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Senate to vote on bill to expand U.S. semiconductor production

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President Joe Biden participates virtually in a meeting on the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, in the South Court Auditorium at the White House on July 25, 2022 in Washington, DC. The meeting was held for President Biden to hear from CEOs and labor leaders on the way funding for production of computer chips would impact them. Photo by Anna Moneymaker/Getty Images

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President Joe Biden met virtually with CEOs and labor leaders Monday to build support for the CHIPS Act. The bill, now before the Senate, aims to expand domestic production of semiconductor chips. The pandemic led to a shortage of those chips, which are primarily produced in East Asia.

The semiconductor shortage has slowed down manufacturing of a range of electronics from vehicles to appliances. On top of creating a more reliable supply, administration officials said the CHIPS Act would also make the U.S. less dependent on chips made in China.

“The U.S. manufacturing share has dropped to around 12% globally,” said Willy Shih, who teaches management at Harvard Business School. That’s down from 37% in 1990.

Shih said having so much production offshore also puts the U.S. at a disadvantage when it comes to designing new chips. “It impacts your ability as a country to do innovation,” he said.

The bill would provide the industry with $52 billion dollars in subsidies. Bernstein Research managing director Stacy Rasgon is skeptical about how much of a difference that would make.

“I know it sounds like a big number, like $52 billion over five years for the industry, but it’s a rounding error,” given the amount of investment he estimates it would take to bring back U.S. chip manufacturing in a meaningful way.

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