Whilst the Inflation Reduction Act steals the headline, this month President Biden also signed a $280 billion legislative package which contained more than $50 billion to support US chip production. The package includes around $39 billion in manufacturing incentives, with other funding streams available for research and design for example. It also includes stipulations around worker and community investments and includes opportunities for small businesses and disadvantaged communities.
After months of shortages in the production of semiconductor chips used across games consoles to mobile phones to electric cards, the US government has moved to reduce reliance on manufacturers in South-East Asia, specifically China and Taiwan. Chip suppliers such as Micron have already responded with renewed investment plans of their own. The move is the latest indicator of a trend of onshoring or nearshoring, which brings elements of supply chains closer to the market they will be consumed. The trend is a reverse of the market dynamic of labor and manufacturing shifting from high to low-cost regions (typically from Western markets to the “Global South”) over the 20th and 21st centuries.
It is also a signal of how supply chain disruptions, whether due to climate, health crises, or conflict, are expected to continue into the future. However, chip manufacturing and shipping are among the final steps in a supply chain that is dizzyingly complex and diverse. Production requires a wide range of highly unique and specific parts, raw materials, and other elements currently sourced across the globe. Whether this can be replicated in a single country setting remains to be seen.