2022 was perhaps the single most pivotal year for semiconductor policy in U.S. history. Seventy-five years after the invention of the transistor, that tiny piece of silicon enabling all modern telecommunications and computing, the importance of this foundational technology is only now being fully recognized by the world at large. A modern silicon chip might have millions or even billions of transistors, and each computer or device may use several chips, further multiplying the power of the technology behind everything we do online, from work to school to entertainment. Given the critical role chips play in our lives, the frequent supply chain disruptions of recent years, from the first major automotive plants suspending production in 2020 to the Shanghai port shutdown in the spring of 2022, have highlighted the necessity of a resilient, redundant supply of chips.
The CHIPS and Science Act of 2022 provides $52.7 billion in federal funding for semiconductor research and development (R&D), manufacturing, and workforce development. This investment comes on the heels of difficult years not just for the semiconductor industry but for the world in general. As manufacturing issues contributed to the global chip shortage, countries around the world began scrambling to attract key industries, including, most importantly, semiconductors. Japan started building new facilities to manufacture chips smaller than 40 nanometers, Mexico hopes to parlay its proximity to the U.S. into manufacturing opportunities, and Taiwan has four new fabs in the planning stages. And, in the EU, the European Chips Act would invest €11 billion in semiconductors.
Never before have we seen such broad and expansive policymaking around semiconductors. The CHIPS and Science Act may well be the single most consequential industrial policy enacted in the U.S. since World War II, when domestic manufacturing was key to supporting the war effort. Today, domestic semiconductor manufacturing has drawn national attention due to its critical role in the supply chain. President Biden himself has paid visits to several semiconductor fabs under construction, including Intel’s site in Ohio.
In the midst of this policymaking push, the semiconductor industry has been working hard to address the global chip shortage, with each major company moving to ramp up domestic manufacturing and reduce dependency on foreign chips. The semiconductor industry is on pace to ship more chips in 2022 than any other year in history. History shows that the semiconductor market is cyclical, however, and even in a record production year, sales can slow. While industry watchers may disagree on exactly when chip sales will rebound, it is widely recognized that the long-term growth prospects for semiconductors remain robust.
The federal investment in semiconductors (alongside the more than $160 billion committed by industry) will help manufacturers be ready for the eventual rebound in demand. Whereas 2022 was the year of CHIPS passing, 2023 will be the year of CHIPS funding being disbursed and implemented to create a stronger, more resilient domestic semiconductor industry. New manufacturing facilities across the country, including in Ohio and Arizona, reflect the push to produce better, more powerful chips. By significantly investing in our manufacturing capability at home, we can help safeguard critical infrastructure against future crises and supply chain issues, helping fulfill the promise of a landmark policy initiative with silicon at its heart.
Bruce Andrews is chief government affairs officer at Intel.