US President Joe Biden on Tuesday signed into law a bill that invests $52.7 billion in the production and development of semiconductors in a bid to secure a technological edge in the face of intensifying competition with the China.
The enactment of the law, which includes $39 billion in manufacturing incentives, also comes as the United States ramps up cooperation with Japan, a key security ally, to build supply chains in resilient semiconductors that depend less on potential adversaries.
US President Joe Biden attends a CHIPS and Science Act signing ceremony at the White House on August 9, 2022. (Getty/Kyodo)
Calling the CHIPS and Science Act “a unique investment in America itself,” Biden said during the bill’s signing ceremony that the planned investment is intended to put the United States in a position to “lead the world for the next few decades.
The acronym “CHIPS” stands for “Creating Helpful Incentives to Produce Semiconductors”. Many essential technologies, ranging from smartphones and automobiles to defense systems, rely on semiconductors.
A stable supply of chips, even during disruptions such as conflicts and natural disasters, has become a matter of urgency as the coronavirus pandemic and Russia’s invasion of Ukraine have exposed the vulnerabilities of supply chains. supply for the high-tech component as well as other essentials.
Although semiconductor technology was invented in the United States, the country currently produces only about 10% of the world’s supply.
Global semiconductor manufacturing capacity is also heavily concentrated in East Asia – a region exposed to high geopolitical tensions – with Taiwan accounting for 20% of the total in 2019, followed by South Korea at 19%, Japan at 17% and China producing. 16%, according to a 2021 US government report.
US Commerce Secretary Gina Raimondo, who also attended the ceremony, said overreliance on foreign semiconductor makers is “a real vulnerability” but added: “That’s going to change.” .
Under the law, which was passed by Congress late last month, $13.2 billion will be spent on semiconductor research and development as well as workforce development. , and $500 million for semiconductor supply chain activities and other issues.
It will also provide a 25% investment tax credit for capital expenditures for the manufacture of semiconductors and related equipment.
Such incentives “will secure domestic supply, create tens of thousands of well-paying union construction jobs and thousands more high-skilled manufacturing jobs,” the White House said, outlining the benefits of the project. bill to the public ahead of the November midterm elections. .
With Biden’s popularity declining and the country struggling with high inflation following Russia’s war on Ukraine, Biden and his Democratic Party are apparently hoping the law will help them turn things around.
The Biden administration has also expressed hope that the new law will boost foreign direct investment from countries like Japan.
Biden, meanwhile, also called for boosting production of advanced chips, none of which are currently produced in the United States, noting that weapons systems will increasingly depend on these components in the future and that “China is trying to move forward”. us in making these sophisticated chips.”
The investment will come with what the administration calls “strong guardrails,” ensuring that recipients do not build certain facilities in China and other countries of concern, according to the White House.