Eight Months In, What Is Happening With Biden's CHIPS Act?

Episode Summary

Executive Summary: The episode examines the Biden administration’s CHIPS Act implementation with Commerce Department officials Mike Schmidt and Todd Fisher. They explain how $50 billion in federal support is being deployed to rebuild U.S. semiconductor manufacturing, improve supply-chain resilience, and strengthen national security, while balancing workforce needs, permitting hurdles, geographic concentration, and global coordination.

Main Topics: The CHIPS Act as industrial policy (Priority: 5/5): The hosts frame the CHIPS Act as a major shift toward active U.S. government intervention in the economy, comparable to broader Biden-era public investment efforts like the Infrastructure Act and IRA. How the CHIPS program office allocates funding (Priority: 5/5): Mike Schmidt and Todd Fisher explain the application process, their investment-office structure, and how the government evaluates projects through term sheets, due diligence, and portfolio-level decision-making. Defining success and measuring outcomes (Priority: 5/5): The guests describe their 'vision for success' framework, including targets for leading-edge logic, advanced packaging, mature nodes, and self-sustaining ecosystems rather than short-term financial returns. Workforce and childcare as implementation constraints (Priority: 4/5): The discussion addresses criticism of childcare requirements, with officials arguing workforce availability, training pipelines, and childcare access are essential to scaling fabs and attracting labor. Permitting, geography, and build-out challenges (Priority: 4/5): The conversation highlights state, local, and federal permitting complexity, environmental reviews, water and power constraints, and why investments are clustering in places like Arizona and Texas. Cyclical demand, private capital, and buyer-of-last-resort risk (Priority: 5/5): The hosts press the officials on whether the industry can remain viable through semiconductor boom-bust cycles without a sustained government buyer or permanent demand support. Global supply chains and allied coordination (Priority: 4/5): The officials say the goal is not self-sufficiency but a more resilient global semiconductor system built with allies such as Korea, Taiwan, Japan, and Europe.

Key Arguments: The CHIPS Act is framed as a strategic public investment, not a financial return play; its purpose is supply-chain resilience, national security, and economic competitiveness. Success should be judged by structural outcomes: more U.S. manufacturing, at least two self-sustaining leading-edge logic clusters, stronger advanced packaging, and a healthier mature-node ecosystem. Workforce is central to semiconductor expansion, and childcare is presented as part of a broader labor strategy rather than an unrelated policy add-on. Permitting and environmental review are real obstacles, but the office says it is building capacity to manage project-specific issues rather than treating them as dealbreakers. The program expects private capital to remain the main driver, with federal money acting as part of the capital stack to crowd in investment rather than replace it. The officials argue the U.S. should not seek chip autarky; instead, it should coordinate with allies and preserve a globally integrated semiconductor supply chain. Demand from automakers and leading technology customers is already encouraging geographic diversification and long-term fab investment in the United States. Stock buybacks are not banned broadly, but the program wants companies to demonstrate long-term commitment through U.S. capital spending, R&D, and production.

Data Points: Total CHIPS Act funding: $50 billion - Overall funding discussed by the guests; includes manufacturing incentives and R&D. Manufacturing incentives fund: $39 billion - Portion of CHIPS funding managed by Mike Schmidt and Todd Fisher for incentives. R&D fund: $11 billion - The remainder of the CHIPS Act allocation is for research and development. U.S. share of global semiconductor production today: About 10% - Mike Schmidt says the U.S. produces roughly 10% of global semiconductors now. U.S. historical manufacturing share: 37% to 10% - Todd Fisher cites a long-run decline in domestic semiconductor manufacturing share over 30 years. Leading-edge logic production share: 0% - Officials say the U.S. produces functionally none of the world’s leading-edge logic chips today. Target leading-edge logic clusters: At least 2 - Part of the program’s 'vision for success' for 2030 and beyond. Statutory support for mature nodes: $2 billion - Todd Fisher notes the law requires $2 billion for current and mature nodes, which he calls a floor. Global semiconductor market size: $600 billion - Todd Fisher describes the industry’s current scale. Projected semiconductor market size by 2030: About $1 trillion - Todd Fisher cites expected industry growth by 2030. Semiconductor industry growth rate: About 6% annually - Todd Fisher says the global industry grows around 6% per year. Automotive chip demand growth: About 12% annually - Todd Fisher says chip demand from the auto industry is growing at roughly double the overall semiconductor rate. Worker decline in semiconductor industry: Lost about one-third of workers over 20 years - Todd Fisher uses this to illustrate workforce shortages. Global industry growth vs workforce decline: Industry tripled globally - Todd Fisher contrasts global industry expansion with U.S. workforce shrinkage.

Pivotal Quotes: "We view ourselves fundamentally as managing a $39 billion investment program on behalf of taxpayers." — Mike Schmidt: Explaining the CHIPS program office’s role and how it differs from traditional private-sector investing. "We want this industry to be hugely successful, right? We want the economic returns from these investments to propel additional investment going forward." — Todd Fisher: Answering concerns about stock buybacks and shareholder returns versus public goals. "One way to think of our goal, what we're trying to do here, is contribute to globalization." — Mike Schmidt: Clarifying that the program aims for a more resilient global supply chain, not self-sufficiency.

Implications: The episode suggests CHIPS success will hinge on execution: permitting, labor, customer demand, and private capital must align. If they do, U.S. semiconductor capacity could become self-sustaining; if not, the program risks becoming an expensive but incomplete industrial-policy experiment.