As part of the billion-dollar plan "Chips for America", the United States will award $162 million for the expansion of microchip production plants.
The United States government issued a $162 million award for two critical chip manufacturing plants to bolster domestic microchip production. The announcement was made by US Commerce Secretary Gina Raimondo.
Specifically, $90 million will go to a production facility in Colorado and $72 million to a similar plant in Oregon.
This is the second award issued by Raimondo as part of the “Chips for America” plan. This is an ambitious project to reduce the reliance of US companies on foreign-made microchips, specifically in East-Asian countries.
“Chips for America” was approved by Congress in August 2022, and will provide $52.7 billion in government investments to the American microchip industry. This is the second award announced so far. The first was issued in December and granted $35 million for the production of chips in fighter jet planes.
Microchips are crucial components in every sector of a modern-day economy. They power any digital and electronic device, from smartphones to cars. They are also a vital component of modern military and defense equipment.
The microchip war
At the moment, over 90% of the world’s semiconductors are manufactured in Taiwan. This de-facto independent country is considered a rebel province by China, which often threatens reunification with the island using military force.
China is as reliant on Taiwanese chips as the United States is. Indeed, part of Taiwan’s defense strategy was securing a monopoly on global chip manufacturing to deter a Chinese invasion.
Taiwan is also a staunch US ally, who pledged to defend the island boots on the ground if Beijing decided to invade.
However, China is taking an increasingly threatening stance against Taiwan, boosting its naval and military strength and actively preparing for an invasion. A disruption of the microchip trade would be catastrophic for both the US and Chinese economies.
For this reason, the United States is bolstering domestic chip manufacturing, while restricting the export of microchip technology to China. Unfortunately for Beijing, Taiwan manufactures chips following designs by American companies, notably NVIDIA and Apple.
This means that, if successful, the United States would have a strong competitive advantage in chip manufacturing over China. At the same time, however, these companies hold large stakes in China, and often Beijing can reverse engineer their designs.
The US Department of Commerce is cracking down on these corporate spillovers but this is not always possible. NVIDIA, for example, has a history of going around restrictions to sell microchips to China.
Whatever the case, bolstering domestic production could turn the United States into a microchip superpower, leaving China behind.
