The 2022 CHIPS Act and Its Educational Impacts—A Partstack Guide

The 2022 CHIPS Act and Its Educational Impacts

Rayan Bajwa, PhD

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Executive Summary The US has lost its global leadership in semiconductor fabrication, as companies are now opting for offshore

Contents Executive Summary .................................................... 1

by

Part 1: What is The CHIPS and Science Act 2022 ........... 2

chip manufacturing owing to its lower costs. With heavy reliance on foreign fabs, the effect of ongoing chip shortage was also deeper on the US due to more complex international supply chain.

To address these challenges and reviving the US

Why the CHIPS Act was needed? .............................. 2 CHIPS Act Allocation Summary .................................. 4 Part 2: CHIPS Act: Remodeling the State of US HigherEd ................................................................................... 5

competitiveness in semiconductors, congress has

A Closer Look at the R&D Funding ............................. 5

passed a legislation “CHIPS and Science Act 2022”

A Scope Far Beyond Just Fabricating the Chips ......... 6

which contains more than $200 billion as direct

Role of Academia—At Large ...................................... 8

appropriations and authorizations to bolster the state of semiconductor industry in the US. In this article, we lay down the key features of this massive CHIPS funding

Part 3: Conclusions....................................................... 12 References ................................................................... 13

and discuss its multifaceted impacts on the US

education system.

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Part 1: What is The CHIPS and Science Act 2022 With bipartisan vote, Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act of 2022 was passed by congress last year in July, and then signed into law by Presiden Biden in August 20221. The CHIPS act was set in motion to tackle a large number of challenges currently faced by the semiconductor industry, particularly in the US, such as a severe ongoing chip shortage fueled by COVID-related instabilities and the diminishing role of the US in chip production that raises geopolitical concerns. Semiconductor industry is among the key industries in any economy and contributes directly to the overall GDP. To boost the US competitiveness in semiconductors and related technologies, CHIPS and Science act offers funding of more than $200 billion in the form of semiconductor manufacturing incentives and various R&D initiatives1.

Why the CHIPS Act was needed?

Reshoring the Semiconductor Manufacturing By all means, with its rapidly growing chip production capacity, Asia is now becoming the leader in semiconductor manufacturing. Back in 1990s, the US used to hold this position, contributing to almost 36% of the semiconductors fabricated worldwide. However, since then, share of the US in global semiconductor capacity is shrinking (12% in 2020) and is expected to lessen even further by 20302 (Exhibit 1).

Exhibit 1.

Shares of the US and China in global chip fabrication capacity (1990-2030)

Source: Semiconductor Industry Association2.

In contrast, China is steadily increasing its capacity, and is set to assume the global leadership in semiconductor fabrication by the end of this decade2. US-

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based semiconductor companies are opting for offshore manufacturing (primarily in China and Taiwan), simply due to lower costs. Though the US still remains the brains in global semiconductor value chain, as firms based in the US account for 47% of the global market3 and they all do chip designing locally, reassuring a leading position in manufacturing is also critical, especially with ongoing geopolitical tensions. Reversing such trends would require a significant amount of funding to encourage domestic production of semiconductors, and the CHIPS act attempts to deliver that.

Alleviating the Semiconductor Shortage Semiconductors are an integral part of the US economy—chip industry contributed (directly or indirectly) a hefty sum of around $246 billion to the US GDP in 20203. Recently, strong fluctuations in demand for semiconductors following the pandemic, especially in consumer electronics and automotive sectors, have led to a serious chip shortage that has affected many industries, essentially posing risks to overall economy. According to one report, this ongoing chip crunch has influenced a total of 169 industries4. State-led initiatives, such as the CHIPS act, are now more important than ever to relieve this shortage by strengthening the supply chain and prevent it from reoccurring in a longer run by building more local fabs, thus reducing reliance on Asian foundries (e.g., TSMC).

Regaining Global Leadership in Scientific R&D Most of the US economic growth in the past has been fueled by technologyrelated innovations, backed by scientific R&D. That said, R&D is the key to advancing in this technological era; however, the US is following an opposite pattern, as it continues to fall behind other advanced economies e.g., Korea and Germany, in terms of R&D spending per year (Exhibit 2). In 1990, the US was among the top few nations with highest R&D spending (as a percentage of GDP), but it has now moved down to 9th position globally5. The key reason behind this is the cut in federal R&D spending, while private businesses have stayed committed to funding R&D programs6. In fact, federal R&D spending in 2020 was at its lowest in 60 years6.

