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Editorial: CHIPS Act Critical to Michigan Manufacturing

Detroit News
The Detroit News Editorial Board
June 11, 2022

The United States, and Michigan in particular, can’t afford to lose out on the growth of another vital sector — semiconductor chips — at a time when domestic manufacturers need more security and stability to meet the rapid demand for these critical products.

That’s why Congress must fund the Chips Act as swiftly as possible. The U.S. House of Representatives and the U.S. Senate have both authorized about $250 billion for programs to strengthen technology, manufacturing, and research in the U.S. to compete with China. The bills, which also address trade and climate, are similar but need immediate resolution by the legislative chambers to be funded. That includes a $52 billion provision to subsidize domestic semiconductor chip manufacturers, with $2 billion of that specifically directed at the automotive industry. Now the House and Senate should act quickly to resolve the bills.

This legislation is critical to Michigan.

Shortages of chips coming from countries such as Taiwan and China have left U.S. companies and consumers in a lurch, with just days of inventory currently on hand. The supply chain struggles — between COVID and lockdowns in China to the war in Ukraine — have become a nightmare. Shortages of products that use chips are widespread.

Meanwhile, the semiconductor chip industry is exploding with growth globally, and many of the largest manufacturers are American companies that want to make their products in the United States but are struggling against global competition and supply chain emergencies.

Semiconductor chips power almost every modern device in one way or another, from the most advanced cars and jets to sewage systems and everything in between. They are critical to material and equipment providers, manufacturing of all kinds, particularly automotive, as well as industrial and healthcare companies and other major industries.

Congress must make sure manufacturing companies such as Intel — which recently committed to investing in a $20 billion manufacturing facility in neighboring Indiana — continue to choose the U.S. as their primary place of investment for these critical products.

Gov. Gretchen Whitmer and the Michigan Economic Development Corporation have been courting chip manufacturers with deals to get investment in Michigan but have not succeeded. Intel’s choice to go to Indiana was a major blow to the state.

And while there’s been a laudable focus on battery plants for electric vehicle production here, the state can’t lose sight of the fact that these major companies will increasingly be looking for states with the best economic atmospheres for chip investment — and a talented workforce to power it.

The industry might appear like it doesn’t need support. But it’s not so much what the U.S. is losing currently as what it’s poised to lose given the trajectory of growth in semiconductor chips that is most worrisome.

Thirty years ago 80% of semiconductors globally were produced in the U.S. and Europe. Today 80% are produced in Asia, where there are substantial incentives for domestic semiconductor industries. This has created an unfair cost disadvantage for U.S. companies that must be addressed. The European Union already passed the European Chips Act to double the EU’s manufacturing share to 20% by 2030.

Global revenues for the industry have done well, increasing more than 20% each month year-to-year for the last 13 months, according to the Semiconductor Industry Association. In the U.S. alone, chip sales in April increased 41%.

The industry is poised to reach $661 billion in 2022, up 14% over 2021, according to analysts at digital forecasting firm IDC. The firm also forecasts a five-year compound annual growth rate for the chip sector of nearly 5%.

The U.S. can’t afford to ignore the industry given global growth patterns, supply chain nightmares, and national security, which heavily depends on U.S. chip production capabilities should global supply chain logistics become even worse than they are.