The CHIPS and Science Act 2022
Two US senators Chuck Schumer and Todd Young introduced a bill in 2020 which is called the Endless Frontier Act. In this act, a suggestion was presented for the establishment of a new directorate whose discretion was set at $100 billion for 5 years. This directorate would take decisions according to science and technology. After so many amendments to this bill, they presented this in front of the senate in April 2020. Senate passed this bill in June 2021 and it was named Strategic Competition Act. When House passed this bill on February 4, 2022, it was named America Competes Act. And, when it became an act on August 9, 2022, it was named CHIPS and Science Act.
Joe Biden took the presidential seat at that time when the US was inflicted by two big conflicts. The first one was the Covid-19 disease which shook the economy of the whole world and the other one was the withdrawal of the US from Afghanistan. This withdrawal caused a blow to the interests of the US. In such situations, the US had to face two challenges. One challenge was to restore the drowned economy and the other one was to restore America’s reputation.
If we talk about regarding the economy, many jobs were organized in 2021. According to facts & figures, 642,000 jobs were provided in 2021. In the construction industry, an increment of 116% was observed. Companies reinitiated investment in companies which created an environment of hope.
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The US & Europe are in crisis for many years and CHIPS (Creating Helpful Incentives to Produce Semiconductors) discussion is everywhere. In the 1990s, the US was producing 37-40% of the world’s semiconductors which has decreased to 10-12%. Joe Biden is continuously struggling to restore this industry. The US companies had to suffer a huge loss because of this. For instance, Ford & General Motors closed their production plants due to a lack of CHIPS.
Therefore, Strategic Competition Act was introduced. Senate passed this and also called Bipartisan Act in which the opposition also support the government. This issue is all about the economy that’s why it is important for both. On February 4, 2022, when House passed this bill, an amount of $54 billion was allocated.
Although this bill was passed with the negotiations with opposition it also faced criticism. To end this criticism, some amendments were made on March 28, 2022. After Congressional committees pondered, at last, on August 9, 2022, this law was named CHIPS & Science Act.
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What is CHIPS & Science Act?
The main focus of CHIPS is semiconductors that’s why it is called CHIPS. Although it also includes other projects which are part of it since the start. It also includes Space Science and funds for NASA. Its details are mostly the same which were already under discussion. They want to do anything for increasing the production of semiconductors. They want to proceed with research, give discounts to investors, and make plans for tax deductions. Besides, the government will provide subsidies for this.
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Investment in Semi-Conductor
A company, Micron, has announced a $40 billion investment and it will increase 2-10% production of semi-conductors in global production. Qualcomm and Global Fundraise declared an investment of $2.4 billion. From these, according to Qualcomm, there is a probability of increasing 505 semiconductor production.
Criticism of the CHIPS Act
Many countries specifically China and the US itself criticize this act. According to this act, the companies which will take subsidies for semi-conductor from the US or will take tax exemption, would not make any deals with China. This is also a disadvantage for the US also because many business circles are expressing grief about it. This will be destructive for the US in the future.
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According to Boston Consulting Group and other institutes, if Washington adopts Hard Technology Decapling against China then it will be the cause of worrisome for China in a short tenure. However, it will also be harmful to American semi-conductors companies. There are also possibilities that these companies will lose 18% of the global market, 37% of income, and 15,000-40,000 skillful employees.
It is just like the policy of the cold war in which the US is not getting worried for their own interests. instead of focusing on its own industry, it wants to destroy the industries of its opponents. It is obvious that just like China has business partnerships with the US and the whole world, it is not possible that not only China will get affected but also the US. However, right now the US is not missing any opportunity to tease China.