Biden's semiconductor initiative faces high costs and uncertain benefits

In 2022, the United States government enacted the CHIPS and Science Act, aiming to boost domestic semiconductor manufacturing and reduce reliance on foreign imports. This legislation was primarily influenced by significant supply shortages during the COVID-19 pandemic, which notably impacted the automotive industry and other sectors. The law entails $280 billion in government subsidies, projected to create approximately 93,000 construction jobs and 43,000 permanent positions. However, a report from the Peterson Institute for International Economics has raised concerns over the overall efficacy of these subsidies, highlighting that each job created would potentially cost taxpayers around $185,000 per year. Moreover, analysts have questioned whether the expected increase in chip production justifies the financial outlay, suggesting alternative strategies might have been explored. For instance, proposals to create a semiconductor stockpile or financial incentives for manufacturers could have provided a more cost-effective means of ensuring adequate supply. The third-party analysis compared the U.S. approach to the global semiconductor market, noting that America’s production capacity had dwindled from 37% in 1990 to a mere 10% by 2022, intensifying concerns around national security. As the chip manufacturing landscape evolves, there is a pressing need to address potential vulnerabilities associated with dependence on foreign suppliers, especially from Taiwan amid ongoing geopolitical tensions with China. The incoming Trump administration in 2025 will have to determine the future of these initiatives, with experts suggesting that previous tariffs under Trump's leadership might take precedence over the subsidies favored by Biden. Some analysts warn that the reliance on tariffs has not historically led to substantial improvements in local production capabilities, as evidenced by similar European efforts that have struggled to yield results. Alongside the CHIPS Act, border restrictions imposed on advanced semiconductor exports to China have further complicated the landscape, raising fears of a tech war that could stifle innovation and economic growth. The transition to the new administration may also impact how semiconductors are prioritized in national strategy moving forward, especially with the hawkish stance expected towards China. A one-year window for revisions to export rules creates uncertainty, emphasizing the need for rapid adaptation within the semiconductor industry. Industry representatives express substantial concerns regarding the implications of the new regulations, which may hinder the competitiveness of U.S.-based tech firms in the global market. As these challenges materialize, the long-term effectiveness of the CHIPS Act and the resiliency of the U.S. semiconductor sector will likely become a pivotal focus in national economic discussions.