INDUSTRIAL POLICY
Why the CHIPS Act is rewriting the rules for every big American business.
THE U.S., WHERE computer chips were invented, hasn’t manufactured leading-edge chips since 2017. From then until now, the world’s fastest, most valuable chips, the kind that power OpenAI’s ChatGPT, Apple’s newest iPhones, and the world’s biggest supercomputers, have been made only in Taiwan and South Korea. But sometime next year, if all goes as planned, the U.S. will reclaim global leadership when Intel starts producing in volume a nextgeneration chip in the U.S. The chip technology, which Microsoft has already committed to use as the foundation for Intel-made proprietary chips, probably won’t be fully matched elsewhere for at least many months.
The dramatic turnaround owes much to the CHIPS and Science Act, which was signed into law in 2022 to revive semiconductor manufacturing in the U.S. Some $52 billion in grants is being disbursed to companies, led by Intel. Subject to reaching milestones in coming years, Intel could receive a grant of up to $8.5 billion, plus up to $11 billion in government loans and a 25% tax credit on a planned $100 billion in investment. A senior administration official said Intel’s package of subsidies would likely be the largest in the program. Commerce Secretary Gina Raimondo, who oversees most of the program, explains its rationale succinctly: “We cannot allow ourselves to be overly reliant on one part of the world for the most important piece of hardware in the 21st century.”
The CHIPS Act is significant for companies beyond the tech industry. With $280 billion in total authorized funding (most of it not yet spent), it’s an enormous exercise of industrial policy—government support of a specific industry. Widespreading ripple effects could help or hinder businesses across the economy. For example, local businesses in cities with large projects (such as Phoenix or New Albany, Ohio) may boom, while companies in almost any industry nationwide could face stiffer competition for tech-literate employees. More broadly, the CHIPS Act may presage a new era for a range of companies, pushing them into an unfamiliar, geopolitical role. The semiconductor industry leads the trend because no modern economy or military can exist without semiconductors, and the more advanced the chips, the more dominant the economy and its military can be. Lazard CEO Peter Orszag and two colleagues, all with deep government experience, describe the larger picture in the latest issue of Foreign Affairs. Nations today contend mainly through economic competition, they say. As a result, “a tectonic shift is taking place, one that is forcing corporations to become actors on the geopolitical stage.” Citing examples including the CHIPS Act, they say “corporations have increasingly become both the
