Following the signing of the CHIPS and Science Act, experts from the Center for a New American Security analyze key provisions of the new law, and weigh in on the potential implications for U.S. industrial policy and strategic competition in the tech sector going forward.
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Martijn Rasser, Senior Fellow and Director, Technology and National Security Program:
Come for the chips, stay for the science. Much of the focus has been on what this bill means for the U.S. semiconductor industry. The real meat of the bill, however, is the focus on research and innovation across the spectrum of science and technology (S&T). The CHIPS and Science Act authorizes the largest five-year investment in public R&D in American history–nearly $170 billion in key programs–from AI to 6G telecommunications to energy storage. The bill also has provisions for the formulation of a national technology strategy, needed to guide long-term U.S. tech policy, and an initial cut at restrictions on S&T infrastructure spending by U.S. firms in China. Investments in research, S&T infrastructure, and talent at this level are exactly what is needed to sustain and promote long-term U.S. competitiveness. Stay tuned for appropriations to see how serious Congress is about securing America’s technological future.
Emily Kilcrease, Senior Fellow and Director, Energy, Economics, and Security Program:
With the signing of the CHIPS and Science Act, industrial policy is no longer a dirty word in Washington. Legislators attached important strings to $52 billion in chips subsidies, including sharp restrictions on the investments that firms receiving subsidies can make in China. The so-called "guardrail" provisions are critically important to ensure that subsidies— that is, taxpayer dollars—are being used responsibly to bend chip supply chains away from China. While broader proposals to screen a much larger scope of U.S. investment in China were ultimately dropped from this bill, the conversation on outbound investment controls is far from over. Expect more action on outbound investment controls in the coming year, whether from Congress or the White House.
Megan Lamberth, Associate Fellow, Technology and National Security Program:
With the signing of the CHIPS and Science Act today, there’s a lot to be excited about. In addition to the widely reported $52 billion for the U.S. semiconductor industry, the bill will have an impact across America’s science and technology base. I am especially interested in the $11 billion allocated to the Commerce Department to create 20 regional technology and innovation hubs. These hubs will focus on “technology development, job creation, and expanding U.S. innovation capacity” and will be located in areas “that are not leading technology centers.” The Biden administration has long advocated for the establishment of regional innovation hubs, including in the 2021 American Jobs Plan. I’m excited to see the idea come to fruition. If carried out effectively, these hubs could allow for the creation of new tech ecosystems—including jobs, ideas, and economic growth—across the country.
Carisa Nietsche, Associate Fellow, Transatlantic Security Program:
A key ingredient of CHIPS and Science Act implementation will be how the United States coordinates with its allies and partners. It is impossible for one country to reach self-sufficiency in chip production. In the case of semiconductors, friendshoring—or basing supply chains in trusted partner countries—is a necessity to build resilient supply chains. Yet, friendshoring has become a loaded term, with politicians perceiving it as the death knell of American manufacturing and policymakers viewing it as a zero-sum game in which the United States stands to lose. However, friendshoring in the semiconductor value chain will be necessary to safeguard the United States and Europe’s economic competitiveness and national security. As the European Union works toward the passage of the European Chips Act, the United States must coordinate with its European partners and allies to ensure that the supply chains are complementary across the Atlantic. Further, preventing a subsidies race should remain a high priority on the EU-U.S. Trade and Technology Council’s agenda. As the TTC plans its next meeting for late 2022, the recently announced mechanism to prevent a subsidies race should be a central focus of the supply chains working group. Only through coordination can the United States and its partners and allies succeed in building a resilient supply chain.
Alexandra Seymour, Associate Fellow, Technology and National Security Program:
Today’s signing of the bipartisan CHIPS and Science Act makes one thing abundantly clear: industrial policy is now a tool to protect U.S. national security interests. Legislators have realized that technology is at the core of strategic competition with China, and given how rapidly it evolves, supporting innovation is key to America’s success. Consequently, the CHIPS and Science Act includes many beneficial aspects, such as subsidizing the semiconductor industry to boost domestic manufacturing and shift investment from China; increases in research and development funding; and STEM workforce initiatives. This level of commitment to investing in supply chain resiliency, ideas, and people is essential to technological advancement in the short and long-term. At the same time, accepting industrial policy to bolster U.S. competitiveness in critical sectors should not cause the U.S. to sacrifice its free market principles, which are another strategic advantage.
All CNAS experts are available for interviews. To arrange one, contact Cameron Edinburgh at email@example.com.