What Is The Semiconductor CHIPS Act, And Why Does The U.S. Need It?

The bipartisan Creating Helpful Incentives to Produce Semiconductors for America Act, or CHIPS Act, was signed into law this week, setting aside $52 billion to boost domestic semiconductor research and production.

We believe government policy is a precursor to change, and if that’s the case, we may soon see a big shift in the U.S.’s global market share of semiconductor chips. These integrated circuits are the hidden brains of nearly everything that fills our lives nowadays, from vehicles to smartphones, TVs, washing machines and even diapers. Without them, nothing would function.

Global demand for chips is growing at an alarming rate and will only accelerate further as more and more devices are designed to be “smart” and connected. According to ASML, the world’s leading supplier to the chip industry, there are an estimated 40 billion connected devices right now, and by 2030, this number is expected to increase to a jaw-dropping 350 billion.

Put another way, the worldwide semiconductor market is forecast to increase 16.3% this year, which would be the second straight year of double-digit growth, says the World Semiconductor Trade Statistics (WSTS). In 2023, growth is expected to be a more moderate 5.1%.

Semiconductor Use in Automobiles

Consider the growth in automobiles’ chip use alone. In 2021, each new vehicle contained close to 300 different semiconductors, a massive 40% increase from just two years earlier, according to research by Goldman Sachs.

This is due in large part to the expansion of electric vehicles (EVs), advanced driver assistance systems (ADAS) and other technologies. A Tesla Model 3, for instance, is estimated to use more than twice the number of chips as an internal combustion-powered vehicle.