Introduction

Semiconductor manufacturing stands as a foundation of the modern global economy, underpinning everything from smartphones and electric vehicles to advanced medical equipment and national defense systems. Semiconductors are not only critical for technological innovation but also for economic growth, national security, and maintaining a competitive edge in the global marketplace6,8. In 2022, global semiconductor sales reached $574 billion, making semiconductors the world’s fourth largest traded product, trailing only crude oil, refined oil, and automobiles6. The industry’s strategic importance has led major economies to prioritize domestic control and resilience in semiconductor supply chains, especially in light of recent disruptions caused by the COVID-19 pandemic and ongoing geopolitical tensions9.

Importance of Semiconductor Manufacturing in Global and National Contexts

The semiconductor industry operates within a highly globalized and specialized value chain, with key production stages distributed across regions such as the Indo-Pacific, including Taiwan, Japan, China, and South Korea1,9. This global interdependence exposes the supply chain to risks from natural disasters, pandemics, cyberattacks, and, most notably, geopolitical disputes9. For the United States, semiconductors are the “brains” of modern electronics, enabling critical advances in fields such as artificial intelligence, healthcare, defense, and clean energy8. The U.S. leads the world in semiconductor design and research, maintaining a significant trade surplus and exporting $52.7 billion in semiconductors in 2023 8. However, more than 70 percent of U.S. semiconductor company sales are to overseas customers, highlighting the sector’s global integration and the potential vulnerabilities from supply chain disruptions8.

Recent Tariff Politics and Incentives Pushing Towards Onshoring in the US

Recent years have seen a sharp escalation in tariff policies and government incentives aimed at reshoring semiconductor manufacturing to the United States. The U.S. government has implemented significant tariffs on imported semiconductors, most notably increasing tariffs on Chinese chips from 25% to 50% by 2025 3,7. These tariffs are designed to protect domestic investments, enhance national security, and reduce reliance on foreign supply chains, particularly in response to China’s aggressive push for semiconductor self-sufficiency7. However, the complexity of global supply chains means that even U.S.-based firms rely heavily on overseas facilities for fabrication, equipment, and materials, making the impact of tariffs multifaceted and sometimes disruptive to domestic companies3.

To complement protectionist measures, the U.S. has enacted landmark legislation such as the CHIPS and Science Act, which allocates $52 billion in manufacturing and research grants, alongside a 25% investment tax credit to spur domestic semiconductor production5,4. The Act has already catalyzed billions of dollars in new investments, with 13 companies across 23 projects in 14 states receiving approximately $30 billion in grants and up to $25.1 billion in loans as of mid-2024 5. The Advanced Manufacturing Investment Tax Credit further strengthens the investment landscape, supporting over 125,000 jobs and boosting U.S. leadership in advanced manufacturing4. As a result, the U.S. is projected to triple its domestic semiconductor manufacturing capacity by 2032, increasing its global share of advanced logic chip production and capturing a significant portion of global capital expenditures in the sector2.

Overall, the convergence of tariff politics and robust federal incentives is fundamentally reshaping the semiconductor manufacturing landscape in the United States. These measures are intended not only to secure supply chains and safeguard national security but also to position the U.S. as a leader in next-generation semiconductor technologies, creating substantial opportunities for investors and stakeholders in the onshoring movement2,4,5.

Reshaping US Semiconductor Manufacturing

Figure 1. The convergence of escalating tariff policies and substantial federal incentives, notably through the CHIPS and Science Act, is fundamentally reshaping U.S. semiconductor manufacturing by strengthening domestic supply chains, enhancing national security, and positioning the country as a global leader in advanced semiconductor technologies.

