A Unique Policy-Driven Impact Scenario for CHIPS Act
How Oxford Economics engaged the world’s largest chip manufacturers to develop an industry-wide impact assessment of the CHIPS and Sciences Act.
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Background
Less than three decades ago, the US-led global semiconductor research and output accounted for nearly 40% of global production. Global technology growth, strategic incentives by overseas competitors, and high domestic investment and business costs saw the prominence of the US semiconductor industry decline to just over 10% of the global market in 2021. Increasing geopolitical risks associated with large semiconductor manufacturing countries such as China, coupled with fast-growing domestic demand for chips, underscored the importance of maintaining a thriving domestic semiconductor sector.
The Semiconductor Industry Association (SIA) engaged Oxford Economics in 2021 to evaluate the economic impact and benefits of early draft versions of what would eventually become the CHIPS and Science Act (CHIPS Act). The research focused on showcasing the potential investment into building new fabrication (fabs) facilities, design facilities (fabless), and foundries.
The Challenge
Prior to the research engagement, there had been no industry-wide effort to quantify the level of investment that new incentives (i.e., CHIPS Act) might catalyse. Furthermore, the diversity of the semiconductor corporate landscape meant that one firm’s investment, development and operation could look very different from another firm’s. As a result, primary data collection, followed by interviews and subsequent consensus building across the industry, would be necessary to build the correct modelling assumptions needed to estimate an impact.
Ultimately, the goal was to develop a defensible study that reflected the short-term and long-term economic value that would be generated from the proposed CHIPS Act legislation.
The Solution
The establishment of new semiconductor fabs and foundries involves a multi-year capital development process, as well as a multi-year process to become fully operational. Oxford Economics engaged five major semiconductor companies, representing more than half of the world’s production of semiconductor chips. The engagement involved interviews, information and primary data gathering. We then combined the data and insight gathered with additional proprietary and third-party government data to develop a set of capital investment, development, and operational inputs for semiconductor design, fabrication and foundries. This enabled us to answer the question: What is involved in building a new semiconductor facility, and how long will a new build take to become fully operational? An additional survey collected information on the number of new semiconductor facilities likely to be built should the CHIPS Act pass.
Using these key data inputs, we created an impact model scenario using IMPLAN to reflect new jobs and economic value created under the CHIPS Act during the construction and operational phases of the new facilities. Specifically, we found that a $50 billion incentive program within the CHIPS Act would create 185,000 temporary construction jobs and 280,000 permanent jobs and add $24.6 billion (annually) to the US economy.
The Result
How Oxford Economics further supported. Upon completion of the research and production of a report and two-page infographic, SIA launched the study with support from Oxford Economics to amplify the findings. Given the policy topic and still early days of the CHIPS Act legislation discussion (i.e., the Act had not yet been passed), Oxford Economics further engaged with policymakers and government agencies—specifically The White House, the Department of Homeland Security, and congressional staffers to explain the findings and answer questions. Oxford Economics also spoke with reporters in the media to characterise the study and the importance of the CHIPS Act to spur new investment, job creation, and economic growth.
Oxford Economics’ value-added. When the CHIPS Act was enacted and signed into law in August 2022, Oxford Economics further supported communication with the media. Prior to the passage of the Act, other studies sought to estimate the impacts and other economic attributes of CHIPS Act legislation. However, Oxford Economics’ impact study was the only one that drew in data collected from semiconductor manufacturers en masse, whose findings fully reflected the investment, development, buildout and operation consensus of the semiconductor industry.
The study’s success. Oxford Economics’ Chipping In report set in motion a significant data resource and set of talking points with Washington DC policymakers to help push forward the passage of the CHIPS Act. Once passed, the level of new investment exceeded expectations. About one year after the Act was signed into law, the semiconductor industry publicly announced over $200 billion of new investments in the US, covering 22 states and creating more than 41,000 direct jobs within the industry. For context, our study estimated that the CHIPS Act would generate 44,000 new direct jobs in the semiconductor industry by 2027—which would, in turn, support nearly 240,000 new permanent jobs in the US. After just one year, the new investment and job estimates produced by Oxford Economics appear to be very close to the real outcomes the US will experience.
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