It is now crucial for the US to redirect the focus towards R&D and regain its leadership among the competing nations in scientific R&D. Creating a sustainable R&D ecosystem has two aspects—building the infrastructure and the workforce. In the semiconductor context, this means establishing more fabs and developing a stronger STEM (science, technology, engineering, and math) workforce that could actually utilize all the facilities.

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Exhibit 2.

R&D spending of countries as a percentage of their GDP

Source: Data from the World Bank5.

CHIPS Act Allocation Summary The CHIPS and Science act has been formally categorized into two divisions, called as ‘Division A’ and ‘Division B’—details are summarized below (Exhibit 3).

CHIPS and ORAN Investment (Division A) ‘Division A’ of CHIPS act provides $54.2 billion in direct appropriations to semiconductor industry, a large portion ($39 billion) of which is reserved as manufacturing incentives that would help expand the domestic chip manufacturing capacity1. In hopes to secure this funding, many big players have already started planning the development of new fabs, including Intel, which expects CHIPS fund to cover as much as $3 billion for its each new fab installed inside the US7.

Building a new fab is expensive, and the cost goes even higher (up to $10 billion) for those that could process leading edge nodes. Certainly, just CHIPS funding will not be enough and to attract private investments, the CHIPS act also provides $24 billion in tax credits for taxpayers that invest in chip fabrication.

In addition to fabrication incentives, some $11 billion has been set aside to support R&D, including the formation of National Semiconductor Technology Center (NSTC). The division ‘A’ of the bill also includes $2 billion for Department of Defense for chips-related activities, as well as $1.5 billion for USA Telecommunications Act (2020) to spur the development of more secure software based 5G networks i.e., Open Radio Access Network (ORAN).

Research and Development Funding (Division B) While division ‘A’ pumps a large investment in chip fabrication, the latter division is solely devoted to strengthening the R&D stature of the US, with authorizations (not yet appropriated) of more than 150 billion over the next five years (Exhibit 3). This funding will be disseminated via state entities i.e., National For more tech insights visit us at https://partstack.com/

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Science Foundation (NSF), Department of Commerce (DoC), Department of Energy (DoE), and National Institute of Standards and Technology (NIST), over the period of next five years.

Exhibit 3.

CHIPS and Science Act funding from 2022 to 2027

Source: The CHIPS and Science Act 20221.

Part 2: CHIPS Act: Remodeling the State of US Higher-Ed A Closer Look at the R&D Funding The CHIPS act provides the biggest 5-year federal R&D funding in the history of the US with value around $169 billion, showing America’s devotion to recover its global leadership in innovation by strengthening the overall R&D infrastructure, creating an inclusive workforce and enabling industry-academia partnerships1.

By the numbers, the overall federal R&D spending would increase dramatically over the course of next 5 years, owing to a large influx from the CHIPS funding (Exhibit 4). In 2022, the budget of NSF, DOE and NIST was estimated at $17 billion, which is expected to reach $32 billion (more than 80% increase over baseline) in 20271,8. In addition to funds allocated to these state agencies, another $10 billion is reserved for creating at least 20 geographically distributed technology hubs to support research and innovation. Academia will play a pivotal role here in effectively utilizing these funds, as most of the funding will

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be channeled through it. That is to say, the way academic institutions move forward will essentially define the success of CHIPS act programs.

Exhibit 4.

Dissemination of CHIPS Act R&D funding from 2022 to 2027

Source: American Institute of Physics8 and The CHIPS and Science Act 20221. This funding only includes authorization from the CHIPS act Division “B”.

A Scope Far Beyond Just Fabricating the Chips In a broad sense, the R&D funding of CHIPS Act has three main motives:

Building a Diverse STEM Workforce The primary goal of this funding is to generate a diverse more inclusive STEM workforce, especially in the microelectronics and semiconductor domains.

