Billions in Chips Grants Are Expected to Fuel Industry Growth, Report Finds

Billions in federal subsidies for semiconductor manufacturers are expected to help reverse a decades-long decline in America’s 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 on Wednesday by the Semiconductor Industry Association and the Boston Consulting Group. As a result, America’s share of world chip manufacturing is expected to rise for the first time in decades, to 14 percent by 2032, up from about 10 percent today.

The report found that much of the industry’s growth would be fueled by the bipartisan CHIPS Act, which gave the Commerce Department $39 billion to encourage semiconductor manufacturing in the United States. Absent that legislation, America’s share of global chip manufacturing would have fallen to 8 percent by 2032, according to the report.

The United States is also expected to see a substantial boost in the domestic production of advanced logic chips, which are used in artificial intelligence, smartphones and autonomous vehicles. Bolstering the production of the most advanced semiconductors has been a central goal for the Biden administration. Federal officials contend that in order for the country to lead in major technological industries, it will need to have a more reliable supply of the most advanced semiconductors.

The 2022 CHIPS Act aimed to re-establish 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 grants to chipmakers, the law established federal tax credits that help companies defray the cost of building and outfitting factories with production equipment.

A key finding from the report is that the United States is expected to produce nearly 30 percent of all advanced logic chips by 2032, up from essentially zero today. Some companies that have recently received federal awards have committed to producing leading-edge semiconductors in the United States in the coming years, including Samsung, Intel and Taiwan Semiconductor Manufacturing Company.

Biden administration officials have already announced awards totaling more than $29 billion in recent months. Those included up to $6.1 billion in grants to Micron to help the memory-chip maker build manufacturing plants in New York and Idaho. Other big 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. Companies have made significant investments in response. Private-sector investment in semiconductor production is projected to grow to about $2.3 trillion between 2024 and 2032, according to the report. The United States is expected to capture about 30 percent of those capital expenditures, second only to Taiwan, the report found.

“Everyone else is growing pretty fast, but we’re growing at a breathtaking speed,” said John Neuffer, the president and chief executive of the Semiconductor Industry Association, which lobbied for the bill. “That’s very much because of 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 businesses’ investment decisions.” He added that the projected increase in America’s production of advanced chips would also be a substantial change.

Still, challenges remain. A lack of construction workers, technicians and electricians could make it more 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 America’s semiconductor manufacturing capacity. Federal officials could consider the need for future incentives, such as a permanent tax credit that is broadened to cover semiconductor design, the authors wrote.

“It will be critical for policymakers in the United States and elsewhere to ‘stay the course’ by extending current support as well as considering additional measures to strengthen resilience,” the authors wrote.