Biden's Big Semiconductor Law Will Ramp Up Us Chip Production -- But At A High Cost, Report Finds

A sweeping 2022 law, touted by President Joe Biden as a way to revive U.S. manufacturing of semiconductors and reduce the country's reliance on foreign-made computer chips, will 'sharply increase production'' of semiconductors in the United States. But it will do so at a high cost and might not deliver the best bang for the buck, concludes a report out Wednesday by an economic think tank in Washington.

Researchers at the Peterson Institute for International Economics calculated that the 280 billion CHIPS and Science Act will create about 93,000 construction jobs as chip factories go up in the United States and 43,000 permanent jobs once they're in operation. But the government subsidies behind the expected chip manufacturing boom mean that each job created will cost taxpayers about 185,000 a year - twice the average annual salary of U.S. semiconductor employees, the Peterson report found.

"More production might not provide the best security for the money,'' wrote researchers Gary Hufbauer and Megan Hogan.

The Peterson reports notes that in passing the CHIPS Act Congress "did not consider alternative ways'' of spending billions of dollars to ensure the U.S. had adequate chip supplies. Other options could have included creating a chip stockpile run by the Federal Emergency Management Agency or providing financial incentives for U.S. chip users and foreign chip producers to keep bigger inventories of semiconductors in the United States.

Biden touted and Congress passed the CHIPS Act after semiconductor supplies ran short following COVID-19 lockdowns . The shortages disrupted production of automobiles and other products. The Biden administration also viewed ramping up made-in-America chip production as a national security issue because it would reduce U.S. reliance on foreign imports of chips, which are used by the military as well as private companies.