Semiconductor design and fabrication is highly complex, and thus requires skilled professionals having knowledge that stretches to various STEM fields such as, materials science, electronics, physics etc. However, the semiconductor industry is already going through a shortage of such trained workforce—A recent survey has estimated that near 5% engineering positions are currently vacant in the semiconductor industry9. Coupling this shortage with a massive number of jobs that will soon be created with initiatives under the CHIPS act, it is quite obvious that semiconductor workforce demand will be rising exponentially in the next few years.

However, the scope of this R&D funding is multidimensional and is not only limited to creating engineers and scientists for semiconductor industry. Instead, the CHIPS act emphasizes on diversifying and strengthening the overall STEM workforce, by mentioning initiatives such as:

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• •

•

Increase participation of historically underrepresented and rural communities in STEM programs.

Revamp graduate research fellowship programs to increase graduate students in critical fields e.g., advanced semiconductor manufacturing and artificial intelligence (AI) etc.

Enhance STEM education also at PreK-12 and undergraduate levels, to nurture students from the beginning according to the needs of industry.

Renovating R&D Infrastructure and Expanding Core Research Secondly, CHIPS act funding aims to support the overall development of cuttingedge research infrastructure with a strong focus on semiconductors. This includes creating new innovation centers across the country, as well as expanding core research activities to better cover the emerging technologies such as cybersecurity and artificial intelligence (AI) that are now national security issues1.

From the semiconductor industry standpoint, since outsourcing the leadingedge fabrication to Asian fabs is now a standard practice, the US simply does not have the relevant talent or R&D facilities anymore. Hence, even by installing more foundries capable of processing sub-10 nm nodes, creating a sustainable ecosystem is impossible without realigning the focus of semiconductor talent pipeline and R&D sector towards the leading-edge nodes. In response to similar challenges that are hindering the US competitiveness in innovation, CHIPS act has identified the core research areas to focus, few among which are1: • • • • •

Advanced semiconductor manufacturing Artificial intelligence and machine learning Quantum computing Cybersecurity 6G communication

Enabling Translational Research Industry-university partnerships are the key to convert innovative ideas into products. Overall research and development cycle is lengthy and contains stages starting from initial research to prototyping and then towards large scale manufacturing. As standalone entities, neither academia nor industry has the abilities to handle the whole R&D workflow—from idea to value. Usually, there exists a lack of cooperation between industry and academia, which essentially makes the university-led innovations trap into prototyping and piloting stages, commonly referred to as the “valley of death” (Exhibit 5). Unfortunately, these innovations eventually die due to financial risks and increased costs, unbearable by academia and unaddressed by industry. A closer collaboration between academia and industry here can allow us to alleviate such dead zones in the

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device development process through cooperative planning, thus realizing true translational research. To address these concerns, the CHIPS act has reserved $20 billion to form Directorate for Technology, Innovation, and Partnerships (TIP) under the NSF to initiate translational research activities1.

Exhibit 5.

Funds distribution in academia and industry during different device development phases

Illustration inspired by an SIA report10.

Role of Academia—At Large Directly or indirectly, all the R&D initiatives under the CHIPS act will be driven by academic institutions—whether it is the STEM workforce that has to be produced by academia or the operation of regional technology hubs that would require support from research universities every step of the way. Similarly, academic institutions also need to take a lead in transferring technology from lab to fab. That said, there are numerous ways to utilize the massive CHIPS fund, and to maximize impact, it is critical for academia to carefully plan and prioritize the activities for future.

Recent initiatives show that academia is well aware of the ongoing semiconductor related challenges and has been progressively planning to combat them while anticipating the support from CHIPS act programs. For instance, 12 mid-west academic institutions joined last year to form the “Midwest Regional Network” that will address national concerns associated with semiconductors i.e., onshoring chip manufacturing, advancing the state of microelectronics R&D, and combating workforce shortage11. Likewise, below we outline the key challenges currently facing the semiconductor industry that



The institutions are: Michigan State University; University of Michigan; Ohio State University; Purdue University; Case Western Reserve; Columbus State Community College; Lorain County Community College; Sinclair Community College; University of Cincinnati; University of Dayton; University of Notre Dame; Wright State University.

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require immediate attention from academia under the scope of CHIPS act and some related ongoing efforts.

