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How the Chips Act Could Reshape the Global Technology Landscape

Written By: RJ Bardsley, Partner
Wireside Communications 

I’m an optimist – I believe that technology is ultimately bringing us to a better place. Innovation means more access, more opportunity, and more efficiency. And there is usually some sort of silicon (chip) at the core of that innovation.

The U.S. was one of the early leaders in chip design and manufacturing, starting with companies like Fairchild, Motorola and Intel. Silicon Valley grew from there and the industry flourished. Over time, as chip manufacturing became more complex, capital requirements ballooned. Today, it’s estimated that a new manufacturing facility (fab) costs more than $15 billion. As these costs soared, a new model emerged – the fabless model, where independent foundries emerged to manufacture chips; allowing fabless chip companies to focus on research and design. This unlocked a host of innovation and spurred growth.

However, there was a drawback to this growth – the bulk of manufacturing capacity went overseas. Today, U.S. companies account for only about 12 percent of manufacturing. This makes silicon supply chains longer and potentially exposes chip companies to transportation, environmental and geopolitical challenges. For the U.S. government, having the bulk of advanced chip production overseas also poses a serious national security risk. Congress passed the Chips and Science Act to rebalance the supply chain, moving manufacturing capacity back to the United States. The act makes money and resources available for companies looking to build fabs here, but it will likely have a host of additional affects.

The Chips Act is similar in many ways to the infrastructure bills of the last century that built America’s roads and cities. In fact, the U.S. Department of Energy has spelled out how the Chips Act has already changed the technology industry in the U.S., citing a boost in national security, a growing tech workforce, and increased funds for research as significant results. But how will this reshape tech? I don’t have a crystal ball, but here are five things I suspect could happen:

1. Faster Innovation. With less physical distance between designers and manufacturers, development could move quicker. With designers able to make a day trip to visit manufacturers and collaborate in the same time-zone, we may be on the cusp of a new era of innovation.

2. A new kind of manufacturing jobs. While many of the new fabs planned for the U.S. will be owned by companies from overseas, the workforce will be American. This means a lot of opportunity. This could be the 21st century’s Henry Ford moment.

3. Immigration may look different. While these factories will be staffed by an American workforce, there will likely be a lot of employees coming from overseas. Silicon Valley has long been a melting pot of technology experts. PhDs and engineers come from all over the globe to work with start-ups and tech giants. As fabs move to places like Arizona and Texas, this may change how immigration looks in these areas.

4. Things may get more expensive. American workers mean American salaries – which are often higher than salaries overseas. These wage increases will undoubtedly get passed along to consumers. While these price increases may not be material to mobile phone or smart watch buyers, they will be there. After all, a lot of offshoring happened initially to keep costs down.

5. This could have a net positive impact on the environment. The EPA has done a fairly decent job of keeping U.S. water and air clean. If fabs are being relocated from countries with less stringent environmental laws, this could mean that chip manufacturing takes less of a toll on our environment.

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