Technology is an important and growing sector of North Carolina’s economy. The tech industry employs almost 270,000 workers and supports almost 900,000 secondary jobs. All told, the tech industry supports approximately 20% of the state’s total employment. The average worker in North Carolina tech earned just over $120,000 per year. This is a vital, family-sustaining industry that we work hard in Raleigh to foster and support.
How can we keep up the momentum in this era of runaway inflation, supply chain blockage, and whispers of an economic recession? Simply put, Washington needs to support the semiconductor industry.
Throughout the 1980s America led the way in semiconductor manufacturing. These chips not only changed American life for the better by spurring an explosion in personal computing, cellular phones, and healthcare technology, but they also helped the United States triumph in the global struggle against the Soviet Union. President Ronald Reagan knew that robust investments in technology were good for America’s national security.
But U.S. primacy in the semiconductor sector began to wane after the Cold War. In 1990, almost 40% semiconductors were manufactured here at home. Today less than 15% are. This happened primarily because other countries saw the wisdom of investing in their manufacturing capacity while we did not.
The result? American manufacturers that rely on these powerful chips are at the mercy of supply chain disruptions (as we are experiencing today) and even geopolitical events. As it stands now, it is estimated that the current chip shortage cost the U.S. economy $240 billion in 2021. Consider that over 90% of semiconductors are made in Taiwan, a U.S. ally that nevertheless has thousands of Chinese missiles pointed at it. A hypothetical disruption of the Taiwan market would cost chip makers almost $500 billion dollars, dwarfing the current supply chain crisis.
The simple answer to this challenge is to encourage increased domestic manufacturing of semiconductors. Simple — but not easy. Semiconductors are considered the most capital-intensive industry in the world. New semiconductor facilities cost billions of dollars in upfront investment before they can even begin manufacturing.
Two pieces of legislation awaiting action on Capitol Hill have the potential to significantly enhance domestic manufacturing capacity. The first is the U.S. Innovation and Competition Act (USICA), which contains $52 billion in funding for CHIPS Act grants to support domestic semiconductor manufacturing and R&D. The second is an Investment Tax Credit (ITC) under the Facilitating American-Built Semiconductors Act (FABS Act), which would provide incentives for capital expenditures in the construction of new chip manufacturing facilities.
CHIPS Act funding helps American manufacturers in the here and now. The ITC ensures American manufacturers have a sustainable path toward growth in market share. Together they represent a powerful, 360-degree strategy for the U.S. economy.
These measures are currently under consideration as the U.S. House of Representatives and the Senate negotiate joint competitiveness legislation. Both initiatives enjoy broad support in both chambers and among members of both parties. Unfortunately, they are being held back and delayed by the rancorous politics of our times.
U.S. Sens. Richard Burr and Thom Tillis have always been great supporters of a dynamic economy and robust national security. We encourage them to plow through the politics. Let’s get this joint competitiveness legislation ironed out now and passed into law by the end of the month.
Jim Perry is the N.C. Senate Majority Whip
