chips act faces scrutiny: will funding delays impact us semiconductor leadership?
Washington, Monday, 19 May 2025.
the ipc has released a report evaluating the us chips act. funding awards are under review, creating uncertainty. this may impact the semiconductor industry’s growth. the act has seeded 90 projects across 28 states with $36 billion in federal awards, aiming to create 58,000 jobs. however, advanced packaging remains underfunded, and global competition is intensifying. china’s $47.5 billion “big fund 3” and other nations’ initiatives pose a challenge. a slowdown could erode us momentum, requiring a broader ‘silicon-to-systems’ strategy to maintain competitiveness.
legislative efforts to secure chip supply chains
The U.S. Congress is considering the Chip Security Act to combat the illegal transshipment of chips [2]. This act would mandate that U.S. chip companies include location verification modules in export-controlled chips [2]. These modules aim to prevent these chips from being illegally obtained by countries like China [2]. The proposed mechanism could use software, firmware, hardware, or physical means to verify chip locations [2]. Representative Bill Foster, a scientist and former physicist, has advocated for equipping controlled chips with location tracking and remote shutdown capabilities [2][3].
tracking chips: technical and economic considerations
Tim Fist, a researcher at the New American Security Center, proposed a ‘governance mechanism’ for AI chips [2]. This mechanism involves installing a ‘security module’ on each high-performance AI chip to ensure the use of authorized firmware and software [2]. This module could remotely verify the chip’s status and enforce updates, offering flexible governance [2]. While technically feasible, the economic implications of embedding such control mechanisms are under scrutiny [2]. A Commerce Department official questioned whether it would affect the market competitiveness of U.S.-made chips [2].
export control adjustments and geopolitical tensions
The U.S. Commerce Department has modified its stance on AI chip export controls, now cautioning against the risks of using Chinese advanced computing chips, including specific Huawei Ascend chips [4]. China has criticized the U.S. for abusing export controls and interfering with Chinese companies using domestically produced chips [4]. China views these actions as a threat to global semiconductor supply chains and technological innovation [4]. The Ministry of Commerce has stated that such measures undermine high-level talks and damage bilateral trade relations [4].
sia’s recommendations for maintaining us chip leadership
The Semiconductor Industry Association (SIA) has submitted recommendations to the U.S. government regarding its chip strategy [7]. The SIA emphasizes the importance of policies that maintain U.S. leadership in semiconductor technology [7]. SIA supports bringing semiconductor production back to the U.S., noting its member companies are investing over $500 billion in new manufacturing and R&D facilities [7]. David Isaacs of the SIA stressed the need for access to the global market and a cost-competitive base for chip development [7].
global market access and r&d investment
Approximately 70% of the U.S. semiconductor industry’s revenue in 2024 came from sales outside the U.S [7]. Between 2001 and 2024, the U.S. semiconductor industry invested about 20% of its revenue in R&D [7]. The SIA’s recommendations include industry agreements, domestic tax incentives, streamlined regulations, and funding for R&D and workforce training [7]. These measures aim to reduce the cost of key inputs for semiconductor design and manufacturing, fostering innovation and competitiveness [7].
china’s response to us restrictions
In response to increasing U.S. pressure, China is increasing investment in its domestic semiconductor industry [6]. The U.S. has been increasing pressure on China’s semiconductor industry since 2018, restricting sales of advanced semiconductors and related equipment [6]. China’s multiple associations have declared that U.S. chips are no longer safe or reliable [6]. China’s Ministry of Foreign Affairs has lodged stern representations regarding updated semiconductor export control rules [6]. These actions reflect a broader effort by China to reduce reliance on foreign technology and build a self-sufficient semiconductor ecosystem [6].