Why the CHIPS Act fell short of its strategic promise

The U.S.’s share of worldwide semiconductor manufacturing decreased from 37% in 1990 to less than 10% in 2022. To ameliorate this shift, Congress had taxpayers front $280 billion via the 2022 Creating Helpful Incentives to Produce Semiconductors Act, ostensibly to spur domestic production. 

While revitalizing domestic semiconductor manufacturing is critical for U.S. national security and economic resilience, the CHIPS Act’s delivery was poorly calibrated to address these concerns.

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The CHIPS Act’s $250 billion package of federal investments — $280 billion including all programs and authorizations — sought to mitigate national security concerns and redefine domestic semiconductor manufacturing, research, and development. Unfortunately, as the Competitive Enterprise Institute points out, “without the market’s guiding forces of profits, losses, and prices, government officials are left in the dark about which projects are worthy of investment.” 

Additionally, while Section 102(g) of the CHIPS Act bans stock buybacks