Earlier this month, President Joe Biden signed into law the Building Chips in America Act (BCAA) to streamline environmental reviews for semiconductor manufacturing plants. It aims to support the CHIPS and Science Act of 2022 by suspending NEPA reviews if the project starts construction before the end of the year, receives loans rather than grants, and receives a subsidy less than 10 percent of total project costs. Reforms like this are needed now more than ever.
Like many failed industrial policy attempts before it, the CHIPS and Science Act shows early signs of trouble. Motivated by national security, the 2022 Act seeks to reshore semiconductor “chip” manufacturing by awarding large subsidies to preferred companies to build semiconductors in the United States.
But it has not gone according to plan. Intel, the biggest beneficiary of the CHIPS subsidies, is struggling financially. Meanwhile, extra agenda items like staffing requirements and climate provisions dampen the Act’s effectiveness for chipmakers that must already contend with ineffective permitting and environmental regulations that slow down production.
Little progress had been made beyond only a few manufacturing sites. That is a far cry from the ultimate goal of US semiconductor independence.
One big hold-up has been the National Environmental Policy Act (NEPA), which requires a comprehensive review before issuing permits for semiconductor fabrication plants. While these reviews are meant to protect the climate, they have instead erected needless bureaucratic hurdles that halt technological progress on everything from solar panels to chip manufacturing.
Bluntly, NEPA needs reform.
The Regulatory Transparency Project estimates that the time to complete a NEPA review has ballooned from less than 12 months in 1981 to 7 years in 2020. These reviews cost more than just time. In 2021, NEPA imposed an estimated $229.4 billion on infrastructure projects. That dwarfs the CHIPS Act’s appropriated budget of $50 billion and has likely risen even higher with recent pushes for more infrastructure investment. The subsidies showered on CHIPS projects subject them to that NEPA process. In a race for global leadership, long-term and expensive delays could be disastrous.
NEPA reform is broadly needed across many sectors of the U.S. economy, but Congress is rightly focused on how these regulations impede chip manufacturing. With the passage of the Building Chips in America Act, Congress provides a respite from regulatory burden if only for a limited time. CHIPS projects that receive only loans, receive smaller subsidies, or begin construction before 2025 are exempt from NEPA reviews. For projects that are not exempt, the Department of Commerce takes the lead on a simplified, single-document review, and can even reuse decisions in special circumstances to speed the process up.
The BCAA is but one small and imperfect step that makes manufacturing chips in the United States easier—but it alone will not usher in the chip manufacturing renaissance that policymakers desire. Much could still go wrong.
The biggest issue is the 2025 deadline. The BCAA’s short-lived relief is needlessly limited in scope and tilts the playing field away from future competition. Policymakers erred by sunsetting NEPA regulatory relief—ensuring that future regulations could return and risk undermining manufacturing progress. The BCAA can be a good pilot to inform future, careful deregulation efforts—but this program does not offer long-lasting regulatory relief.
By limiting this short-term relief to only projects that started construction before 2025, the United States government once again puts its thumb on the scale in a way that deters future competition and growth. The tight window entrenches existing industry leaders who can act quickly, blocking future competitors. If the United States is going to compete in chip manufacturing, streamlined regulatory compliance reforms should apply to everyone—including new entrants—instead of giving advantages only to companies with a head start.
The Building Chips in America Act is an imperfect helping hand for the CHIPS and Science Act. And it can accelerate the American push for national leadership in semiconductor manufacturing. Importantly, achieving sufficient buildout of high-tech semiconductor manufacturing is best achieved through deregulation, not further handouts—and that is one policy reform that Congress got right this time around.
Nate Karren is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal