Covid-19 has had an unprecedented impact on global manufacturing and supply chains, leading to supply shortages, facility shutdowns and rising prices. For governments, these disruptions, and the current conflict in Ukraine, have been an awakening, exposing significant vulnerabilities in their economies and overall national security.
This has led to countries expanding incentives and grants available to businesses to attract investment in manufacturing for critical sectors to onshore domestic locations to be more self-sufficient and prevent reliance on overseas foreign trade during times of global crisis. Countries, such as the United States, Canada, and the European Economic Union, have moved quickly to expand incentive and grant programs to address these concerns.
This is most evident in microchip manufacturing where shortages led to significant disruptions in automotive manufacturing and other industries. Intel recently announced a $20 billion investment to build microchip manufacturing facilities in Ohio that will lead to the creation of at least 3,000 jobs. This investment is supported with approximately $2 billion in grants, tax credits and other incentives from the State of Ohio. A similar $17 billion investment was announced last November from Samsung for a plant in Texas.
To increase the competitiveness of the U.S. in high tech industries and further promote on-shoring of manufacturing, several bills are currently passing through Congress that will offer billions in incentives to expand investment in this critical area. The CHIPS Act and Competes Act when jointly approved by House of Representatives and the Senate will significantly expand the incentives available to businesses to invest in high tech research and manufacturing in the United States. A third bill, the Facilitating American-Built Semiconductors Act, has also been introduced aimed at establishing an investment tax credit to incentivize semiconductor manufacturing.
Sources: The Economist, February 19-24; Office of the Governor, State of Ohio; Semiconductor Industry Association, Latest News March 16, 2022