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Impact of CHIPS Subsidy on the American Economy.

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Impact of CHIPS Subsidy on the American Economy.

A subsidy is any kind of financial assistance given to companies or individuals with the

goal of stimulating increased output. When subsidies are included, the supply curve shifts to the

right, resulting in a lower equilibrium price. The goal of the subsidy is to increase output, and it

does this by pushing production toward the demand side of the market.

Companies have committed about $50 billion in further investments in American

semiconductor manufacturing as a result of the enactment of the CHIPS and Science Act of

2022, increasing total company investment to approximately $150 billion since President Biden

entered office: Micron has announced a $40 billion investment in memory chip production,
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which is crucial for computers and other gadgets, which would result in the creation of up to

40,000 new construction and manufacturing jobs. This investment alone will increase the United

States' market share in memory chip manufacture from less than 2% to up to 10% over the next

decade. Qualcomm and GlobalFoundries have announced a $4.2 billion agreement to produce

semiconductors in an expansion of GlobalFoundries' upstate New York factory. Qualcomm, the

world's top fabless semiconductor business, revealed ambitions to grow semiconductor

manufacturing in the United States by up to 50% over the next five years.

The CHIPS and Science Act would strengthen American semiconductor research,

development, and manufacturing, guaranteeing American leadership in the technology that

underpins everything from autos to home appliances to military systems. The United States

created the semiconductor, but now it only manufactures about 10% of the world's supply, and

none of the most advanced chips. East Asia is the real powerhouse in the manufacturing sector,

responsible for 75% of global output. Hundreds of billions of dollars more in private sector

investment in semiconductors across the country, including in critical military and key industries

manufacturing, would be stimulated by the CHIPS and Science Act.

The Act has therefore revitalized the manufacturing indusrty of the country by lowering

the production costs. Since more private sectors are now entering the indusry, there is creation of

good-paying American jobs. There is also strengthening of the American supply chains which

has made the industry to rival the Chinese counterparts who have controlled the industry for

some time now due to high production costs from American firms.
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References

Bown, C. P. (2020). How the United States marched the semiconductor industry into its trade

war with China. East Asian Economic Review, 24(4), 349-388.

de La Bruyere, E., & Picarsic, N. (2022). Supply Chain Resilience in an Era of Long-Term,

Peacetime Competition: The Semiconductor Case and a New Framework for Supply

Chain Assessment. Acquisition Research Program.