Semiconductor production, geopolitics and the CHIP SACT of 2022: a theoretical analysis

Abstract

Purpose

This paper aims to examine rising geopolitical tensions associated with the implementation of the US Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022.

Design/methodology/approach

To provide background for the analysis, the authors conduct a theoretic analysis of the literature to introduce the current geopolitical environment while examining the rising threat of conflict, general factors driving change in the world order, and the critical role that the international semiconductor supply chain plays to all involved.

Findings

In this paper, the authors observe that in good times, economic forces drive capital-intensive industries toward a free-trade-inspired concentration of manufacturing in low-cost centers of production. In challenging economic and geopolitical times, however, the trend reverses toward retrenchment and what some call techno-nationalism. This occurs as nations struggle to secure access to critical sources of supply for themselves while stifling access for competitors and rivals.

Practical implications

The CHIPS Act of 2022 signifies a pivotal change in global trade dynamics, shifting away from liberal norms to techno-nationalism. This shift may spark supply chain hurdles as countries adopt nationalistic sourcing, potentially causing shortages in vital components like chips. Consequently, consumers may face disruptions as companies seek alternative suppliers, resulting in higher costs and lower-quality products. Supply chain disruptions may also delay product launches, and retaliatory trade actions could affect multiple industries, limiting access to lucrative markets.

Originality/value

The passage of the US CHIPS Act of 2022 has major implications related to global supply chain issues and potential geopolitical concerns. This study uses the threat of potential conflict as a lens for examining the international semiconductor supply chain.

Citation

Hyatt, K., Ryle, P.M. and McKnight, M.A. (2024), "Semiconductor production, geopolitics and the CHIP SACT of 2022: a theoretical analysis", Digital Policy, Regulation and Governance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/DPRG-12-2023-0184