Opportunities for Onshoring

Economic Growth

Onshoring semiconductor manufacturing presents a powerful engine for economic growth in the United States. The sector’s expansion is projected to create substantial employment opportunities, both directly and indirectly. According to industry estimates, the U.S. semiconductor industry directly employs nearly 338,000 people and supports more than 1.9 million additional jobs throughout the broader economy15. The construction of new fabrication facilities, or fabs, is especially labor-intensive; for example, building a single multibillion-dollar fab can require up to 6,000 construction workers over several years14. Once operational, these facilities are expected to employ about 115,000 people, although a significant talent gap remains a challenge, with up to 67,000 positions potentially going unfilled without robust workforce development initiatives14. The CHIPS and Science Act has catalyzed over half a trillion dollars in private sector investment, transforming states like Arizona and New York into burgeoning chipmaking hubs and stimulating local economies through increased demand for housing, services, and infrastructure13,15. The resulting economic ripple effect extends to suppliers, logistics, and ancillary industries, amplifying the impact of semiconductor manufacturing on regional and national prosperity.

National Security

Reducing dependency on international supply chains is a central rationale for onshoring semiconductor manufacturing. The COVID-19 pandemic and rising geopolitical tensions have exposed vulnerabilities in the global chip supply chain, particularly the heavy reliance on East Asian manufacturing hubs such as Taiwan and South Korea11,14. By increasing domestic production capacity, the U.S. can mitigate the risks of supply disruptions caused by natural disasters, trade disputes, or potential conflicts11,16. Enhancing strategic autonomy in semiconductor supply is vital for national security, as semiconductors are foundational to defense systems, critical infrastructure, and emerging technologies like artificial intelligence and quantum computing11,15. The CHIPS Act and related incentives are designed to fortify America’s chip supply chains and ensure that critical components for sensitive applications are produced within secure domestic facilities15. This strategic shift not only safeguards the U.S. from external shocks but also strengthens its negotiating position in international trade and technology policy.

Technological Innovation

Onshoring semiconductor manufacturing accelerates technological innovation through localized research and development. The proximity of advanced fabs to U.S.-based R&D centers fosters rapid prototyping, iterative design, and closer collaboration between engineers and manufacturing teams. This environment is conducive to breakthroughs in chip design, process technologies, and advanced packaging, particularly as demand for generative AI chips and energy-efficient solutions continues to surge10,12,13. Collaboration with local universities and technology hubs further amplifies innovation, as academic institutions provide a pipeline of skilled talent and contribute to cutting-edge research15. States investing in semiconductor clusters have seen increased partnerships between industry leaders and research universities, driving advancements in materials science, nanotechnology, and manufacturing automation. These synergies position the U.S. to lead in next-generation chip technologies, ensuring that intellectual property and high-value activities remain anchored domestically and supporting the broader innovation ecosystem.

The onshoring of semiconductor manufacturing offers the United States significant opportunities for economic revitalization, enhanced national security, and accelerated technological innovation. While challenges such as workforce shortages and higher operational costs persist, the strategic benefits and long-term potential make onshoring a compelling priority for policymakers, investors, and industry stakeholders.

Impact of Onshoring Semiconductor Manufacturing

Figure 2. Onshoring semiconductor manufacturing in the U.S. presents transformative opportunities for substantial economic growth, strategic national security autonomy, and accelerated technological innovation, driven by robust federal incentives despite existing workforce and cost challenges.

Strategic Approaches to Onshoring

Policy and Government Incentives

The CHIPS and Science Act represents the cornerstone of U.S. policy to revitalize domestic semiconductor manufacturing, allocating $52 billion in grants and tax incentives to accelerate onshoring. As of mid-2024, the Department of Commerce has awarded $32.5 billion in grants and $5.85 billion in loans across 48 projects, catalyzing over $540 billion in private investments19. Complementing direct funding, the Advanced Manufacturing Investment Credit (CHIPS ITC) provides a 25% tax credit for qualifying semiconductor manufacturing equipment and facilities, incentivizing companies to localize production17. These measures aim to counterbalance higher U.S. operational costs and reduce reliance on foreign supply chains, particularly for advanced logic chips critical to AI and defense applications20. Regulatory streamlining, such as the Building Chips in America Act, further accelerates projects by exempting federally subsidized semiconductor facilities from lengthy environmental reviews under the National Environmental Policy Act (NEPA), provided construction begins by 2025 18.

