Economic Impacts of the CHIPS for America Act

By Matt Mazewski and Christian Flores

Introduction

In January 2021, Congress enacted the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021, after overriding a veto issued by President Trump in December 2020. The CHIPS for America legislation aims to establish “investments and incentives to support U.S. semiconductor manufacturing, research and development, and supply chain security.”[1]

However, while the NDAA authorized a variety of incentive and grant programs to stimulate U.S. manufacturing of microelectronics, it did not actually appropriate any funds for these purposes. The United States Innovation and Competition Act (USICA) and America COMPETES Act, currently the subjects of conference committee negotiations between the Senate and House, would finish the job by allocating more than $50 billion in emergency appropriations for CHIPS Act implementation.

These investments would constitute an important step toward alleviating semiconductor shortages that have developed over the course of the coronavirus pandemic. Given the importance of microelectronics as inputs to the production of everything from smartphones to automobiles, these shortages have had a range of deleterious downstream consequences, including supply chain disruptions and price increases for everyday goods.

In earlier research released this March, we employed the Data for Progress Jobs Model to conduct a macroeconomic analysis of USICA and found that its appropriations provisions, if enacted, would contribute around $287 billion to U.S. GDP and would create or preserve a total of around 2.8 million jobs from 2022 through 2027. In this memo, we now focus on the emergency semiconductor appropriations of the bill and estimate that this spending would create or preserve just over half a million jobs over the next five years while contributing more than $60 billion to GDP — clearly distinguishing them as among the most impactful elements of this legislation.