Biden signs CHIPS bill into law

President Biden today signed into law a long-anticipated plan to boost funding for domestic semiconductor production and funnel some $2 billion toward military microelectronics.

The framework, the Pentagon’s No. 2 official has said, is key to addressing supply issues for the chips that are used in Defense Department weapon systems and that enable artificial intelligence, hypersonics, 5G and other technology areas.

“Ensuring the military’s access to secure microelectronics, and having the most advanced capabilities that the commercial sector can offer, is vital to national defense,” Deputy Defense Secretary Kathleen Hicks said in a statement last week.

The legislation, which includes tens of billions of dollars to encourage facility and equipment investments and incentives for semiconductor manufacturing such as a four-year, 25% tax credit, made its way to Biden’s desk last week after clearing the Senate on a 64-33 vote and the House by a vote of 243-187.

Called the "CHIPS and Science Act,” the measure spent the last year inching its way through Congress, lagging behind the Fiscal Year 2021 National Defense Authorization Act that created chips manufacturing and research programs that had gone unfunded.

Sujai Shivakumar, the director of the Renewing American Innovation project at the Center for Strategic and International Studies, told Inside Defense in a Monday interview that the legislation as a whole is “comprehensive” in its scope, touching on workforce issues, research, production and “the ecosystem that supports a much more robust semiconductor industry in the United States.”

Still, he acknowledged that adjustments will be required in the future, saying the plan “provides a base on which to take those initiatives forward.” He added DOD can also work to “diversify” the sources it draws from, something he said would bolster resiliency.

Forward movement could be limited by the restrictions DOD faces in its ability to shape the microelectronics market. Shivakumar noted while the Pentagon is “not a market mover in the sense that it perhaps was in decades past,” the department is “certainly moving the research agenda” in regard to specialized chips.

Pentagon officials have repeatedly touted the importance of onshoring microelectronics processing, with the supply chain currently centralized in the Asia-Pacific region. The Pentagon’s fiscal year 2023 budget request includes $3.3 billion for microelectronics technologies -- investments that Hicks previously said will focus on developing “the kinds of more high-processing and specialized chips that we need uniquely.”