US semiconductor industry bonanza: What's in the CHIPS bag?

The CHIPS and Science Act – also known as the CHIPS+ Act – earmarks around US$52.7 billion (S$72 billion) to support the US semiconductor industry.

– Some US$39 billion will go to American chipmakers, so they can make more semiconductors.

– At least USS$13 billion will go to research, development and innovation.

– The law provides for a four-year, 25 per cent tax credit that runs up to US$24 billion to encourage chipmakers to open more plants in the US.

– There are some sections setting up new studies and creating new government organisations to monitor supply chains.

– The law also seeks to create regional technology hubs to mobilise underserved communities where a labour force can be tapped for fields such as robotics and cyber security.

– Outside the chipmaking sector, the law earmarks more funding for science agencies, including the National Aeronautics and Space Administration to support its programme to send humans back to the Moon and, eventually, to Mars.

Is there a catch?

It bars semiconductor manufacturers that will get federal subsidies from expanding their capacity in China or any other nation for 10 years. But it does contain exceptions that may allow those producing so-called legacy chips – used in a wide variety of electronics devices, from smartphones and computers to home appliances and connected cars – to continue investing in China if those investments are aimed at protecting existing and significant American business interests.

Why is it a big deal?

Semiconductors are as vital as oil, as they act as the brains of all devices that the world now relies on – from smartphones to laptops to data centres – as well as sophisticated weapons systems that make the US the world’s most powerful nation.

But the US gets most of its chips from abroad. About 92 per cent of the world’s most advanced chips are made in Taiwan. The rest come from South Korea.

Supply chain disruptions caused by the Covid-19 pandemic have exposed vulnerabilities as a result of the US’ reliance on chip suppliers outside its borders.

China has also set in motion plans to raise its share of the chip market.

There’s also Taiwan’s own vulnerabilities.

Chinese President Xi Jinping’s repeated warnings that he is willing to use force if necessary to reassert control over self-ruled Taiwan have forced US policymakers to contemplate what would happen if the American military was ever cut off from the chips that it needs.

Disclaimer: This report is automatically generated from worldwide news services. NTN is not responsible for its content and does not moderate it.

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