Shortage of Skilled Professionals With recent shift of academic institutions towards technologies such as AI and machine learning, students are now more inclined towards learning computer sciences; while semiconductor industry is becoming less popular and has gained the status of “Invisible Industry”9. In fact, a study found that almost half of all the STEM degree holders pursue a career in computer science12. However, semiconductor workforce demands are higher than ever, since all these rapidly growing computer science related technologies are essentially programmed on semiconductor chips. This has consequently initiated a shortage of skilled professionals in semiconductor industry. A survey conducted recently reports that 82% of the executives in semiconductor industry have indicated a shortage of skilled professionals13.

Exhibit 6.

Semiconductor workforce characteristics and future job market

Source: SIA14 and Data for Progress15.

In addition, manufacturing incentives from CHIPS act will also create new jobs soon, especially in chip fabrication division, thus further fueling the workforce

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shortage. It is estimated that number of new jobs created under CHIPS act programs could be as high as 70,000, which would increase the total semiconductor employments by almost 25% in 2026 (Exhibit 6).

To match these aggressively increasing workforce demands, academia needs to realign its focus towards semiconductors by adjusting curriculum and increasing the number of semiconductor related courses/degrees. Furthermore, it is also essential to promote semiconductor industry among students by increasing university-industry partnerships and offering them hands-on training experiences. Purdue University has recently launched first-of-its-kind “Semiconductor Degrees Program”—a dedicated program to upskill undergraduate and graduate students for semiconductor industry 16. Similarly, University of Michigan in collaboration with Intel has introduced the “Semiconductor REU” program that offers funded microelectronics research opportunities to undergraduate students across the country17.

Realizing the Importance of Community Colleges Semiconductor value chain requires a certain degree of sophistication when it comes to designing chips or devising high-yield fabrication processes for them, and thus requires professionals with advanced level of understanding on topics related to materials science, microelectronics etc. However, performing routine tasks in cleanrooms and operating fabs do not exactly need PhD scientists. As a matter of fact, 35% of the workers in semiconductor industry do not posses any college degree14. Additionally, it has been estimated that 60% of the manufacturing roles do not exactly require a bachelor’s degree18. In contrast, the approach of academia has been on the contrary, as most of semiconductor related education is offered only at bachelor or advanced levels i.e., Master or PhD (Exhibit 7).

Exhibit 7.

Focus of semiconductor related education at different levels

Source: Government Technology19.

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Therefore, academia has to rework its strategies to ensure sufficient attention on the development of technicians. Community colleges can be a viable solution to these challenges—in fact, various such institutions* have already been contributing by offering two-year programs in semiconductor related fields20. By leveraging CHIPS funding, more programs need to be added to better utilize the community colleges in generating skilled technicians. Recently, a new chip fabrication training program for technicians has also been announced by Intel in collaboration with Maricopa Community Colleges that would provide hands-on chip fabrication training in a two-week program21.

Closing the Academia-Industry Gap Partnerships between universities and industry are essential to fully understand and match the industry’s workforce needs and provide “lab-to-fab” solutions.

American Semiconductor Initiative (ASA), a network of academic institutions distributed nationwide to ensure a sustainable growth of semiconductors9, is a significant step towards fostering the university-industry partnerships. ASA aims to create internship opportunities for students and supporting translation research. Benefitting from such initiatives as well as the massive CHIPS fund, academia needs to narrow the gap with the industry, to keep the semiconductor ecosystem in harmony.

Encouraged by CHIPS act, SkyWater has announced an investment of $1.8 billion to establish a state-of-the-art chip fabrication facility in collaboration with Purdue University22. The facility will be located inside the university and will carry out both R&D and mass-fabrication tasks. Proximity to fab will not only accelerate translational research but will also encourage students to participate in trainings/internships. Intel has also revealed its plans to develop two leadingedge fabs in the state of Ohio, where it pledges an additional $100 million for strengthening partnerships with universities in the region 23. These collaborative initiatives will serve the US semiconductor industry for decades to come and are the perfect examples of how academia and industry should collaborate in general.

Realizing the Role of Foreign Talent While CHIPS act has covered many different issues in the semiconductor industry, it has missed to acknowledge the contribution of foreign talent.