Public-Private Partnerships

Collaborative models between government and industry are driving large-scale semiconductor projects. For example, TSMC’s $165 billion expansion in Arizona-the largest foreign direct investment in U.S. history-relies on CHIPS Act grants, state incentives, and partnerships with Apple, NVIDIA, and AMD to establish a complete AI chip supply chain20. Similarly, Intel’s $3 billion “Secure Enclave” initiative, co-funded by the Departments of Commerce and Defense, exemplifies how public-private ventures enhance domestic production of secure chips for military systems19. These partnerships often involve shared R&D commitments, such as TSMC’s planned R&D center in Phoenix to co-develop next-generation packaging technologies with U.S. universities and tech firms20.

Infrastructure Development

Onshoring demands massive investments in advanced fabrication facilities (fabs) and supporting infrastructure. Arizona’s semiconductor boom highlights both progress and challenges: TSMC’s three new fabs and two packaging facilities require 1,100 acres of land, ultra-pure water systems, and a reliable power grid capable of sustaining 24/7 operations21. To address energy needs, the CHIPS ITC supports renewable energy integration, while state governments are upgrading transportation networks to streamline logistics for raw materials like silicon wafers21. The Building Chips in America Act’s permitting reforms have accelerated construction timelines, though critics warn of potential environmental trade-offs18.

Talent and Workforce Development

Workforce shortages remain a critical barrier, with the U.S. semiconductor industry facing up to 67,000 unfilled jobs by 2030 22. The CHIPS Act allocates $200 million for workforce training, funding initiatives like registered apprenticeships and VR-based simulations to upskill technicians in nanofabrication and equipment maintenance23. Partnerships with universities, such as Arizona State University’s collaboration with TSMC, create tailored curricula in semiconductor engineering and direct pipelines for graduates21. Additionally, the National Semiconductor Technology Center (NSTC), funded by the CHIPS Act, aims to establish regional innovation hubs to retain talent and diversify the workforce through partnerships with community colleges and HBCUs 22.

Overall, strategic onshoring requires a multi-pronged approach: leveraging federal incentives to offset costs, fostering industry-government collaboration for scalable projects, modernizing infrastructure to support advanced manufacturing, and building a sustainable talent pipeline. While challenges like water scarcity and global competition persist, these strategies position the U.S. to capture 20% of global advanced logic chip production by 2032 19,20.

Semiconductor Onshoring Strategies

Figure 3. Strategic semiconductor onshoring in the U.S. requires a coordinated, multi-faceted approach—leveraging substantial government incentives, robust public-private partnerships, targeted infrastructure modernization, and comprehensive workforce development—to overcome operational and resource challenges and achieve significant global market leadership by 2032.

Latest on CHIPS and Science Act:

As of May 2025, the CHIPS and Science Act remains active and continues to drive substantial investments in U.S. semiconductor manufacturing, research, and workforce development. However, its future is uncertain due to political shifts and policy changes under the Trump administration.

Implementation Progress:

• Approximately $32.8 billion of the $39 billion allocated for semiconductor manufacturing incentives has been awarded, supporting major projects by companies like Intel, TSMC, and GlobalFoundries. The Conference Board+1Reuters+1

• The CHIPS Program Office, under the Department of Commerce, continues to oversee these investments, aiming to bolster domestic chip production and reduce reliance on foreign suppliers. Financial Times+2Wikipedia+2Reuters+2

Political Challenges:

• President Donald Trump has publicly criticized the CHIPS Act, describing it as a “horrible, horrible thing” and urging Congress to repeal it. Reuters+1The Conference Board+1

• The administration is reviewing and potentially renegotiating terms of existing CHIPS Act awards, particularly concerning requirements like union labor usage and affordable childcare provisions. Reuters

• A bill (S.1745) has been introduced in the Senate to repeal certain provisions of the CHIPS Act, aiming to limit federal mandates on entities seeking funding. Congress.gov

Industry Impact:

However, companies like Samsung have delayed projects, such as the Texas chip facility, citing uncertainties stemming from potential policy changes and trade investigations. AP News

Despite political headwinds, the semiconductor industry has seen over $540 billion in supply chain investments, indicating strong momentum in domestic chip manufacturing. Semiconductors