What Is the CHIPS Act?

The first CHIPS grant, totaling $35 million, went to BAE Systems—a UK-based defense contractor—in December 2023 to produce chips for F-15 and F-35 fighter jets. Intel, the American chipmaking giant, was approved in March 2024 to receive $8.5 billion in grants and $11 billion in loans—the largest grant awarded to a chipmaker. Intel previously announced it would invest $100 billion over five years to build new U.S. facilities. Taiwan Semiconductor Manufacturing Company (TSMC) will receive $6.6 billion in grants and $5 billion in loans to support three fabrication plants in Arizona. TSMC’s plans to invest $65 billion in the United States marks the largest foreign direct investment in a greenfield project in U.S. history.

The Joe Biden administration says that those and other investments put the United States on track to meet the near-term goal of manufacturing 20 percent of the world’s most advanced chips by the end of the decade.

Challenges Ahead
Some experts believe a CHIPS Act II or CHIPS Act III could be needed to completely revitalize the U.S. semiconductor industry and compete with inducements in foreign markets. The European Union passed a similar policy—the European Chips Act—just last year, which puts €43 billion into the bloc’s industry through the end of the decade. China, on the other hand, has invested billions in the industry year after year—not to mention in other technologies such as artificial intelligence—though it too is heavily reliant on TSMC.

Delays or disruptions to projects are also likely. TSMC and Intel have already delayed the opening of their facilities, pointing to higher costs for construction and issues with their suppliers. Another challenge facing semiconductor companies hoping to break ground in the United States is the current lack of a trained workforce. 

Some U.S. partners, businesses, and industry analysts have criticized the requirements and conditions the U.S. government has tied to the CHIPS incentives. South Korea’s trade, industry, and energy minister last year, for example, took issue with stipulations he saw as atypical, including the need to submit business management information and childcare plans for their employees. Also, under the terms of CHIPS Act, chipmakers who are awarded funding are restricted from expanding their facilities in China and other “countries of concern” for ten years.

Michelle Kurilla is Research Associate, U.S. Foreign Policy, at CFR. This article is published courtesy of the Council on Foreign Relations (CFR).