On its face, the idea of increasing semiconductor manufacturing in the US seems like it would help address the global supply crunch for computer chips, which has made it harder to buy everything from
cars and laptops to
sex toys and medical devices during the pandemic. Senate Majority Leader Chuck Schumer (D-NY) has even suggested that the funding package
could help fight inflation, presumably by making these goods cheaper.
But while it’s certainly fair to call the legislation a victory for bipartisanship, this plan is primarily focused on keeping up with China’s growing investment in its own domestic chip industry — not solving the present issues with the tech supply chain. The chip factories produced by this package won’t be complete for years, and the bulk of the funding won’t necessarily go toward basic chips, also known
as legacy chips, which account for
much of the ongoing shortage. And that shortage may be nearing its end anyway.
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Regardless, the new factories funded by the CHIPS+ Act likely won’t produce chips until long after the current shortage ends. Chip factories are major industrial plants that usually take years to design and construct before production starts. Semiconductors made at the mega-factory that Intel is planning in Ohio — which will focus on advanced chips — may not end up in
consumer devices until 2026, though the company’s CEO has said the shortage might end
sometime in 2024. Other experts have said the shortage will end sooner, possibly by next year.
There are already signs that chip demand is slowing down. While there was a surge in demand for electronics during the first two years of the pandemic, inflation-wary consumers are
scaling back their purchases. Some chip manufacturers
have said that their sales are starting to wane. Device makers are
reportedly cutting back on orders from the world’s biggest chip manufacturer, Taiwan Semiconductor Manufacturing Company, and South Korea’s national chip stockpile had its
largest jump since 2018 this past June.
Still, US politicians think they’re making a long-term bet on American chip manufacturing. It’s not the first time, as the government funded some of the
first semiconductor companies in the mid-20th century. In more recent decades, however, federal support for the American chip industry has declined, while other countries, including China and Japan, have invested heavily in their domestic manufacturing capabilities.
Just 12 percent of the world’s chips are made in the US today, compared to about 37 percent in 1990, according to the Semiconductor Industry Association, a US semiconductor trade group that lobbied for the CHIPS+ Act.