How real is America’s chipmaking renaissance?

The CHIPS Act was signed into law in August 2022 in an effort to bring advanced chip manufacturing back to America. Since then, chipmakers have announced over $200 billion in investments in the country. However, building leading-edge fabs in America is slower, costlier, and smaller than in Asia. Additionally, demand for chips seems to be cooling in the short term, which could impact long-term profitability. American fabs also face challenges with navigating regulations, higher operating expenses, and a shortage of workers with semiconductor industry experience. As a result, America is projected to produce only a third of its domestic demand for cutting-edge chips. The law may also have unintended consequences, such as prompting Chinese chipmakers to invest in producing less advanced chips, which could harm higher-cost Western producers. The CHIPS Act’s impact on the semiconductor industry’s boom-and-bust cycle is uncertain. Although demand is expected to revive, inventory adjustments may take longer than anticipated, and the business landscape that emerges may be less lucrative. Overall, it will take more time to properly evaluate the impact of the CHIPS Act on American economic security.

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