Innovation, Independence and Important Incentives

Rising costs are a concern to everyone. It’s an inescapable reality that we pay increasingly more for food, transportation, housing, healthcare, consumer products and everything else available to purchase. The sharp rise in consumer prices is disconcerting. While there is no panacea to alleviate higher prices, we can take steps to mitigate them.

Fostering increased manufacturing capability is an especially important step. America’s ability to make goods has shrunk over time and that should be a concern. Our country doesn’t need only to sell products, we need to make products. When we must look overseas for the source of much of our goods, we become captive to the capricious nature of the global supply chain. 

When global trade works well, everything is fine. When the system breaks down, interruptions in timely routing a product from the other side of the world can snarl every other product down the line. When the product or device is critical to every facet of our economy, delays in its arrival can be debilitating.

An American original, the semiconductor, is an essential component to a myriad of products and operating systems and functions we rely on every day. We created it, built it, and sent it out into the world. The chip ignited a technological revolution that continues to evolve and grow. 

Yet our country has fallen behind in our ability to build these items while other countries, particularly those in Asia, have incentivized companies and invested in infrastructure to manufacture semiconductor chips in their region. Asia Pacific is the largest regional semiconductor market, and China is the largest single-country market. Countries in the region know this and have acted accordingly to invest in facilities to build chips while our manufacturing capability has trended downward as our need for chips continues to increase.

The share of modern semiconductor manufacturing capacity located in the U.S. has declined from 37% in 1990 to 12% today. The share of semiconductor manufacturing capacity in the U.S. fell by more than 10% over the past 8 years.

Congress needs to do the following: 1) fund the domestic semiconductor manufacturing, research, and design provisions in the CHIPS for America Act; and 2) enact an investment tax credit encompassing both manufacturing and design to spur the construction of new onshore advanced semiconductor research, design, and manufacturing facilities and to promote domestic chip innovation. 

Legislation now under negotiation by the House and Senate includes these provisions that will provide $52 billion in CHIPS funding and will create an investment tax credit to provide incentive to design and build more chips domestically. Those provisions need to pass so they can provide positive results. 

The semiconductor industry directly employs more than 250,000 workers and indirectly supports another 1.6 million jobs. Estimates forecast funding the CHIPS Act alone would support another 185,000 new jobs and pump $24.6 billion into the economy by 2027.

We need to urge Congress to help make this legislation become law.