Congress must fund semiconductor legislation to strengthen innovation and supply chains

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Semiconductor chips are the building blocks in almost every part of our modern life. Cars, smartphones, internet services, financial services, healthcare – virtually every technology uses chips to function and drive further innovation. When the COVID-19 pandemic forced Americans to move their lives, jobs and businesses online, global semiconductor manufacturers struggled to meet an historic peak in demand.

Chip production over the past year is at an all-time high and many manufacturers have operated their factories above 100% of normal capacity 24 hours a day, seven days a week, 365 days a year. However, a wide range of US companies that rely on semiconductors have been hit hard. Apple has reportedly lost the equivalent of $ 6 billion in sales and is set to slash its worldwide iPhone production targets by a whopping 10 million units. For automakers, the shortage has forced factories around the world to close and is expected to cost the industry $ 210 billion in revenue. With the industry pivoting towards electric vehicles, each holding up to 3,000 chips, the shortage is particularly damaging.

These are just a few examples of the widespread disruptions in the global economy. Today, the semiconductor shortage is approaching a year and while industries have been doing their best to provide short-term solutions to improve the problem, structural supply chain deficiencies need to be addressed now to avoid prolonging the current crisis. and protect yourself from a more serious one in the future. To address these issues in the long run, Congress can strengthen resilience in the supply chain by passing the US Innovation and Competition Act (USICA), which would provide $ 52 billion to fund the CHIPS Act and support increased semiconductor capacity. national.

The US semiconductor industry has longed for the world, consistently accounting for 45% to 50% of global revenues, and we need to preserve the strength of the entire semiconductor ecosystem from design to tools to manufacturing. The US share of semiconductor manufacturing capacity has dropped from 37% in 1990 to 12% today. A handful of manufacturing sites account for 75% of global capacity, while with no improvements only 6% of new global capacity is expected to be in the United States. This geographic concentration of manufacturing creates numerous supply chain risks and creates a cost disadvantage for the United States of at least 30% over the region. Funding from the CHIPS Act would be key to relieving supply chain constraints and increasing our economic security.

In addition to creating an incentive to increase capacity, the CHIPS program and the free investment tax credit under consideration in Congress will allow the United States to better compete for the hundreds of billions of dollars of investment that semiconductor companies will deploy in the next decade. Without these programs, only 6% of new capacity over the next decade is expected to be put into service in the United States, as governments around the world are also investing heavily to lure global semiconductor companies to their shores. It is imperative that the United States acquires more of the new capacity on the way to reinvigorate high-tech manufacturing, build greater resilience in global supply chains, and lay the foundation for decades of collaboration with innovative partners around the world.

An increase in domestic manufacturing capacity would also address critical national security issues and boost US competitiveness. As US domestic manufacturing has flattened, China, South Korea and others are investing heavily in their industries, with the goal of securing global manufacturing leadership and leaving the US behind.Have safe sources for the myriad of industrial systems. commercial and military upon which our government depends is a top national security priority. According to a report from the National Security Commission on Artificial Intelligence, if a potential adversary overtakes the United States in long-term semiconductors or suddenly cuts off U.S. access to cutting-edge chips, it could have the upper hand in every field of science. war.

Clearly, the US initiative for innovation and competition is a bipartisan initiative that deserves the utmost attention, and Congress should act swiftly to get its many necessary components through. Chief among these is the CHIPS Act. By passing the Biden administration’s flagship infrastructure project, Congress must overcome the core elements of the USICA, most notably the CHIPS Act.

About the authors John Drake

Vice President, Supply Chain Policy

John Drake is Vice President of Supply Chain Policy at the United States Chamber of Commerce. Drake oversees the development and implementation of the House’s supply chain policy priorities and represents the House before Congress, the administration, the business community and other stakeholders.

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Giordano Crenshaw

Vice President, C_TEC

Crenshaw is Vice President of the Chamber Technology Engagement Center (C_TEC).

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