The bipartisan CHIPS and Science Act that President Joe Biden signed into law this week gives automakers hope that the semiconductor industry will now be able to keep up with surging auto industry demand.
The law provides about $52 billion in subsidies for semiconductor research, design and production in the U.S., including $2 billion set aside for the mature node “legacy chips” that are commonly used by automakers and suppliers. The bill also includes a 25 percent tax credit for investments in microchip production through 2026.
The bill comes 18 months into a disruptive global microchip shortage that has crimped auto production worldwide and sent average vehicle transaction prices soaring.
Automakers have cut 13.5 million vehicles out of their factory schedules since the start of 2021 because of the shortage, according to estimates by AutoForecast Solutions. That includes nearly 4.3 million vehicles axed at North American assembly plants.
The industry’s hunger for semiconductors will only grow in the years ahead as more electric vehicles are built and as infotainment offerings and driver-assistance systems become more advanced.
“Considering the computing power of today’s increasingly digital and connected vehicles, this bipartisan investment in domestic semiconductor manufacturing is a smart investment in the future,” John Bozzella, CEO of the Alliance for Automotive Innovation, said in a statement.
German supplier giant and semiconductor maker Robert Bosch, for example, estimates that microchips will account for about $800 of a vehicle’s value by the end of the decade, up from around $200 today.
Since it takes up to five years for new semiconductor fabrication plants to get up and running, the bill is unlikely to show immediate results in relieving the chip shortage. Although automakers and suppliers have signaled that they see the shortage easing as the year progresses, demand is likely to outpace supply into 2023.
But new semiconductor production is already on the way.
Even before the CHIPS and Science Act became law, U.S. chip giant Intel said it would invest $20 billion in two new Ohio plants, which come in addition to the two plants it is constructing in Arizona at a cost of $20 billion. South Korean conglomerate SK Group said it will spend $15 billion on its U.S. semiconductor business, and Taiwan Semiconductor Manufacturing Co. is building a $12 billion facility in Arizona.
The White House and the auto industry hope those gargantuan investments are just the beginning and that the new law will spur more domestic production plans in the coming months and years.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.
Please enter a valid email address.
Please enter your email address.
Please verify captcha.
Please select at least one newsletter to subscribe.
See more newsletter options at autonews.com/newsletters.
You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.
Sign up and get the best of Automotive News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.
Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.
Our mission
The Automotive News mission is to be the primary source of industry news, data and understanding for the industry’s decision-makers interested in North America.
1155 Gratiot Avenue
Detroit, Michigan
48207-2997
(877) 812-1584
Email us
Automotive News
ISSN 0005-1551 (print)
ISSN 1557-7686 (online)
Fixed Ops Journal
ISSN 2576-1064 (print)
ISSN 2576-1072 (online)