Surprisingly, a substantial portion of semiconductor high-skilled workforce is foreign born (Exhibit 8), and the US universities are the key entities that channel foreign talent towards the industry. That said, more than 60% of the students enrolled in graduate programs related to semiconductors are foreign born24, and this trend has been consistent for past many years (Exhibit 8).

* Hudson Valley Community College; Schenectady Community College

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Exhibit 8.

Dominance of Foreign Talent in Semiconductor Workforce

Source: SIA24 and CSET25.

Despite the strong dependence of semiconductor industry on international talent, CHIPS legislation has not pointed out any initiative to attract or retain it.

At the same time, the number of new university enrollments of international students per year has started to decline marginally24. Academia, in collaboration with industry, must discuss these talent needs with the government, where the end goal should be new immigration policies to encourage foreign talent.

Part 3: Conclusions CHIPS and Science Act provides a timely funding in an attempt to restore the US dominance in semiconductors. Though a large part of this funding is reserved to scale up chip fabrication inside the US, the portion reserved for enhancing R&D infrastructure and STEM workforce is even larger. The legislation has also indicated ways to disseminate the R&D funding in broad terms; however, the details are yet to be planned. Academia, being a focal point in the innovation cycle, will play a critical role in making the CHIPS act programs successful.

We have identified key issues currently hindering the advancement of US semiconductor industry, and discussed how academia can help mitigate them. A

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big challenge to chip industry is the shortage of skilled workforce. Academic institutions, while seeking support from the CHIPS funding, should tailor the semiconductor talent pipeline to better match the industry needs—by offering semiconductor manufacturing related courses at all levels. At the same time, closer collaboration with industry is also crucial, to fuel translational research and initiate hands-on trainings for students.

References 1.

Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act of 2022, H.R. 4346, 117th Cong. 2022.

2. SIA, “Government Incentives and U.S. Competitiveness in Semiconductor Manufacturing”, 2020.

3. SIA, “State of the U.S. Semiconductor Industry”, 2021.

4. Goldman Sachs, “The Global Chip Shortage: Impact, Outlook and Recovery”, 2021.

5. The World Bank Data, “Research and development expenditure (% of GDP)”.

6. American Enterprise Institute, “US Federal Research Spending Is at a 60-year Low. Should We Be Concerned?”, 2020.

7. CNET, “Biden Set to Sign Law to Pump $53 Billion Into US Chip Manufacturing”, 2022.

8. American Institute of Physics, “Congress Urged to Meet Budget Targets in CHIPS and Science Act”, 2022.

9. Semi, “Fueling American Innovation and Growth”, 2022.

10. SIA, “American Semiconductor Research: Leadership Through Innovation”, 2022.

11. Semiconductor Digest, “12 Midwest Institutions Launch Semiconductor-focused Network”, 2022.

12. U.S. Census Bureau, “Does Majoring in STEM Lead to a STEM Job After Graduation?”, 2021.

13. Deloitte and Semi, ““Looming Talent Gap Challenges Semiconductor Industry”, 2017.

14. SIA, “Chipping In: The U.S. Semiconductor Industry Workforce and How Federal Incentives will Increase Domestic Jobs”, 2021.

15. Data for Progress, “Economic Impacts of The CHIPS for America Act”, 2022.

16. Purdue University, “Purdue launches nation’s first comprehensive Semiconductor Degrees Program”, 2022.

17. Michigan University, “Interdisciplinary Research Opportunities for Undergraduates in Semiconductor Technology”.

18. Brookings, “With high-tech manufacturing plants promising good jobs in Ohio, workforce developers race to get ready”, 2023.

19. Government Technology, “University-Industry Partnerships Key to CHIPS Act Goals”, 2022.

20. CSIS, “Reshoring Semiconductor Manufacturing: Addressing the Workforce Challenge”, 2022.

21. BCG, “The National Semiconductor Economic Roadmap”, 2022.

22. SkyWater, “SkyWater Plans to Build Advanced $1.8B Semiconductor Manufacturing Facility in Partnership with the State of Indiana and Purdue University”, 2022.

23. Intel, “Intel Announces Next US Site with Landmark Investment in Ohio”, 2022.

24. SIA, “The Growing Challenge of Semiconductor Design Leadership”, 2022.

25. CSET, “The Chipmakers: U.S. Strengths and Priorities for the High-End Semiconductor Workforce”, 2020.

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