Supply Chain: CHIPS Act Gives Hope to U.S. Semiconductor Industry.

• Author: Roaten, Meredith

Semiconductors have always been in widespread use across the nation, but with the Pentagon's increasing use of more advanced systems and tensions in East Asia, shoring up the supply chain is more important than ever.

That's what was on the minds of domestic manufacturing advocates and industrial policy watchers as Congress passed a law to protect the vulnerable supply chains.

In August, President Joe Biden inked the $280 billion bill--the Creating Helpful Incentives to Produce Semiconductors, or CHIPS, and Science Act--to the excitement of its many advocates and microelectronics industry executives, said Doug Crowe, the director of an other transactional authority program at the National Security Technology Accelerator.

The act does not immediately protect the supply chain from Chinese competition and influence, but it marks a change in attitudes and a step toward the future, Crowe and other experts said in interviews.

"It's a start," he said.

The legislation primarily creates financial incentives for chip manufacturers to onshore production and ensure that access to the critical technology is never cut off. Currently, U.S. semiconductors make up 10 percent of global production. Most chips are produced in East Asia, particularly South Korea and Taiwan, according to the Biden administration.

China's increasing assertiveness in the region also motivated Congress to pass the bill, which includes $52.7 billion to spur domestic semiconductor manufacturing. The legislation will impact the nation's China policy and generate conversations around the future of that relationship, said Mira Ricardel, a former deputy national security advisor during the Trump administration. She currently heads the geopolitical and regulatory risk practice at the consulting firm The Chertoff Group.

"We have to determine what that relationship is going to be," she said.

While Russia is seen as an acute threat, the Pentagon sees the pacing threat in East Asia. Chinese relations with Taiwan--a major producer of microelectronics--have grown even more strained in recent months. In August, China and Taiwan reported completing military exercises in the South China Sea in close proximity to each other.

The National Security Technology Accelerator hosted a microelectronics conference in Indianapolis the same day the bill was signed. Crowe said he watched industry leaders from across the country stop what they were doing and live stream Biden's press conference on the...