The CHIPS Act: How U.S. Microchip Factories Could Reshape the Economy

In 2022, President Joe Biden signed into law the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act. The legislation directs hundreds of billions of dollars toward supercharging domestic production of advanced technologies such as semiconductors—also known as microchips or chips. Since its passage, private firms have announced nearly $400 billion dollars in additional investments in chips and other electronics. Arizona and several other states are poised to become semiconductor powerhouses, but the law’s implementation is facing delays, worker shortages, and other challenges.

What does the act do?

The law commits roughly $280 billion—a mix of direct subsidies and tax incentives—to the tech sector. More than $70 billion of that is aimed at the chips industry, including investments in high-technology manufacturing, scientific research and development (R&D), and workforce development.

The U.S. Commerce Department is distributing most funds to private industry over a five-year period. Smaller sums are channeled through the Departments of Defense and State to fund research and training and address global supply chain issues. Meanwhile, a semiconductor investment tax credit worth approximately $24 billion is in effect until 2027.

Why is the United States investing in chips?

The CHIPS Act is part of a larger government effort to create jobs, revitalize domestic supply chains, and increase the U.S. production of critical technologies.

Despite producing close to 40 percent of the world’s semiconductor supply in 1990, the United States now manufactures only about 12 percent [PDF], and none of the most advanced types. In contrast, more than half of all semiconductors and some 90 percent of the world’s most advanced chips are made in Taiwan, predominantly by industry giant Taiwan Semiconductor Manufacturing Company (TSMC).

Chips are crucial to modern life, powering a vast array of products including cars, computers, phones, and weapons systems. Supply disruptions during the COVID-19 pandemic shook the global economy, driving growing concerns that a potential China-Taiwan conflict could cripple Western access to the chips market. More broadly, there is a growing fear that lagging behind China in such critical technologies will undermine U.S. national security and economic competitiveness.

How do Harris and Trump view industrial policy?

Both major parties have focused their attention on the United States’ flagging chips production. As vice president, Kamala Harris has voiced her support for the CHIPS Act, which falls under Biden’s broader industrial policy push. The CHIPS Act also passed with notable Republican support. While in office, former President Donald Trump criticized Taiwan’s dominance of the semiconductor industry and restricted exports of chips and chipmaking equipment to China—controls which the Biden administration has intensified.

Still, the push for reshoring chips has its critics. Some Republican skeptics have said that despite the bill’s efforts to keep investment from going to China, its “guardrails” contain major loopholes. Other conservatives took aim at the bill’s massive price tag, calling it a “corporate handout” and arguing the spending will worsen inflation. Meanwhile, antitrust advocates worry the effort will deepen monopolistic consolidation in the tech industry, and some lawmakers have raised concerns over the environmental effects of the massive, energy-hungry new facilities.

Where are the investments going?

The Commerce Department has so far allocated more than $32 billion in CHIPS Act subsidies and almost $29 billion in loans to seventeen companies across sixteen states. Those subsidies have spurred recipient companies to announce close to $400 billion dollars in additional investments, which the White House says will put the United States on a path to producing nearly 30 percent of the global supply of leading-edge chips by 2032.

The largest announced investments are concentrated in a handful of states and are being implemented mostly by tech giants Intel, Micron, Samsung, and the U.S. subsidiary of TSMC.

Arizona is a centerpiece of this effort, with the government allocating more than $15 billion [PDF] to Intel and TSMC to build five new semiconductor fabrication plants, commonly known as fabs, in the state. Officials say that is driving another $100 billion in private investment. “We are poised to really be the epicenter of chips manufacturing, but also research, and development, and prototyping,” Sally Morton, a professor at Arizona State University, told The Arizona Republic.

Other major recipients include Idaho, New York, Ohio, Oregon, and Texas. Micron is set to receive more than $6 billion for new fabs in Idaho and New York, in addition to the company’s previously planned $100 billion “megafab” near Syracuse. Chipmaker GlobalFoundries will also receive $1.5 billion for facilities in New York and Vermont, while in Texas, Samsung is set to receive $6.4 billion for new fabs and R&D centers.

How could they affect local economies?

Tech companies say that the CHIPS Act will boost their already robust contributions to local economies. In more than four decades operating in Arizona, Intel has invested more than $34 billion [PDF], contributing almost $9 billion annually to the state’s gross domestic product (GDP) and directly supporting twelve thousand jobs. The Commerce Department estimates the CHIPS subsidies will spur more than $1 billion in local infrastructure development and some $32 million for semiconductor apprenticeships and other workforce development programs. 

The promise of high-paying, highly skilled jobs has been a central rationale for the law. The semiconductor industry has shed one hundred thousand jobs in recent decades, and some economists say the new CHIPS-funded fabs are expected to create upwards of forty thousand new manufacturing jobs nationwide. In New York, for instance, Micron says its new megafab will directly employ nine thousand people and support tens of thousands more jobs in the broader community. 

However, some critics say promises of job growth can be misleading, and recent optimistic estimates of subsidized tech jobs have fallen flat. Others say that manufacturing complications—both Intel and TSMC have cited high costs and a shortage of skilled workers for construction delays—underscore how revitalizing the U.S. semiconductor industry won’t be so easy. 

Despite the difficulties, many experts see the CHIPS Act as a turning point in reducing supply chain vulnerabilities. They say that combined with similar investments and export controls by allies such as Japan and the European Union, the global economy will be better insulated from any China-related shock—though they predict that Taiwan will likely retain a dominant position in the industry for decades to come.

Will Merrow created the map for this In Brief.