Speed Up CHIPS Funding, Before It’s Too Late

However, the complexity of the application process and the slow pace of fund approvals have dampened enthusiasm. And high labor and material costs, coupled with the difficulty of meeting subsidy eligibility requirements—specifically, that high percentages of building materials and components must be sourced from U.S. suppliers—have posed significant challenges. With many firms concurrently building new facilities, certain components like switchgears and transformers provided by U.S. suppliers are in short supply. As a result, firms face wait times exceeding 100 weeks.

A 2023 decline in semiconductor sales and a shortage of skilled labor in the U.S. have also contributed to the delays.

In early 2023, Panasonic initiated construction of a $4 billion EV battery plant near De Soto, Kansas, but cancelled plans for a second plant in Oklahoma. Similarly, LG Energy and GM abandoned their plans for a fourth EV battery plant due to cost overruns at their other three facilities and a slowdown in EV sales in the U.S.

Intel had initially planned to commence chip production at its new Ohio plant in 2025. However, in February, it announced that the plant’s completion would be postponed until late 2026.

Similarly, TSMC delayed from 2024 to 2025 the completion of its first U.S. plant, which would produce 5-nanometer chips in Arizona. It also announced a significant delay in the completion of its second plant, which would produce 3-nanometer chips—an advanced chip required by Apple—until 2028.

A Three-Pronged Solution

Over 170 firms have applied for funding under the CHIPs act. However, apart from a $1.5 billion grant awarded to GlobalFoundries in February, only two minor grants had been issued, to manufacturers of less advanced chips, by the end of January.

Without a concerted effort to fund various projects, doubts may arise about the U.S. government’s commitment to semiconductor and EV manufacturing. This could lead to cancellations and delays, making it challenging to compete with China.

The Biden administration should consider a multi-faceted approach to rejuvenate these vital industries.

First, to expedite the fund application process, the U.S. government should assemble an advisory committee of scientists and engineers from industry, universities and various national laboratories. This committee could reignite interest in establishing a consortium similar to Sematech in the 1980s.

The Department of Commerce oversees CHIPS Act funding. The Bureau of Industry and Security (BIS), an agency within the DOC, has the expertise to evaluate which semiconductor manufacturing technologies are critical to national security in both commercial and defense sectors. However, its capacity to provide advisory support regarding various CHIPS Act funding applications is limited. Leveraging expertise from industry and research institutes could help speed up the grant review process.

Second, the U.S. government should establish a dedicated team spanning various federal and state agencies. This team would streamline the permitting process for firms to design, construct and operate semiconductor manufacturing facilities. This step is particularly important given that various federal agencies, including the EPA, continue to introduce new regulations that restrict or ban chemicals essential for advanced chip production. Interagency collaboration would overly complicated and sometimes contradictory regulations

Third, the U.S. government should consider increasing the number of temporary work visas to enable firms to hire foreign skilled workers for the development and operation of semiconductor facilities. Despite a moderate increase in the number of STEM graduates in recent years, there is a shortage of skilled workers in the U.S. to install and operate specialized equipment for advanced chip manufacturing. To overcome this challenge, TSMC is currently attempting to expedite visas for 500 Taiwanese workers to accelerate the launch of its $40 billion fabrication plant in Arizona.

While hiring foreign skilled workers is a temporary solution, the U.S. government must continue to provide additional support to encourage universities to produce more STEM graduates. It is unfortunate that the National Science Foundation’s federal funding has been reduced by $820 million in 2024. The Biden administration needs to secure stable funding to support research and development in science and technology.

The IRA and the CHIPS Act are essential, but effective execution of these plans is critical to develop resilient supply chains in the semiconductor and clean energy sector.

Christopher Tang is a distinguished professor at the UCLA Anderson School of Management.