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The CHIPS Act won’t solve the chip shortage


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In a 64-33 vote on Wednesday, the Senate finally passed the CHIPS Act, a $52 billion package that aims to boost semiconductor manufacturing in the United States. The House is likely to approve the funding by the end of the week, and President Joe Biden is expected to sign the legislation soon afterward. But while its biggest champions have connected the CHIPS Act to the ongoing chip shortage, the legislation won’t really help, at least in the short term.

“Semiconductor chips are the building blocks of the modern economy — they power our smartphones and cars,” said President Biden in a tweet before the legislation was formally approved by the Senate. “And for years, manufacturing was sent overseas. For the sake of American jobs and our economy, we must make these at home.”

The bulk of the CHIPS Act is a $39 billion fund that will subsidize companies that expand or build new semiconductor manufacturing facilities in the US. The Commerce Department will determine which companies receive the funding, which will be disbursed over five years. More than $10 billion is allocated to semiconductor research, and there’s also some support for workforce development and collaboration with other countries. The bill also includes an extensive investment tax credit that could be worth an additional $24 billion.

It’s been a long journey for the CHIPS Act, which has been renamed the CHIPS and Science, or CHIPS+, Act: Democrats had originally planned to incorporate support for domestic semiconductor manufacturing within a much broader package that focuses on American competitiveness with China. Sen. Mitch McConnell said Republicans would oppose Democrats’ plans to use reconciliation to pass the bill, and negotiations between the two parties, and across the two chambers, ultimately failed to produce a compromise. The CHIPS+ Act was only approved after Congress separated semiconductor funding from those other measures, and after several chipmakers warned that they might scale back their plans for new factories in the US. Intel even delayed groundbreaking at its chip mega-factory in Columbus, Ohio, which the company could invest more than $100 billion in over the next decade.:snip:

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