The 2022 CHIPS Act was passed months before ChatGPT's launch. The subsequent AI-driven demand for semiconductors was not the primary driver for the legislation. The Act's incentives accelerated US manufacturing capacity, luckily positioning the nation to capitalize on an unanticipated boom.
To manage its broad legislative discretion, the CHIPS team proactively published a 'Vision for Success' document. This public commitment acted as both an internal disciplining mechanism for measuring progress and an external accountability framework, preventing mission creep and aligning stakeholders.
Government intervention is most effective when targeting industries that meet three criteria: they must be critical to national security or the economy, compromised by foreign dependence or choke points, and fundamentally changeable through targeted financial incentives that can shift their long-term economics.
While simple, tax credits are a passive tool. Discretionary funding grants, like those in the CHIPS Act, allow government agencies to actively negotiate for specific strategic outcomes, such as compelling a company to build an extra fab or onshore a critical technology that a tax credit alone would not incentivize.
High-achievers from the private sector are drawn to government service by missions with tangible impact and the resources to execute. The CHIPS program's success in recruiting was tied directly to its significant funding and clear mandate, which is far more compelling than a purely analytical or advisory role.
The political fallout from failed investments like Solyndra fosters a risk-averse government culture that undermines industrial policy. To succeed, public funding programs must accept that backing ventures the private market shuns will inevitably lead to some failures—a necessary cost for enabling major successes.
The CHIPS program director was chosen for the ability to 'get something done in government,' not for a background in semiconductors. For a massive federal startup, navigating bureaucracy and building processes from scratch is a more critical leadership skill than pre-existing industry knowledge, which can be hired onto the team.
The CHIPS Act's success came from a 'happy medium' design. Congress set a clear, bipartisan objective (semiconductors) but granted the executive team broad discretion on implementation. This structure proved more effective than an overly broad mandate (e.g., 'economic security') or overly prescriptive legislation.
A complete national industrial strategy requires a dual approach. It needs large, congressionally-approved programs for trillion-dollar sectors like semiconductors, paired with a smaller, more flexible fund to quickly address emerging choke points in smaller markets like rare earths or APIs without new legislation each time.
Lacking formal demand-side tools like government purchase guarantees, the CHIPS Act team relied on persuasion and strategic influence—the 'bully pulpit.' They actively engaged major customers like Apple and Nvidia to signal demand for new US-based fabs, creating market confidence through informal channels.
Current US policy is reactive, fixing compromised supply chains like semiconductors. A proactive 'offensive' strategy would identify nascent, critical industries (e.g., humanoid robotics) and build the entire supply chain domestically from the start, securing a long-term economic and national security advantage.
The CHIPS team's primary goal was securing a commitment for three TSMC fabs, viewing it as a strategic tipping point. They believed the operational scale of a three-fab cluster would make building a fourth, fifth, and sixth a near certainty, creating a self-sustaining 'mega fab' without requiring subsidies for later expansions.