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What is the CHIPS Act and How Will it Affect International Trade?

After much debate and negotiation, President Biden signed the Creating Helpful Incentives to Produce Semiconductors and Since Act of 2022 into law on August 9, 2022. The CHIPS and Science Act is structured to make investments in American manufacturing, supply chains, national security, research and development, science and technology, and related workforces. The more specific goal is to encourage the U.S. technology sector to become the world leader in nanotechnology, clean energy, quantum computing and artificial intelligence.

In the process of the Act being negotiated, many businesses began to invest in their entry into the U.S. technology market. Micron announce a $40 billion investment in memory chip manufacturing. Qualcomm and GlobalFoundries announced a new partnership that includes a $4.2 billion expansion of their facilities to further focus on chip manufacturing.

The U.S. government wants the technology industry to focus heavily on semiconductor research, development and production. Semiconductors are mandatory for any technology with circuitry and as more advanced semiconductors are being developed the resulting technology will have higher computing potential. In explaining the Act, the government notes that the U.S. only produces about 10% of the world's supply of semiconductors while East Asia produces 75%.

Aiming to significantly lessen this gap, the U.S. has taken a two pronged approach: the introduction of the CHIPS act to encourage domestic semiconductor production and a series of trade regulations to discourage U.S. based businesses from assisting semiconductor production abroad.

The CHIPS and Science Act has six specific goals:

  • Bolster U.S. Leadership in Semiconductors

  • Promote U.S. Innovation in Wireless Supply Chains

  • Advance U.S. Global Leadership in the Technologies of the Future

  • Catalyze Regional Economic Growth and Development

  • Provide STEM Opportunities to More of America to Participate in Good-Paying Skilled Jobs

  • Drive Opportunity and Equity for All of America in STEM and Innovation

With the broad scope of the Act now laid out, it becomes very easy to discern how it will affect U.S. trade practices. With the increase in job opportunities and federal funding it is clear that many companies will be entering or expanding in the U.S. technology market, similar to Micron and Qualcomm mentioned above. With these new job and business opportunities physically in the U.S. it is very likely that many foreign workers will need deemed exports for advanced research and development.

Similarly, businesses that specialize in specific types of technology may chose to import their rare equipment to the U.S. or export parts of their products out to further develop their supply chain. There also has already been instances of new policy that will directly discourage the export to certain CHIP manufacturing technology to other countries. The export controls that have been placed on Advanced Computing and Semiconductor Manufacturing Items to the People's Republic of China by U.S. Department of Commerce's Bureau of Industry and Security is the most prominent example of this.

Will you be taking advantage of the CHIPS Act? Do you want to learn more about what types of businesses the CHIPS Act subsidizes? Will you be exporting your new products that are developed as a result of this Act? Check out our article here.

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