The United States and Industrial Policy: A Look Inside the CHIPS Program Office

Abstract

The “Creating Helpful Incentives to Produce Semiconductors” (CHIPS) and Science Act of 2022 represents the United States’ most significant industrial policy initiative in recent decades, allocating $52.7 billion to revitalize domestic semiconductor manufacturing. This thesis examines the implementation of the CHIPS Program Office (CPO), analyzing how the American approach to industrial policy creates opportunities and challenges. Via an evaluation of the CPO’s organizational structure, funding mechanisms, and application processes, this research identifies key tensions in the program’s execution. The study finds that, despite the CPO’s efforts to align with commercial and industry growth objectives, substantial challenges remain. The root causes of these execution challenges can be traced to the dual objectives of the program: improving supply chain resilience and advancing social policy goals within the constraints of a very low tolerance for risk in the context of protecting taxpayer dollars. These elements, not clearly aligned with economic interests, complicate the program’s execution. The significant attrition rate—marked by over 640 initial Statements of Interest but fewer than 200 sustained applications—highlights tensions between the program’s broad scope and its regulatory demands. Key obstacles include compliance with the retroactive Davis-Bacon Act, National Environmental Policy Act requirements, and rigid milestone-based funding structures, which may hinder flexibility in adapting to rapidly changing market conditions. This research also contrasts the CPO’s expansive approach with more targeted strategies employed in East Asia. While East Asian countries tend to focus their efforts more narrowly, the American approach simultaneously seeks to expand manufacturing capacity, develop the workforce, protect the environment, and pursue social policy goals. The thesis concludes that this broad scope, while commendable, may dilute the program’s effectiveness in achieving its primary goal of strengthening supply chain resilience and enhancing national and economic security. Ultimately, policymakers must strike a balance between the social policy goals included to gain support for the bill and the practical economic realities involved in its implementation. Some key considerations include the adaptability of regulatory frameworks, the need for focused objectives, and the overall design of government intervention in industrial development. Indeed, the findings have significant implications for American industrial policy and global semiconductor manufacturing competitiveness.