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U.S. Semiconductor Revival? The CHIPS and Science Act of 2022

by Christopher Shrope September 21, 2022

The CHIPS and Science Act of 2022 (H.R.4346) is anticipated to boost American semiconductor research, development, and manufacturing by building a stronger public-private partnership, expanding production capabilities, and providing financial assistance via incentives. Model N would like to congratulate all our customers who participated in supporting these efforts and driving this change.

Microelectronics are everywhere, propagating into almost every industry, including key national security interests like aerospace, defense, cyber intelligence, and telecommunications. Looking toward the future, technology companies should continue to focus on efforts that enable the long-term supply of semiconductors across the node spectrum.

The U.S. semiconductor industry today is at a pivotal point. Its share of modern semiconductor manufacturing capacity has steadily decreased over the decades, from 37% in 1990 to just 12% today. The key reason: the governments of other countries have been investing aggressively in chip manufacturing initiatives while the U.S. government has held back. Federal investments in chip research has remained low as a share of the gross domestic product (GDP) at a time when other countries’ investments remain consistent.

How and why did we get here? To answer this, learn more about the history of the semiconductor industry in the U.S. Part One.

Then there’s the current shortage of certain chips. It began in early 2020 when the COVID-19 pandemic disrupted the semiconductor supply chain. Many factories in Asia were forced to shut down, dramatically decreasing semiconductor production. Add this to many years of the United States government investment in research over industrial capacity and you have a situation where the industry today relies almost completely on a limited number of overseas fabrication plants.

But lately, the news has been more positive. To attempt to reverse this situation, Congress passed the CHIPS and Science Act in July 2022 with the President signing the act into Law in August 2022. The law encompasses semiconductor manufacturing grants, research investments, and an investment tax credit for semiconductor manufacturing. The goal: to strengthen domestic semiconductor manufacturing, design and research, fortify the economy and national security, and reinforce America’s semiconductor supply chains.

“By passing the CHIPS Act, Congress has risen to a defining challenge of our time, seized an historic opportunity to fortify American semiconductor manufacturing, design, and research, and delivered a big win for our country.”  –The Semiconductor Industry Association

Will CHIPS help revive the U.S. semiconductor industry? It’s possible. After all, the history of semiconductor manufacturing offers clear evidence that aggressive industrial policy works. It’s even possible that it will do more than just alleviate the current chip shortage, but also begin building back a robust innovative ecosystem to put the United States again on the semiconductor technological edge.

What can you do to stay ahead of the market as all these changes are unfolding? To answer this, learn more about the history of the semiconductor industry in the U.S. Part Two.

The good news is that almost all the factories are up and running again, with a long list of backlogged orders for many quarters ahead. Investment is up, profits are up, and supply is catching demand. The passing of the CHIPS and Science Act of 2022 means more government investments industry players are planning for more mergers and acquisitions (M&As) and have already shown an increased investment commitment of their own to match the government incentives.

Model N is ready to help support you in growing and modernizing your business during this transformational time. We invite you to learn more about the revenue management solutions we offer for high tech to help support you, as you scale and ramp up your business and innovation.

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