John H Howard, 5 November 2024*
The passage of the US CHIPS and Science Act in 2022 marked a pivotal moment in the nation’s pursuit of technological sovereignty and economic resilience. Amid global supply chain uncertainties and rising geopolitical tensions, the speed and scope of the Act’s implementation have exceeded expectations.
Under the Biden Administration, the US has moved with unprecedented urgency, translating policy into action through initiatives that are already reshaping the nation’s technological and economic landscape.
A recent initiative is the establishment of a federally funded semiconductor research facility in Albany, New York, with an estimated investment of $825 million. As part of the National Semiconductor Technology Center initiative, this hub will focus on research into the advanced machinery required for semiconductor manufacturing. Other hubs, focusing on chip design and packaging, will be announced soon.
The CHIPS Act itself represents an estimated $280 billion investment, with $52.7 billion earmarked specifically for the semiconductor sector. This includes $39 billion for manufacturing incentives aimed at constructing and expanding chip fabrication plants in the US.
The Act also provides $13.2 billion for R&D targeted at constructing and expanding chip fabrication plants, including funds for the National Semiconductor Technology Centre and the Microelectronics Commons initiative, which supports prototyping and accelerates the transition from research to manufacturing.
Beyond semiconductors, the Act funds critical scientific research in fields such as artificial intelligence, quantum computing, and biotechnology, positioning the US as a leader in emerging technologies.
Complementing this, the Inflation Reduction Act (IRA) allocates $369 billion towards climate action, clean energy, and green technology manufacturing. It provides tax incentives for renewable energy production, carbon capture, and other sustainable technologies, with the aim of reducing US carbon emissions by 40% by 2030.
Together, the CHIPS Act and the IRA represent significant investments aimed at ensuring supply chain security, technological independence, and economic growth across the US These Acts exemplify a coordinated approach to revitalising the US tech sector, creating a resilient economy that can drive equitable growth and secure a self-sufficient future.
Microelectronics Commons: Reclaiming Semiconductor Supply Chains and Strengthening National Security
The National Semiconductor Technology Center and initiatives like the Microelectronics Commons play crucial roles in the Administration’s strategy by enabling domestic chip production essential for defence and green technology sectors.
The COVID-19 pandemic highlighted the vulnerabilities of global supply chains, particularly in semiconductors, where shortages impacted everything from consumer electronics to automotive manufacturing.
The Microelectronics Commons initiative, a cornerstone of the CHIPS Act, seeks to address this issue by closing the gap between semiconductor research and commercial production in the US through partnerships involving industry giants, research institutions, and the Department of Defense. In this way the Microelectronics Commons aims to establish a secure, end-to-end semiconductor supply chain within US borders.
This initiative goes beyond merely ensuring supply chain continuity; it represents a proactive stance on national security. By reducing reliance on East Asian manufacturing—an area fraught with geopolitical tensions—the US is insulating itself from external disruptions in critical technology. Furthermore, the Microelectronics Commons is fostering an environment of rapid innovation within the semiconductor sector.
By providing the infrastructure for rapid prototyping and testing, this initiative is positioning the US as a leader in advanced microelectronics, supporting breakthroughs in areas like artificial intelligence and energy-efficient computing.
Regional Tech Hubs: Empowering Local Economies and Diversifying Innovation
A central feature of the CHIPS and Science Act’s rollout has been the creation of Regional Technology Hubs. These build on the shift in thinking from reliance on corporate R&D labs and university-led research to place-based innovation ecosystems which integrate industry with research and education institutions in stand-alone facilities.
In October 2023, 31 cities were selected as tech hubs, directing federal funding and resources to areas that had previously been sidelined in the US innovation ecosystem. These hubs are designed as catalysts for regional economic transformation. By creating specialised ecosystems focused on high-impact industries—such as quantum computing, biotechnology, and advanced manufacturing—they aim to decentralise tech-driven economic growth.
The strategic intent behind these hubs is twofold. First, they democratise access to high-tech infrastructure, addressing regional economic disparities by creating jobs and fostering innovation outside traditional tech hubs like Silicon Valley. Early indicators from places like Pittsburgh and Oklahoma City show a promising uptick in local partnerships, university-industry collaborations, and job creation, triggering a dynamic ripple effect across local economies.
Second, the Regional Tech Hubs are laying the groundwork for resilience, building skilled labour pools in diverse locations that can withstand global economic shocks. By embedding innovation within the broader socio-economic fabric of the US, this approach is nurturing a more robust, balanced economy.
NSF Innovation Engines: Bridging Academic Research and Industry Needs
The NSF Innovation Engines is another transformative aspect of the CHIPS Act. Funded by the National Science Foundation, these engines aim to strengthen academic-industry collaboration in fields such as artificial intelligence, quantum technology, and biotechnology. Acting as innovation accelerators, these engines provide the platform and resources necessary to bring academic research closer to commercial viability.
