Biden moves to bring microchip production home

Tom Brady

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The Covid pandemic sharpened bipartisan fears in Washington about U.S. reliance on microchips produced overseas — primarily in China or Taiwan. As factories shut down in Asia and supply chains snarled, U.S. automakers and other manufacturers were unable to get the chips they needed, idling their plants and spiking prices for cars and other goods. That led the Biden administration and lawmakers from both parties to consider policies to bring production of the most advanced microchips back to the U.S.

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The move

The administration and a bipartisan group of lawmakers coalesced around legislation that became known as the CHIPS and Science Act, which offered more than $50 billion to subsidize the construction of new microchip facilities in the U.S. and boost research and development across a series of national research facilities. After two years of debate, lawmakers passed it in July 2022 with solid bipartisan majorities. It was a remarkable endorsement of industrial policy — government support for selected industries — that U.S. lawmakers had largely shunned for decades.

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The impact

The expectation of new subsidies has led major chipmakers to announce plans for new semiconductor plants in the U.S. — like an Intel campus near Columbus, Ohio, and a facility from Taiwanese chipmaker TSMC in Arizona. More than a dozen new tech research hubs are also planned based on the CHIPS Act’s funding. And the administration recently announced its first actual CHIPS Act grant — $35 million to defense contractor BAE to expand a facility that supplies Air Force fighter jets.

The upshot

The CHIPS Act was a landmark move for Biden’s new industrial policies that sought to decrease U.S. reliance on China and boost manufacturing at home. Its passage showed that lawmakers in both parties are now willing to spend huge sums to ensure the manufacturing of essential goods like microchips happens in the U.S. — and certainly not in China. The administration is set to continue rolling out CHIPS Act grants in 2024 in an attempt to gain electoral advantage from the subsidy package. But it remains to be seen if the effects of the law — like new jobs from plants coming online — will come quickly enough to be felt by voters in swing states.