier statement promising to be “vigilant” about the way it spends taxpayer money and awards CHIPS Act grants.
Biden touted and Congress passed the CHIPS Act after semiconductor supplies ran short following COVID-19 lockdowns, disrupting production of cars and other products. The Biden administration also viewed ramping up production as a national security issue because it would reduce reliance on foreign imports of chips used by the military and private companies.
A study by the Boston Consulting Group and the Semiconductor Industry Association has found that America’s share of world chip production capacity, by volume, fell from 37% in 1990 to just 10% in 2022.
Policymakers are alarmed that U.S. industry depends heavily on chips manufactured in Taiwan, a supply that could be threatened if China invades the autonomous island to reunite it politically with the mainland.
The CHIPS Act also aims to boost the U.S. share of the world’s advanced chips to 20% by 2030 from none today. But the Peterson report argued that such a leap would require additional government subsidies and overcoming shortages of skilled labor and electricity. It also noted that South Korea and Taiwan are offering their own chipmaking giants generous tax credits to protect their lead in the market. Asking whether the U.S. can meet that 20% goal, the Peterson researchers conclude: “Maybe.”
It’s also unclear what the incoming Trump team will do with the CHIPS Act.