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  • Writer's pictureManesha Sundar

The US bets all chips to revive its domestic semiconductor industry

The invention of the first integrated circuit or microchip over six decades ago has come to revolutionise the electronics industry and drive global production of goods to new-found heights. Currently estimated to be a $600bn industry, with projections to reach the trillion-dollar mark by 2030, semiconductor production has become a driving force in global manufacturing. From phones, cars, computers, planes and almost anything with an on-off switch, microchips - also known as semiconductors- are an essential component to power these products. The reigns of technological supremacy have long been held by the US, primarily instigated by the Second World War; however, dynamics have shifted in recent years as the declining US semiconductor industry is posing a major threat to the nation’s once-held manufacturing prowess. Indeed, this is reflected by the fall in the country’s capacity for global microchip manufacturing from 37% in 1990 to a mere 12% today.

To reclaim a resilient national supply chain, President Joe Biden passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act in 2022. $52.7bn out of the total $280bn passed through legislation is directed towards subsidies for US chip manufacturers as well as a 25% investment tax credit (ITC) for any ‘fabs’/fabrication plants that are constructed or advanced. National security and defence have been high on the agenda to promote these funding opportunities. However, the US is not alone in this pursuit to upgrade its semiconductor manufacturing capacity as its foreign counterparts like Japan, South Korea, India, Taiwan and China are also increasing incentives for the production of this ubiquitous component through subsidies. Chip-making is also a rather central factor in geopolitical strains, particularly US-China relations. The regulations surrounding the CHIPS Act restrict companies in receipt of grants to expand capacity in China as well as posing export control regulations that hinder Beijing from receiving advanced chips, building pressures between the two nations.

Taiwan Semiconductor Manufacturing Company (TSMC) is known to be the leader in chip production technology, controlling 90% of the global market for custom-made chips. While most large factories are located on Taiwanese land, apprehension over geopolitical tensions is forcing the company to branch out its factory sites overseas. Primarily, uncertainty is brewing over a Chinese attack on Taiwan, which potentially has the impact of ceasing chip supplies worldwide. Alongside the first trial fabrication plant in Arizona, TSMC is also establishing a factory presence in Japan and a €10 billion joint venture fab in Germany. Despite the cogent prospects that a US hub offers, one significant hurdle to overcome appears to be the difficulty in locally sourcing the necessary high-skilled labour to operate the fabs. A tacit understanding, often involving shopfloor expertise is most desirable in a technical industry such as this, which is culturally less appealing to some engineering students in the US. Therefore, the difficulties in creating a locally hired workforce, particularly in the short run, invite conversation around US policies regarding highly skilled immigration. Intending to develop and source local talent, TSMC and US grants are contributing towards supporting many local engineering schools like Arizona State University.

Apple’s latest smartphone models (iPhone 15 Pro and Pro Max) were the first mass-market consumer products to adopt TSMC’s new 3 nanometre chips in September 2023. In observance of Moore’s Law (predicting chip structures to shrink), 2-nanometre chips are in the process of being tested and deployed in the near future by TSMC.


US Commerce Secretary, Gina Raimondo, expresses the “goal” of ensuring that the US “is the only country in the world where every company capable of producing leading-edge chips will be doing that in the United States at scale”. In light of the efficiency and greater scale of microchip production, coupled with a highly skilled workforce in other parts of the globe, it seems unlikely that the US can operate on a basis devoid of foreign supply chains. However, the CHIPS Act is still in its early days of serving the US to revitalise its semiconductor production – time will tell what the outcomes of these substantial investments have been to the industry.


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