Biden’s CHIPS claim too optimistic about investment
Ahead of his 2024 State of the Union address, President Joe Biden said that legislation under his watch boosted private sector investment in the semiconductor industry.
“I signed the CHIPS and Science Act, which attracted $640 billion in private companies’ investments that are building factories, creating jobs in America again,” Biden said Feb. 12 at a Washington, D.C., conference for county officials.
PolitiFact ruling: Mostly false.
Biden didn’t mention that the $640 billion investment refers to projects shaped by CHIPS and two other bills he signed — the Inflation Reduction Act and the Bipartisan Infrastructure Law.
It’s also important to note that the $640 billion is based on companies’ announcements. Not every project will come to fruition, and those that do may not materialize for years. Biden or the White House have described the $640 billion figure more accurately before.
Discussion
The CHIPS and Science Act, introduced in 2021 by U.S. Rep. Tim Ryan, D-Ohio, passed as a rare example of bipartisanship, with 17 Republicans voting for it in the Senate and 24 in the House joining Democrats in support. Biden signed it into law in August 2022. Lawmakers wanted to pass the bill amid a global semiconductor shortage and to help the U.S. compete with China.
Analysts at the consulting company McKinsey said the CHIPS Act is a $280 billion spending package over 10 years that includes research money as well as $53 billion for manufacturing.
A Semiconductor Industry Association analysis updated Feb. 26 said that $256 billion in private investments had been announced across 22 states since 2020, when precursor legislation to the CHIPS and Science Act was proposed.
For example, news outlets reported that GlobalFoundries, a semiconductor manufacturer, said in February it would invest more than $12 billion over the next 10-plus years after the U.S. Commerce Department agreed to give the New York-based company $1.5 billion. GlobalFoundries will use the money to expand and create manufacturing capacity to produce more chips.
The U.S. Chamber of Commerce wrote in August that the private sector and federal government have made “significant strides” in implementing the law. But the chamber called for additional steps to expand the talent pipeline, including investing in K-12 education. The chamber added that “immigration reform is also necessary to meet current and future talent needs for the semiconductor industry.”
We found multiple instances when Biden or the White House described the $640 billion figure as stemming from his broader agenda — not just the CHIPS and Science Act:
Three economists told us that Biden’s numbers are based on what companies have announced. That’s not the same as dollars already spent.
“These are announcements and announcements are great but are not actual investments,” said Douglas HoltzEakin, president of the centerright American Action Forum. Some of these investments may never happen, he said, and if they happen we won’t know when that will be.
Dean Baker, co-founder of the liberal Center for Economic and Policy Research, said that if the economy-stimulating effects of all three bills are considered, Biden’s numbers seem reasonable. He added that estimating how much bills spur private investment is hard because no one knows how much investment there might have been absent the legislation.
“There clearly has been a huge uptick in investment and we know this will continue into the future, based on companies’ commitments,” he said. “Of course, the latter are never hard data until their investment is actually carried out. Companies are always free to change their plans, and they do.”
Sanjay Patnaik, an economist at the Brookings Institution, a Washington. D.C., think tank, said some investments will take a long time to manifest because they involve building new plants. Also, he said, it is hard to separate the CHIPS Act’s effects on investments in semiconductor manufacturing and jobs from other factors, such as rising demand from the artificial intelligence boom.
There are geopolitical considerations, too: Companies want to rely less on China and worry about a military conflict arising between China and Taiwan, a noted chip manufacturing hub. So, to diversify their manufacturing, these companies may consider making chips in the U.S.
“Based on the limited analysis and data out there, announced investments in the semiconductor industry appear to have increased somewhat following the enactment of the CHIPS Act,” and other legislation, Patnaik said. “However, in some cases, investments already seemed to have ramped up before passage of the act (this could have been companies investing in anticipation of the bill being approved or it could have been a trend that was reinforced by the bill).”