In a nod to mercantilism, the U.S. federal government on Wednesday passed legislation to meaningfully support the onshoring manufacturing of semiconductor chips. The CHIPS Act, which will subsidize U.S. firms for their manufacturing and research, is a pivotal step for the country to remain globally competitive in economic trade, given the massive importance and use of semiconductors in nearly every major sector, especially autos. Currently, only 12% of these chips are made domestically, compared to 37% in the 1990s. This act aims to reverse this trend, with a 25% tax credit for investments in semiconductor manufacturing, among other provisions of the $52.7 billion incentive package. This should help solve one of the major impediments to supply chain disruption and in our view is a market positive for corporate profits, which ultimately drives markets.
Big News That May Have Been Missed: The Chips Act of 2022
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