Major Semiconductor Support Bill Passes First Hurdle

6:57 minutes

A line of large, off-white machines used to manufacture electronics in a brightly-lit factory with a low ceiling.
A production line in the manufacturing process of industrial electronics. Credit: Shutterstock

Earlier this week, the Senate voted in favor of the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act. If passed, the bill would provide more than $50 billion to companies that will build semiconductor factories here in the United States. Semiconductors are versatile materials—such as silicon—often used in electronics and in microchips. But the bulk of semiconductors, known as “chips,” are produced in other countries, mostly Taiwan. If the CHIPS Act is passed, the government will fund tech companies to build factories at home instead. Although the bill still has to go through the House and be signed by President Biden, this Senate vote is still a monumental moment in the tech world.

Jesús del Alamo, a professor of electrical engineering at MIT, joins Ira to talk about why this bill is such a big deal, and what’s at stake.

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Segment Guests

Jesús del Alamo

Jesús del Alamo is a professor of electrical engineering at the Massachusetts Institute of Technology in Lincoln, Massachusetts.

Segment Transcript

IRA FLATOW: This is Science Friday. I’m Ira Flatow. The modern computer chip– the integrated circuit was invented by Robert Noyce way back in 1959. It was an American invention, designed and built in the good old USA.

But now, more than half a century later, most of the complex computer chips in your cell phone, your laptop, your car, and even smart weapons are made abroad. In fact, only 11% of the world’s computer chips are made in America. So if you need computer chips, wait in line with the rest of the world.

Recognizing the economic effects of relying on chips from abroad and the potential threat to national security, the Senate voted this week in favor of the CHIPS Act. That’s a bill that would provide more than $50 billion to encourage companies, even foreign companies, to build semiconductor factories here in the US instead of overseas. The legislation is slated to land on President Biden’s desk to sign next week.

It is a big deal in the tech world, and our next guest will tell us why. Joining me now is Jesús del Alamo, professor of electrical engineering at MIT. He’s based in Lincoln, Massachusetts. Welcome to Science Friday.

JESUS DEL ALAMO: Yes, hello.

IRA FLATOW: Why do we rely on other countries to build our chips?

JESUS DEL ALAMO: Well, most of the chip fabs today are in other countries. We have no choice. And in fact, the most advanced fabs with the most advanced technologies are all overseas. We have no choice. If we want to deploy the most advanced products, we have to use chips that are made overseas.

IRA FLATOW: So even our military relies on computer chips that we don’t make. Isn’t this considered a national security issue?

JESUS DEL ALAMO: That is a big concern, which is the reason we need to regain control of the leading edge of semiconductor manufacturing, so that the most sensitive chips can definitely be made in the US.

IRA FLATOW: Let’s walk through the CHIPS Act. How would that act solve this problem?

JESUS DEL ALAMO: Well, a big chunk of the act, $39 billion out of the $52 billion, is really to provide incentives, incentives for semiconductor manufacturing. Essentially, this is trying to level the playing field with what other countries are already doing. China, Taiwan, South Korea, they are heavily helping, subsidizing, companies to set up shop in their countries. And the US needs to do that if we want to lure those fabs to the US. And so that big chunk of the act will go after that. But there is another $12 billion that is about thinking about future technologies to not only regain leadership immediately, but also to be able to sustain that leadership with future technologies.

IRA FLATOW: What is a fab that you’re talking about?

JESUS DEL ALAMO: Yeah. A fab is the term that we use to refer to a semiconductor manufacturing plant. This is where the chips are made.

IRA FLATOW: There were companies that were waiting for this CHIPS Act to basically pour concrete on new projects. Do we think this will move forward now?

JESUS DEL ALAMO: We very much hope so. It’s really critical. All other significant countries– the European Union, China, Taiwan, Korea– they’re offering similarly very generous incentives for American companies and other companies to set up their fabs in their territories. So if we don’t move on with this quickly, these other countries will move on, and our American fabs will set up the new fabs overseas, without any question.

IRA FLATOW: Do we need to build factories here if we want to stay in the tech world or to try to regain leadership in the tech world?

JESUS DEL ALAMO: Most definitely. So there is a deep connection between leading-edge manufacturing and innovation. And the connection is in that the leading-edge technology, the most advanced technology, is the most profitable, also. So essentially, winner takes all is how this industry works. Whoever gets the most advanced technology first in the marketplace is going to rip off the greatest profits, and as a result is going to be able to invest into innovation at a greater level and therefore be able to move faster than their competitors.

So it really is critical to stay at the leading edge, to maintain the leading edge, and to just continue to play, to be on the leading edge. So we can’t afford not to do that. And unfortunately, we have slipped somehow in the last few years. And we need to regain that leadership and stay there.

IRA FLATOW: And savvy computer chip makers are sort of playing one country off against another, aren’t they, in deciding where they would build their new factories? And I think they were waiting to see if this CHIP Act would go through, if America would be one of the competitors.

JESUS DEL ALAMO: Yes. It sounds perverse, but think about it– these fab investments, they are all north of $10 billion, all those that have been announced in the last few months. And the level of subsidies that Asian countries in particular are offering easily are in the 25% to 30%. So if you calculate 25% to 30% of $10 billion, you are really talking about a lot of money. And so it really is not surprising that companies would respond to those kinds of incentives. We need to be able to match that if we want American companies to create, and also foreign companies to create the fabs in the US.

IRA FLATOW: I think it was also interesting that there was a rare bipartisan cooperation here in Congress recognizing the weight of this issue.

JESUS DEL ALAMO: Yeah, and there are many aspects– there are several aspects of this. One is, you mentioned earlier the defense side of things. But there is also the jobs side of things, which is that the semiconductor industry really pays very good salaries, employs a lot of people, and there is a multiplicative effect in which each job in the semiconductor industry creates 5.7 jobs, as the Semiconductor Industry Association estimates. So the job implications of siting semiconductor fabs in the US is very significant. And so you can see how this ought to appeal across the entire political spectrum.

IRA FLATOW: I know there’s a lot at stake here, and the tech and research industries have had their eyes on this bill for months, as I said before. How did you feel watching it unfold this week? Were you stressed, excited, biting your nails?

JESUS DEL ALAMO: Yes. It has been nerve wracking. And in fact, I have– one of my kids has been living this with me. We’ve been monitoring what was happening in the Senate in the last few days with a lot of nervousness, almost minute by minute texting each other with the latest developments. We’re happy where we are right now. But there’s still a lot to be done in a very short time before Congress goes into recess. So it’s going to be a nail-biter to the last minute.

IRA FLATOW: Yeah, Friday, I think, is the last day before Congress goes into recess. We’ll see what happens next week. Well, I have run out of time. I want to thank you for taking time to be with us today.

JESUS DEL ALAMO: Thank you very much. My pleasure.

IRA FLATOW: Jesús del Alamo is a professor of electrical engineering at MIT, based in Lincoln, Massachusetts.

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