The NSF’s framework for multi-sector partnerships encourages co-investment from private firms, creating a symbiotic relationship that benefits both academia and industry. The rapid establishment of these engines has already borne fruit, with universities across the Midwest and the South reporting increased industry-funded research and an influx of internship opportunities for students.
These engines are not only expediting the pace of technological breakthroughs but also creating a steady pipeline of skilled professionals in emerging fields. By aligning research goals with commercial demands, the NSF Innovation Engines are redefining the role of universities in the US economy, transforming them into active contributors to economic growth and technological advancement.
Broader Transformative Impacts: A New Model for Equitable Economic Growth
The CHIPS and Science Act’s rapid implementation is already producing significant impacts across the US tech and economic landscapes. These programs are doing more than just bolstering innovation and supply chains; they are reshaping workforce development and reinforcing community resilience.
By creating skilled labour markets outside major urban centres, the US is cultivating a geographically diverse innovation ecosystem that benefits the entire nation rather than the traditional narrow ‘lab to market’ approach to research commercialisation and industrial clustering.
The emphasis on inclusive growth is crucial. The Biden administration’s approach of investing in regions outside the main tech cities aligns with broader goals of reducing income inequality and creating high-paying jobs in underserved areas. This model recognises that technological advancement should be a national endeavour, accessible to all communities, and a driver of shared prosperity.
Furthermore, the alignment of federal, state, and private sector resources marks a shift in the US approach to economic competitiveness. For years, the country relied largely on organic growth and market dynamics to drive innovation. However, the CHIPS and Science Act represents a more strategic and coordinated approach in which the government plays a central role in orchestrating resources and partnerships.
This model is more commonly associated with countries like Germany, Japan, and South Korea, and it has been adapted to fit the unique dynamics of the US economy.
Lessons for Australia: Embracing a New Model of Innovation and Economic Sovereignty
Australia can learn from the US’s bold approach. The Biden administration’s initiatives demonstrate a shift away from traditional, linear models of innovation policy towards place-based, ecosystem-oriented strategies.
By establishing Regional Tech Hubs, the US is embracing the concept of stand-alone innovation ecosystems, where large companies, SMEs, research institutions, and communities converge to drive technological progress.
Australia has taken some steps towards adopting a decentralised approach and establishing regional innovation hubs tailored to local industries and strengths, but without an overall policy framework to encourage these endeavours. This should be developed urgently around clear missions, stimulating local economies, creating skilled jobs, and reducing reliance on urban centres.
While Australia has focused on competing with US tax credits around hydrogen, there is potential to look beyond immediate fiscal incentives and invest in foundational infrastructure and industry-research partnerships, as seen in the US NSF Innovation Engines. More structured university-industry collaborations could address Australia’s ‘innovation paradox’, where world-class research often fails to translate into commercial products.
Australia has long-standing programs, such as the CSIRO and Cooperative Research Centres (CRCs), which contribute to our research and innovation efforts, but not as place-based innovation ecosystems. More recently, some worthwhile but disconnected steps have been taken through initiatives like the Australian Economic Accelerator (AEA) and the Trailblazer Universities Program.
The AEA seeks to bridge the research-commercialisation gap by funding promising early-stage projects in areas of national importance. However, unlike the US NSF Innovation Engines, the AEA lacks large-scale, multi-sector partnerships and a focus on creating regional innovation ecosystems.
While aligning research with industry needs, the Trailblazer Program operates on a much smaller scale than the US Regional Tech Hubs, involving fewer universities and lacking a broad, region-focused strategy. Like the CRCs, public funding is short term and hence does not enable institutional sustainability.
Over the last two years, Australia has initiated several new promising programs, such as the National Reconstruction Fund, the Critical Minerals Strategy, the Battery Breakthrough Initiative, the Solar Sunshot Program, the Advanced Strategic Capabilities Accelerator (ASCA), and the Net Zero Economy Authority.
Strategies are being developed for AI, Quantum and Robotics. Some of these programs are part of the Future Made in Australia initiative, with a focus on achieving net zero emissions and national economic resilience and complexity. Others have a broader remit.
However, these initiatives and actions are progressing slowly, despite their laudable and ambitious objectives, and lack the coordination, funding, scale, urgency, and integration of the CHIPS and Science Act. Moreover, Australia’s largest research and innovation program, the R&D Tax Incentive, even lacks formal targeted alignment with these objectives.
Only by adopting a more integrated and cohesive approach across Ministerial portfolios and allocating funding according to defined, future-focused national objectives can Australia secure its position in the global tech landscape, promote regional development, and build resilience to future economic and geopolitical shifts.
This posting was prompted by an article in the New York Times, “New York State Chosen as National Center for Chip Manufacturing Research”, 31 October 2024.
*Emeritus Professor Roy Green contributed insights and comments for this article.
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