Congress Passes Bill to Aid Domestic Production of Microchips
In January, Intel announced that it will invest $20 billion in a new microchip manufacturing facility near Columbus, OH. The fab is expected to create 3,000 company jobs, 7,000 construction jobs, and tens of thousands of additional jobs for suppliers and partners. Construction is expected to begin this year, with production coming online at the end of 2025. The Ohio facility will be in addition to the company’s plans, announced last year, to build two new factories in Arizona.
None of those projects will immediately alleviate the current shortage of microchips that has plagued U.S. manufacturers of cars, appliances and other products for the past year, but it should bolster the domestic supply chain in the future. The U.S. share of the worldwide chip manufacturing market has declined from 37 percent in 1990 to just 12 percent today, according to the Semiconductor Industry Association. That’s not good. Improving domestic production of microchips isn’t just important for making pickups and dishwashers, it’s also vital for national defense.
A January report from the Commerce Department found that many manufacturers that rely on semiconductors have only a few days’ worth of inventory at any time. The report is based on more than 150 responses to a survey of businesses that produce and use semiconductors. The survey found that the median supply of chips held by manufacturers has dropped from 40 days’ worth in 2019 to less than five days’ worth last year.
The limited supply means that disruptions to production overseas could again lead to factory shutdowns and furloughed workers in the United States. The report notes that inventories are even smaller in key industries, such as automotive, aerospace and defense.
Thankfully, Intel isn’t the only chipmaker willing to boost U.S. production. Samsung is building a $17 billion factory near Austin, TX. Texas Instruments will begin construction this year on a series of new semiconductor fabrication plants in Sherman, TX. GlobalFoundries plans to expand production at its existing semiconductor facility in Malta, NY, and build a new facility to double the site’s current capacity. And, Micron Technology said it will spend $150 billion globally over the next decade to develop a new line of memory chips, a project that could include expansion of U.S. manufacturing capacity.
Meanwhile, in our nation’s capital, lawmakers are doing what they can to boost domestic production of microchips. On Feb. 4, the House of Representatives passed the Creating Helpful Incentives to Produce Semiconductors for America Act, or CHIPS Act, legislation aimed at increasing U.S. competitiveness in semiconductor manufacturing. The Senate had passed the CHIPs for America Act back in June 2021, but it stalled in the House—until now.
Once signed into law, the CHIPs Act will provide $52 billion in R&D and production funding for semiconductor companies in the U.S. Some $2 billion of that money will be set aside to fund “legacy chip” production, to ensure a steady supply of the semiconductors used in automotive manufacturing.
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While the core provision of the CHIPS Act is popular on a bipartisan basis, the bill still has some way to go before it becomes law. For example, the version passed by the House excludes sections on trade and climate change. Leaders from both houses of Congress must now iron out those differences in conference before sending the bill to President Biden’s desk.
Let’s hope the come to an agreement soon.
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