Semiconductors, or chips, are tiny electronic devices that are fundamental to nearly all modern industrial and national security activities. These devices power tools as simple as a light switch and as complex as a fighter jet or a smartphone. Small but mighty, semiconductors are also essential building blocks of other emerging technologies, such as artificial intelligence, autonomous systems, 5G communications and quantum computing.
Semiconductors were invented in America, and the U.S. semiconductor industry has historically dominated many parts of the international semiconductor supply chain, such as R&D, chip design and manufacturing. Yet the U.S. position within the semiconductor industry has been declining. In 1990, the U.S. accounted for around 40% of global semiconductor fabrication capacity. By 2019, that number had dropped to about 11%.
In 2022, President Joe Biden signed into law the CHIPS and Science Act of 2022. It is a vital first step that provides the Department of Commerce with $50 billion for a suite of programs to strengthen and revitalize the U.S. position in semiconductor research, development, and manufacturing—while also investing in American workers.
These programs seek to restore U.S. leadership in semiconductor manufacturing by providing incentives and encouraging investment to expand the domestic manufacturing capacity necessary to produce the most advanced semiconductors needed for applications in AI and high-performance computing, as well as less advanced semiconductors that remain critical components of everything from automobiles to microwave ovens. In addition to major manufacturing investments, these programs will also create a dynamic new center for innovation and research, laying the groundwork for the creation of the next generation industries.
The Department of Commerce will balance urgent needs in the semiconductor industry with long-term strategic goals. The CHIPS program is a marathon, not a sprint. The program includes several tools, some with near-term benefit and many with a longer-term horizon. We encourage participants to view CHIPS as a long-term program and a sustained partnership between the public and private sector. As we embark on program design, we have set out the following principles:
The CHIPS program must address economic and national security risks by building domestic capacity that reduces U.S. reliance on foreign production of both leading edge and older generation microelectronics. U.S. long-term economic and national security requires a sustainable, competitive domestic industry.
The CHIPS program will establish a dynamic, collaborative network for semiconductor research and innovation to enable long-term U.S. leadership in the industries of the future. The program will support a diversity of technologies and applications along many stages of product and process development.
Long-term competitiveness requires large economies of scale and investments across the supply chain. Regional clusters containing manufacturing facilities, suppliers, research and workforce programs, along with supporting infrastructure, will be the foundation for a competitive industry. The CHIPS program will facilitate the expansion, creation and coordination of semiconductor clusters that benefit many companies.
A successful CHIPS program will respond to market signals, fill market gaps and reduce investment risk to attract significant private capital. The role of government in the CHIPS program is to shift financial incentives to maximize large-scale private investment in production, break-through technologies, and workers. The CHIPS program will encourage new ecosystem partnerships that reduce risk, build on U.S. strengths, and facilitate such investments.
A successful CHIPS program will create benefits for startups, workers, socially and economically disadvantaged (SEDI) businesses, including minority-owned, veteran-owned and women-owned businesses and rural businesses, universities and colleges, and state and local economies, in addition to supporting semiconductor companies. The CHIPS program will encourage linkages to underserved regions and populations to draw in new participants to the semiconductor ecosystem.
The CHIPS program will include rigorous review of applications along with robust compliance and accountability requirements to ensure taxpayer funds are protected and spent wisely, and are not used for dividends, stock buybacks, or windfall profits.