CHIPS Act will spur US production but not foreclose China

22 Pages Posted: 28 Oct 2022

See all articles by Gary Clyde Hufbauer

Gary Clyde Hufbauer

Peterson Institute for International Economics; Institute for International Economics

Megan Hogan

Peterson Institute for International Economics

Date Written: October 16, 2022

Abstract

The CHIPS and Science Act, export controls, and agreements with allied countries will accomplish many of their multiple objectives. More US semiconductor fabrication plants will be built, US R&D will be accelerated, and advanced chips and chip-making machines will be denied to China, Russia, and other adversaries. However, the Act will not make a material difference to US chip supplies in the next two or three years. Slower economic growth has already tipped the chips market in favor of ample supplies. While collective measures have inflicted considerable short-term pain on China, causing a sharp drop in the fortunes of its high-tech firms, China will respond by redoubling its self-sufficiency programs. The United States, however, should not mimic China in pursuing self-sufficiency, as US self-sufficiency is an illusion. The United States currently exports high-value chips and imports low-value chips, so increasing self-sufficiency would require the United States to prioritize basic chip production at the same time it is supposed to be competing with China in advanced chip production. Continuing to prioritize advanced chip production—where the United States has a clear advantage—is the most efficient course of action.

Keywords: Technology, United States. Trade Policy

Suggested Citation

Hufbauer, Gary Clyde and Hogan, Megan, CHIPS Act will spur US production but not foreclose China (October 16, 2022). Peterson Institute for International Economics Policy Brief No. 22-13, Available at SSRN: https://ssrn.com/abstract=4261113

Gary Clyde Hufbauer (Contact Author)

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036-1903
United States

Megan Hogan

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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