Apr 30, 2023, 7:38am EDT

Can the U.S. win the microchip war?

Our newest episode of The Agenda explores the history of the U.S. chip industry, how America lost its ground in chip production, and the stakes of the fight to claw that economic power back. Watch it here:


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The Agenda

If you’re in a rush, here’s the gist: Semiconductors are the brain of modern electronics, embedded in everything from cars to advanced weapons systems.

America has lost dominance in the production of chips in recent decades. Today, the globe is largely dependent on advanced chips made in Taiwan. China is making major investments, too. That has policymakers worried.

“All of the cutting-edge chips, the ones that go in our planes and submarines and satellites, the most cutting-edge — they’re all made in Taiwan,” Senate Intelligence Committee Chairman Mark Warner, D-Va. told Semafor in an interview for this project. “We don’t make any here. So you’ve got this rise of China, vulnerability of Taiwan, and a notion of an American industry where we were falling way far behind.”

Enter the CHIPS and Science Act, a $280 billion project passed by Congress almost a year ago to revive the ailing domestic semiconductor industry in the U.S. It was motivated, in part, by a desire to bring back chip production to the U.S. and minimize the global and catastrophic disruptions of a major crisis — like military conflict over Taiwan.


“The most important benchmark is that we have a resilient semiconductor industry in the U.S., one that isn’t reliant on individual countries or beholden to folks who may be our adversaries,” Deputy Secretary of Commerce Don Graves told Semafor.

The U.S. government is working to implement the legislation, doling out billions of dollars in subsidies and tax credits to incentivize chip manufacturing in the U.S. Big companies like Micron, Intel, and Taiwanese chip giant TSMC have already started construction on new semiconductor manufacturing plants in the U.S. Private companies have pledged about $200 billion in total investments, according to the Semiconductor Industry Association, a trade group.

But there are major hurdles the U.S. has to clear for the law to be successful, and doubts about how much of a difference it can make when it comes to bringing back production to the U.S.

“It’s much cheaper to build the chips and the factories in Taiwan than it is in the United States,” former Google CEO Eric Schmidt told Semafor. “Similarly, the workforce quality is not as good as it is in Taiwan.”

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  • Taiwanese officials have privately warned their U.S. counterparts to tone down rhetoric about the risks of American dependence on chips made by TSMC, Bloomberg reported, amid concerns it is leading investors to cut slash holdings.
  • Under new rules set by the Commerce Department in February, chip companies who receive federal funding need to agree to restrict expansion in foreign countries, like China. Recipients of some of the funding will also be required to provide childcare for employees and encouraged to utilize union labor, which prompted criticism from Republicans.
  • TSMC, which is building a multibillion dollar chipmaking facility in Arizona, has expressed concerns about rules attached to the chip subsidies it is applying for, the Wall Street Journal reported.
  • House Republicans told members to vote against the CHIPS and Science Act last year. Twenty-four Republicans bucked the party and voted for it.