Billions in federal subsidies for semiconductor makers are expected to help reverse a decades-long decline in the United States’ share of global chip manufacturing.
The United States will triple its domestic chip manufacturing capacity by 2032, the largest increase in the world, according to a report released Wednesday by the Semiconductor Industry Association and Boston Consulting Group. As a result, the United States’ share of global chip manufacturing is expected to rise for the first time in decades, to 14 percent in 2032, up from 10 percent today.
The report found that much of the industry’s growth would be driven by the bipartisan CHIPS Act, which gave the Commerce Department $39 billion to encourage semiconductor manufacturing in the United States. Without that legislation, the United States’ share of global chip manufacturing would have fallen to 8 percent by 2032, the report said.
The United States is also expected to see a substantial boost in domestic production of advanced logic chips, which are used in artificial intelligence, smartphones and autonomous vehicles. Boosting production of the most advanced semiconductors has been a central goal of the Biden administration. Federal officials maintain that for the country to be a leader in important technology industries, it will need to have a more reliable supply of the most advanced semiconductors.
The CHIPS Act of 2022 aimed to reestablish the United States as a leader in the production of semiconductors, the vital components that power everything from phones and computers to electric vehicles and weapons systems. In addition to providing subsidies to chipmakers, the law established federal tax credits that help companies defray the cost of building and equipping factories with production equipment.
A key finding of the report is that the United States is expected to produce nearly 30 percent of all advanced logic chips by 2032, up from virtually zero today. Some companies that recently received federal awards have committed to producing cutting-edge semiconductors in the United States in the coming years, including Samsung, Intel and Taiwan Semiconductor Manufacturing Company.
Biden administration officials have already announced concessions totaling more than $29 billion in recent months. Those include up to $6.1 billion in grants to Micron to help the memory chip maker build manufacturing plants in New York and Idaho. Other major chipmakers, including Samsung, TSMC and Intel, have also received awards. GlobalFoundries, Microchip Technology and BAE Systems were the first three recipients of federal money.
Other governments, including the European Union, Japan and China, have also offered new or expanded incentives to entice chipmakers to build plants in recent years. In response, companies have made significant investments. According to the report, private sector investment in semiconductor production is expected to rise to about $2.3 trillion between 2024 and 2032. The United States is expected to capture about 30 percent of those capital expenditures, only surpassed by Taiwan, according to the report.
“Everyone else is growing pretty fast, but we’re growing at an impressive rate,” said John Neuffer, president and CEO of the Semiconductor Industry Association, which lobbied for the bill. “That’s largely due to our policy responses through the CHIPS Act.”
Chris Miller, author of the book “Chip War” and a professor at Tufts University, said the report showed there was “real evidence” that the incentives included in the CHIPS Act were “changing companies’ investment decisions.” He added that the projected increase in US production of advanced chips would also be a substantial change.
Still, challenges remain. A lack of construction workers, technicians and electricians could make it difficult for companies to build and operate manufacturing plants, the report’s authors wrote. They also maintain that “sustained support” may be necessary to further strengthen US semiconductor manufacturing capacity. Federal officials could consider the need for future incentives, such as a permanent tax credit that is expanded to cover semiconductor design, the authors wrote.
“It will be critical for policymakers in the United States and elsewhere to ‘stay the course’ by expanding current support and considering additional measures to strengthen resilience,” the authors wrote.