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The CHIPS and Science Act is expected to expand semiconductor production in the United States and make supplies more resilient, but a preliminary Peterson Institute for International Economics (PIIE) report argues that cash grants and concessional loans may have been essential for only about half of the 20 firms it reviewed. It estimates that up to $7.1 billion in grants and loans may have been unnecessary for 10 financially strong companies. The report treats the 25% investment tax credit differently: it sees the credit as broadly important to projects, but not enough on its own to make every project viable.
What the PIIE report says about CHIPS Act subsidies
In a January 17, 2025 article, EE Times’ Nitin Dahad summarized PIIE’s preliminary report, Industrial Policy Through the CHIPS and Science Act. The report evaluates Division A of the 2022 law, including federal grants, concessional loans and a 25% investment tax credit for semiconductor construction.
PIIE puts the program’s subsidy budget, including the value of investment tax credits, at nearly $200 billion. Its central conclusion is two-sided: subsidies are expected to increase advanced-chip production on US soil and lower the risk of future shortages, but building more capacity may not be the most cost-effective way to improve national security.
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The report does not say that all CHIPS Act support was wasteful. It questions whether some companies needed cash grants or subsidized loans on top of the tax credit. As the report put it, “the cash subsidies might have been essential for 10 out of the 20 firms.” That is an assessment of the awards, not proof of what each company would have done under a different policy.
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Why a tax credit can be necessary while a grant is not
The support comes in different forms, and PIIE’s argument depends on separating them. A construction tax credit lowers the cost of a qualifying investment; a grant or concessional loan adds another layer of public support. The report regards the 25% investment tax credit as necessary but not sufficient for the selected projects overall. In its words, “the investment tax credit was a necessary but not sufficient condition for the projects selected by the CPO [CHIPS Program Office] to go forward.”
Whether extra cash was needed depends on the project and recipient. PIIE’s reasoning favors support where a company’s finances were weaker, where the project involved unique leading-edge technology or advanced assembly, test and packaging (ATP), or where onshoring had particular strategic value. It is more skeptical when a recipient was financially strong, when another US supplier could provide mature or legacy chips, or when the project might have proceeded with the tax credit alone.
For the 10 firms the report identifies as cases where cash support might have been essential, grants plus the subsidy value of concessional loans total $31.4 billion, while projected investment-tax-credit subsidies total $68.6 billion. Separately, PIIE estimates that up to $7.1 billion in grants and loans may have been unnecessary for 10 financially strong companies. These are the report’s estimates and judgments, not independently established counterfactual savings.
How the report judged the 20 projects
EE Times’ summary groups the report’s judgments as follows. “Probably not essential” concerns the cash subsidy, not necessarily the tax credit or the project itself. Where an award amount is given below, it is the amount reported in the summary; amounts are not stated for the other listed companies.
| Report’s cash-support judgment | Companies and reported award amounts |
|---|---|
| Probably not essential | BAE Systems Electronic Systems (amount not stated in EE Times’ summary); Microchip Technology ($162 million); GlobalFoundries (close call; amount not stated); Polar Semiconductor ($123 million); Absolics ($75 million); Rocket Lab ($23.9 million); Rogue Valley Microdevices ($6.7 million); Amkor Technology ($400 million); Texas Instruments ($1.6 billion; report says the tax credit was critical, while the grant or loan might not have been); Edwards Vacuum ($18 million). |
| Probably or possibly essential | Intel (amount not stated in EE Times’ summary); TSMC (amount not stated); Samsung (amount not stated); Micron (amount not stated); Entegris ($75 million); GlobalWafers ($400 million); SK Hynix ($450 million; close call); HP ($50 million); Wolfspeed ($750 million); Infinera ($93 million). |
The labels are PIIE’s case-by-case judgments as relayed by EE Times, not causal proof that a company would—or would not—have invested without the cash support. The summary also notes that external evaluators did not have access to detailed CHIPS Program Office spreadsheets, a constraint on how precisely outsiders can assess the awards.
Will the CHIPS Act reduce reliance on imported chips?
PIIE expects the law to add US production and reduce the risk that a future disruption leaves domestic buyers without chips. But it is skeptical that the United States will stop depending heavily on imports. Additional capacity does not automatically replace every imported chip: the product, manufacturing capability and supplier alternatives matter, as does whether newly built facilities reach production at scale.
The report’s assessment of the goal for the United States to make 20% of the world’s leading-edge chips by 2030 is “maybe,” rather than a firm prediction. The target is therefore an ambition with meaningful uncertainty, not a guaranteed outcome of the awards.
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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsHow many jobs might the subsidies support?
PIIE estimates approximately 93,000 temporary construction jobs and 43,000 permanent jobs, with a subsidy cost of about $185,000 per job-year. The cost-per-job-year figure is the report’s estimate for the program; it is not a salary paid to each worker. PIIE says this subsidy cost is about twice the average annual salary of US semiconductor employees and argues that other employment programs might create jobs more efficiently.
The report also questions the balance between incentives for production and support for research and development. EE Times’ account says PIIE places the United States at the bottom of advanced countries for R&D subsidies to large profitable firms. The policy implication is not that manufacturing capacity has no value, but that public spending could be weighed against alternatives that support innovation or employment more directly.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Would tariffs work better than subsidies?
PIIE compares the subsidy approach with a hypothetical 20% tariff. Its model uses 2023 US chip sales of about $70 billion and imported-chip sales of about $51 billion. In that scenario, the tariff would create about $14 billion in domestic chip-price effects; roughly $10 billion would go to the Treasury as tariff revenue, leaving about $4 billion in producer benefit. Those modeled effects are far smaller than the nearly $200 billion subsidy package.
The trade-off is that a tariff raises costs for domestic chip users, including industries such as autos, electronics and AI, potentially putting them at a disadvantage against foreign competitors. PIIE points to the European Union’s 17% tariff, which it says was judged a failure in promoting the EU semiconductor industry, and sees no compelling reason a comparable US tariff would work better. The comparison is the report’s modeled scenario, not a measured result from a US tariff already in force.
What the report establishes—and what it does not
PIIE’s report supports the view that the CHIPS Act can expand domestic production and improve resilience, while raising a narrower but important question: did every recipient need cash support in addition to the tax credit? Its answer is no—not every recipient, in its judgment. The report does not establish that all projects deemed probably nonessential would have proceeded unchanged without grants or loans, nor that withdrawing support would leave production, timing or security outcomes unaffected. Its conclusions are best read as an evaluation of the awards and their likely necessity, rather than a definitive accounting of what would have happened under an alternative policy.
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