The World’s Semiconductor Equilibrium is Shifting

How the U.S. is investing billions to regain semiconductor supremacy

The semiconductor industry is critical to the country’s competitiveness, as chips are used in practically every product, from missiles to airplanes, cars to home appliances, computers to mobile phones, manufacturing tools to robots.

Having experienced the tremendous economic impact caused by chip shortages, government leaders now recognize that supply chain reliability and control are critical not only to economic stability and growth but also to national security and technological supremacy.

Two years ago, the Biden Administration created the CHIPS and Science Act (CHIPS Act), a $52.7 billion initiative designed to strengthen the U.S.’s strategic position within the semiconductor marketplace. Of that amount, $13.2 billion is committed to R&D and workforce development, and a 25 percent investment tax credit is provided for capital expenses related to semiconductor manufacturing and related equipment. The Act intends to boost domestic semiconductor manufacturing and R&D in the U.S., improve supply chain resiliency, increase global competition, and address national security concerns.

The initiative will act as an innovation boost and a competitiveness strengthener. Critically for smaller companies, funding for research and development is included in the CHIPS Act, which is anticipated to spur semiconductor technology innovation. This will result in improved performance and efficiency, as well as new applications for semiconductors. For example, our portfolio company, EnaChip, is innovating with power-integrated circuits (ICs). The proliferation of AI applications and interconnected devices creates a massive demand for highly advanced power systems on a chip. EnaChip replaces bulky and inefficient power components by directly integrating power delivery and voltage conversion onto the IC, enabling revolutionary device miniaturization and enhanced functionality.

The CHIPS Act has the potential to substantially benefit companies like EnaChip and reinvigorate early-stage investment driving innovation. The financial incentives for semiconductor research, development, and manufacturing will reduce the risk associated with early-stage investments in these areas. By fostering a more secure and robust domestic supply chain for semiconductors, the CHIPS Act could increase investor confidence in startups that contribute to or benefit from this supply chain.

The overall impact of the CHIPS Act on the technology ecosystem will have a multiplier effect, where improved infrastructure and resources will lead to a more vibrant and active startup landscape. The significant government investment demonstrates a solid commitment to the industry, which could boost overall confidence and attract more early-stage investments.

According to the ambitious goal set by the Biden administration as part of the CHIPS Act, by the end of the decade, the U.S. is expected to generate approximately 20% of the most advanced semiconductor chips in the world. Less than 12% of chips are produced in the U.S. today, compared to roughly 37% in 1990. The most sophisticated semiconductors are produced almost exclusively in Taiwan.

To quote economic historian Chris Miller, “Microchips are the new oil.” Chips have become the modern world’s equivalent of oil, serving as a vital and scarce resource. Today, military, economic, and geopolitical strength is intricately tied to chips, a connection that has only intensified with the rise of AI. A more robust domestic semiconductor industry will lead to faster technological advancements and the ability to maintain the country’s economic leadership.

But thinking that everything can be done locally, without relying on other countries, would be a mistake. The semiconductor sector is complex and relies on an interconnected supply chain, where collaboration is necessary for the success of the industry. An example is the lasers used to imprint circuits on wafers, which require purified neon. Today, little neon is produced domestically, and most come from Ukraine, Russia, and China. Other raw materials used to build chips, such as tungsten, are sourced primarily from China. Creating a big fracture between the U.S. and China or other countries is impractical and poses a severe risk.

Progress report.

For chipmakers, the government disbursements will help cushion the financial impact of building facilities that can cost as much as $30 billion. Semiconductor companies have pledged to invest more than $230 billion in the US in recent years, many on the explicit condition that they receive government support.

Since the federal government enacted the “CHIPS Act” in 2022, subsidies have been modest, with only three American companies currently benefiting, including BAE Systems, GlobalFoundries, and Microchip Technology.

There are reports that Intel, which is constructing a new facility in Ohio, is negotiating to receive up to $10 billion of that government funding. Last week, Intel unveiled its new process roadmap at its Intel Foundry Direct Connect event, showcasing its ambition to be the number two foundry by 2030.

The latest subsidy list may also include Taiwan Semiconductor Manufacturing Company (TSMC). TSMC is investing roughly $40 billion to build a foundry in Phoenix, Arizona, which is scheduled to begin producing 3nm process technology—the most advanced in the world—in 2026.

The CHIPS Act creates tremendous opportunities for U.S. companies –big and small. This legislative approach to investing in America is part of a strategy to make the U.S. a more attractive place for investment and to demonstrate the country’s global leadership in critical industries of the future.

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Longview Innovation delivers on the promise of scientific innovation. The firm invests in and builds companies with strong scientific breakthroughs, partnering with innovators who want to impact billions of lives.  We invest in several sectors, including life science, climate tech, manufacturing, semiconductors, transportation, and artificial intelligence.