- The paper argues that CHIPS Act manufacturing support, averaging $7.8 billion per year over five years, is too small relative to projected global semiconductor capital expenditures to rebuild U.S. production leadership by itself.
- It estimates that CHIPS support plus anticipated industry participation could reach roughly $22 billion annually, but says that would represent only about 10 percent of projected global investment.
- The paper says leading semiconductor-producing governments, including China and U.S. allies in Europe and the Indo-Pacific, have announced more than $500 billion in investments over a similar period.
- A central argument is that semiconductor fixed-asset costs, long investment horizons, and foreign subsidies create incentives that discourage private capital from funding domestic leading-edge production.
- The proposed Si² Fund would begin with $10 billion in federal funding and provide matching startup capital to public-private investment funds focused on U.S.-based semiconductor production components and capacity credits, support for technology licensing, and supplier subsidies to encourage domestic cluster formation around semiconductor manufacturing.
The white paper proposes the Semiconductor Industry Investment Fund, or Si² Fund, as a fund-of-funds model for expanding U.S. semiconductor manufacturing investment. Written as a policy proposal based on the author’s research before and during an SCSP sabbatical, it compares CHIPS Act funding with projected global semiconductor capital expenditure and announced foreign investment plans, then argues that direct subsidies alone are unlikely to restore U.S. production share. The paper says the $39 billion CHIPS manufacturing support averages $7.8 billion annually and, even with anticipated private matching, may reach only about 10 percent of projected global annual investment. It identifies scale, political concerns over government selection of winners, and weak incentives for patient capital as barriers to rebuilding domestic fabrication. The proposed Si² Fund would use $10 billion in federal startup funding to provide matching grants, capped at 30 percent of partner funds’ investable capital, while leaving final project decisions to private fund managers. The paper also outlines charter, governance, return, and cluster-formation mechanisms. Its policy relevance is a proposed vehicle for aligning private capital with domestic microelectronics capacity, economic security, and defense-sector resilience.
The United States is not destined to lose in manufacturing, but it does need a creative new way to ensure CHIPS and other federal funding mechanisms actually address the core problems.
Rick Switzer
- Establish a Semiconductor Industry Investment Fund (Si² Fund). This fund-of-funds model proposes channeling federal dollars as matching startup capital to incentivize private investment into domestic…
- Provide $10 billion in startup funding for the Si² Fund. Startup funding should come either from existing CHIPS funding or a new special purpose federal investment vehicle.
- Provide tax credits and subsidies to encourage domestic suppliers to expand production. This support is critical as providing technical support to locally based manufacturers serves as the training ground for young engineers.
Published by the Special Competitive Studies Project. Co-publishers and external authors, where they exist, are credited in the byline above.