Got Salsa?

Chips! Delicious, of course. But the less tasty ones make up the brains behind all but the very simplest of electronic devices. Smart phones, chargers, microwaves and cars alike all use integrated circuits (ICs for short) to perform whatever task they’ve been designed to do. As we know, we’re still recovering from the same chip shortage which has made buying those cars and electronics trickier, even this deep into 2022. This week however, Congress has made moves to help prevent this kind of supply squeeze from happening in the future. Will you finally be able to go and buy a PS5 next week, then? Probably not, but there are still wins here and a more diverse supply chain might help you secure a PS6 after 2030s global pandemic! Can’t wait? Me neither.

As it stands today, the U.S. imports around 90 percent of the chips used in our modern technology. Seventy-five percent of global chip production as a whole is handled in East Asia, which means when a large scale crisis of any real magnitude affects that area of the world, we’re all left scrambling for supply. Being that it’s so much cheaper to allow China, Taiwan and South Korea to continue handling the manufacturing of these goods, amongst other very boring global trade reasons, this has gone largely unchecked for many years. The most recent shortage though, and moreover the slowness of its recovery, has driven lawmakers to act and pass legislation to help mitigate this risk moving forward.

The Chips and Science Act stands to help boost the U.S.’s production capabilities when it comes to IC manufacturing. The bill, passed last week, contains around $52 billion in subsidies to bolster the number of chips, through both construction of new and modernization of existing factories, we’re able to supply domestically. It also provides investment tax credits and mentions resources to increase scientific research in order to control the reliance we have on imported components of this kind. Given that these chips touch almost every industry, doing all we can to try and lessen the effects of another shortage seems like a sensible move. When we have companies the size of Apple delaying product launches, that’s a fairy clear indicator as to the magnitude of any given problem.

So we can expect chip factories to be springing up everywhere, then? Not so fast. Without diving into the finer details, suffice to say that manufacturing a silicone chip is a complicated and sensitive process. A building set up to fabricate these chips often has to be purpose built due to the environmental challenges involved. This can take years and cost tens of billions of dollars, so things aren’t going to change overnight by any means. What we can expect however is renewed interest in locally manufactured electronic components, which of course brings benefits economically. It’s a win by way of being a step in the right direction when it comes to prioritizing focus.

For me that’s what this new bill represents; the modernization of domestic manufacturing. It’s jobs, it’s more homegrown businesses and it’s less risk when it comes to sourcing critical components. The diversification of the supply chain is great news for everyone, whether you’re buying a tractor or a tablet. The world’s changing and it’s important that we remain competitive in this industry, which can’t happen without sustained support for new facilities, education and innovation. While I by no means believe that importing goods from overseas is without merit, as both a consumer and a business owner I’d like to have the option of buying “local.”