Chips – the tiny processors that underpin the electronic world – have major geopolitical significance. The United States Congress recognized that when it passed the CHIPS and Science Act (the CHIPS Act for short) in August 2022, appropriating over $50 billion to support the U.S. semiconductor industry.
This year, the Commerce Department’s Chips Program Office (CPO) has begun allocating those funds to build advanced chip manufacturing facilities (fabs) in the United States and to revitalize the nation’s semiconductor R&D infrastructure. Two years in, policymakers and pundits are asking whether the rollout of those funds is too slow.
However, whether progress to date is viewed as success or failure depends on which objective is in focus. The CHIPS Act aims to achieve three key objectives: reduce the risk of foreign supply shocks, bolster U.S. technological competitiveness, and reduce risks of foreign-produced chips used in critical national security systems. Considering these three key goals in conjunction, the speed of the initial rollout matters less than whether the investments will, in the long term, sustain manufacturing capacity and bolster innovation.
Woven into the rationale of the CHIPS Act is the recognition that advanced chips carry particular geopolitical importance. These chips are fabricated using the most sophisticated available equipment and techniques, enabling them to operate more quickly and with greater energy efficiency compared to prior generations. Because of these benefits, advanced processors are used in the latest smartphones, laptops, and servers – powering the virtual assistant on your phone and training new AI models in vast datacenters. Biden administration officials rightly view the computational capabilities of advanced chips as a “force-multiplier” that drives both economic growth and military modernization.
As for the advanced manufacturing processes needed to fabricate these chips, U.S. firms that once dominated the market gradually ceded ground to foreign competitors, and production largely shifted to East Asia. As of 2022, no advanced chip fabrication capacity was located in the United States. Congress aimed to reverse that trend with the CHIPS Act.
Progress to date has been promising. So far, through preliminary deals, the CPO has allocated about $28 billion of the total $39 billion toward the construction of new, leading-edge fabs.