The CHIPS Act and US Reshoring: What it Means for Your Business
November 11, 2022
The US government is currently implementing initiatives to revitalize US manufacturing with the goal of increasing high-income technical jobs, strengthening supply chains, and expediting our track to leading the industry.
Out of this plan came the CHIPS and Science Act, a bipartisan law signed on August 9, 2022 by President Biden. This legislation brings a major industry shift in US electronics manufacturing and aims to aid in the recovery of domestic manufacturing by boosting US-based manufacturing jobs and revenue.
How does the CHIPS and Science Act affect US reshoring and ultimately your business? Let’s unpack the policies and how they directly impact the industry.
What is the CHIPS and Science Act?
The Chips and Science Act (originally introduced in the House as the America COMPETES Act) is “a historic investment to surge production of American-made semiconductors, tackle supply chain vulnerabilities to make more goods in America, revitalize America’s scientific research and technological leadership, and strengthens America’s economic and national security at home and abroad” (US House of Representatives Committee on Science, Space, & Technology).
The initiative is a bipartisan effort to strengthen US manufacturing, focusing specifically on electronics and allocating $280B to key projects, including $52B in federal funding for domestic production of semiconductors to build a stronger STEM workforce and boost innovation to take our economy into a more secure future.
That means big changes for the US electronics industry that will affect research and development, supply chains, and ultimately, US reshoring for manufacturing in semiconductor device fabrication.
Location Matters for Electronics Manufacturing
Reshoring is the process of shifting the production of goods from international locations back to the United States.
Americans felt heightened awareness of the need for onshore chip manufacturing due to shortage issues that happened during the COVID-19 pandemic. While many do not realize that semiconductors are the foundation of these supply chain issues, it slowed many industries to almost a standstill, including car production, consumer electronics, and more. Used car prices skyrocketed, and consumers were on long waiting lists to purchase new cars – all of which also affected the economic environment of the times.
Offshore Manufacturing Impacts:
- Supply chains and timeliness of shipments
- Development of skilled labor
- Displacement of US jobs and cost of labor
- Economic impact of US revenue and product costs
- Environmental impact of carbon emissions and pollution from overseas shipping
Because of the negative impact of these outcomes, the US Administration knew it was time to make changes due to our minimal global share of production.
The CHIPS and Science Act developed out of a need to improve onshore semiconductor manufacturing, which had taken a downturn to less than 15% of global share, with countries in East Asia holding over 75% of production. The CHIPS Act will fund grants, research investments, and tax credits to support increased US-based chip manufacturing.
It will take time and resources to build up US-based manufacturing, but the long-term effects will strengthen and keep economic resources within the United States.
Industry Reshoring: Our Economy and Your Business
Now that the legislation is in place, many manufacturing companies are scrambling to move production to the US, and buyers will need to find reliable providers to keep up with demand.
The CHIPS Act is certain to cause some discomfort in its early stages, but its programs will help to expand and diversify the industry within the United States to establish a more inclusive environment within STEM fields.
The United States is on the path to becoming a leader in semiconductors through increased domestic manufacturing, R&D and workforce development, and other incentives that will boost economic development.
What’s the Impact?
A great benefit of the CHIPS Act is the business it will bring to fellow US-based companies.
If you’re buying from a US-based manufacturer, you can rely on shorter lead times, higher standards in quality and safety, and better customer service to get custom products that meet your needs.
We can help you navigate the challenge of new legislation while delivering quality customization within budget and on time for your next electronics build.
If you’re not sure whether to move your process in house or partner with a customer electronics manufacturer, check out our custom Build or Buy Calculator.