The new CHIPS and Science Act will bring semiconductor chip manufacturing to the U.S. President Joe Biden signed the CHIPS and Science Act of 2022 into law Tuesday, which allocates $53 billion dollars in federal funding to manufacture semiconductor chips domestically.

The new CHIPS and Science Act will bring semiconductor chip manufacturing to the U.S.

The new CHIPS and Science Act will bring semiconductor chip manufacturing to the U.S.

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President Joe Biden signed the CHIPS and Science Act of 2022 into law Tuesday, which allocates $53 billion dollars in federal funding to manufacture semiconductor chips domestically.

AILSA CHANG, HOST:

All right, stop for a moment and look around your car, your desk, your kitchen. How many high-tech gadgets do you see? I mean, look - your laptop, your cell phone, your TV, all of those things - they need semiconductor chips in order to function. And most of those chips are not made in the U.S. Now, the Biden administration is determined to change that. So today, the president signed the CHIPS and Science Act into law. It allocates more than $50 billion to bring semiconductor chip manufacturing to the U.S. and away from its current production hub in East Asia.

Joining us now to discuss the CHIPS Act is Sourabh Gupta. He's a senior Asia-Pacific policy specialist at the Institute for China-America Studies. Welcome.

SOURABH GUPTA: Thank you for having me on the show, Ailsa.

CHANG: Well, thanks for being with us. So just to start us off, Sourabh, can you just paint a picture of, like, the worst-case scenario? If the U.S. didn't start manufacturing more semiconductor chips and then suddenly stopped getting them from Asia, where would we find ourselves?

GUPTA: Life would come to a standstill if we don't have the chips, which is - like oil, it is the resource that runs our electronics and effectively that runs our life in many ways. I mean, a car has hundreds of chips in them. And we are not talking of the most sophisticated cars. We're not talking electric vehicles. We are talking your average car. We're talking just television sets - something as straightforward as that. You know, the kids are going - the gamer kids are not going to have much of their entertainment if the chips don't come. Exactly, and so - but what the chips also do is provide the foundation for a lot of innovation, next-generation innovation - what has been dubbed as the fourth industrial revolution.

CHANG: Right. OK, so in your opinion, does this CHIPS Act go far enough to prevent this potential slowdown if it were to happen one day, like if the U.S. is so far behind its competitors in the semiconductor chip manufacturing area? Is this legislation kind of too little, too late, you think?

GUPTA: No, I wouldn't characterize it as too little, too late. It is sufficient. There is a lot of money, and a lot of it is frontloaded - literally $19 billion frontloaded in this next 12 months to support chip manufacturing in the U.S. But we don't need to have all chips or a very significant number of chips made in the U.S. We just need a certain amount of chips which will not hold the U.S. in a situation of blackmail or in a situation of peril if there are - if there is a war in East Asia or if there are others - just general supply chain snafus.

CHANG: OK. Well, that's very interesting. You know, while this legislation is being touted as a way to shore up the U.S.'s position in the semiconductor chip manufacturing area, this is a law that is very much trying to curb China's influence in this area, right? Like, do you think it effectively does that?

GUPTA: It absolutely does that, but it doesn't necessarily curb China's influence. It forces China to be able to come up with greater indigenous innovation to catch up with the U.S. in terms of - and its East Asian peers - in terms of chip manufacturing.

CHANG: But let me ask you about other parts of East Asia because I'm wondering, is there a concern here that, as the U.S. is trying to undercut China or limit China's influence in the semiconductor chip manufacturing area, that it is hurting, say, Taiwan?

GUPTA: Yes. East Asian manufacturers are conflicted with regard to the CHIPS Act and having certain disciplines imposed on them in terms of expanding capacity in China. But that having been said, they value the importance of the United States. And so the way they are trying to proceed going forward is asking the federal government, the U.S. federal government, to allow them to continue to produce legacy chips in China - chips which are not cutting-edge - while they will produce the cutting-edge chips in their home countries and in America so that that technology which goes into cutting-edge chips does not bleed into China and enhance China's productive capabilities in any way.

CHANG: That is Sourabh Gupta of the Institute for China-America Studies. Thank you very much.

GUPTA: You're most welcome.

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