• The CHIPS and Science Act is expected to significantly increase U.S. semiconductor production.
• It will create approximately 93,000 construction jobs and 43,000 permanent positions.
• Each job created will cost taxpayers about $185,000—twice the average salary of U.S. semiconductor employees.
• Experts question the efficiency of the spending and suggest alternative strategies could have been explored.
• The Act aims to boost the U.S. share of advanced chips from 0% to 20% by 2030.

In a formidable effort to revitalize American semiconductor manufacturing, President Joe Biden's CHIPS and Science Act was enacted in 2022 with promises to drastically enhance production capabilities. As detailed in a recent report by the Peterson Institute for International Economics, the federal initiative will lead to a high-cost scenario for U.S. taxpayers amidst conflicting assessments of its value and efficacy. According to the findings, the $280 billion legislation is projected to create around 93,000 construction jobs while generating 43,000 permanent jobs once the chip factories begin operations. However, the financial ramifications reveal that each job will effectively cost taxpayers roughly $185,000 annually, which is double the average salary of semiconductor workers in the U.S. (source: AP News).

Researchers, specifically Gary Hufbauer and Megan Hogan, expressed skepticism regarding the efficiency of resource allocation, indicating that "more production might not provide the best security for the money." This sentiment arose partly because Congress, while passing the Chips Act, did not efficiently consider alternative strategies such as establishing a national stockpile of chips managed by FEMA, or offering financial incentives for broader inventory maintenance by both U.S. manufacturers and foreign producers. The drive for this major legislative act gained momentum as semiconductor shortages brought production in various sectors, including automobiles, to a standstill in the wake of the COVID-19 pandemic (source: SCMP).

The Biden administration underscores the critical importance of bolstering homegrown chip production as a component of national security, reducing dependence on foreign supplies, particularly as geopolitical tensions rise in regions like Taiwan, which has been a pivotal source of chips globally. A study conducted by the Boston Consulting Group and the Semiconductor Industry Association revealed a sharp decline in U.S. participation in worldwide semiconductor production capacity, plummeting from 37% in 1990 to just 10% in 2022.

The CHIPS Act also aspires to elevate the U.S. share of advanced chip production to 20% by 2030, a significant increase from the current baseline of zero. However, the Peterson report warns that achieving this ambitious target would necessitate further government subsidies alongside initiatives to mitigate shortages in skilled labor and energy resources. The competitive landscape is complicated by similar lucrative incentives being offered to chipmakers in South Korea and Taiwan, raising concerns over whether the United States can meet its aggressive production goals (source: AP News). Ultimately, as the political landscape shifts with the incoming Trump administration, uncertainty remains regarding potential alterations to the Chips Act and the effectiveness of tariffs versus subsidies in rejuvenating domestic semiconductor production. Previous experiences in Europe caution against optimistic expectations for tariffs to spur similar technological advances (source: SCMP).