What's in the new Building Chips in America Act and what does it mean for the semiconductor industry?

“On Wednesday 2 October 2024, the president signed into law the ‘Building Chips in America Act of 2023,’ which exempts certain projects relating to the production of semiconductors from environmental reviews under the National Environmental Policy Act of 1969.”

So reads a tiny update on the Briefing Room section of the White House website that could have – and is, indeed, intended to have – significant implications.

Chips – also known as semiconductors – are at the centre of most technologies driving the future economy, from AI, computers and electric vehicles to solar panels, healthcare devices and military weapons.

Their importance is underlined by the fact that global semiconductor sales rose more than 20% on the year in August to their highest ever level for the month, according to the US Semiconductor Industry Association.

Sales are rising fastest in the Americas, with a 43.9% spike in August compared with a year earlier.

However, only about 10% of the world's semiconductors are produced in America, down from 37% in 1990, according to The New York Times. The US would prefer more production to be homegrown for national-security and supply-chain reasons. The US Inflation Reduction Act (IRA) and CHIPS and Science Act are designed to help achieve this, by offering tax credits, loans and grants to incentivize production.

But they do not appear to be working as well as was hoped for, with around 40% of major manufacturing projects announced in the first year of the IRA and CHIPS Act facing delays, according to The Financial Times.

The new Building Chips in America Act is designed to remedy this.

The Building Chips in America Act 2023 removes the need for National Environmental Policy Act (NEPA) reviews for semiconductor manufacturing projects that are receiving government subsidies through the CHIPS and Science Act.

NEPA reviews require federal agencies to “incorporate environmental considerations in their planning and decision-making through a systematic interdisciplinary approach. Specifically, all federal agencies are to prepare detailed statements assessing the environmental impact of and alternatives to major federal actions significantly affecting the environment.”

The NEPA also provides the public with the chance to review and comment on environmental evaluations.

Opponents of the change say it will allow companies to “skirt an important step aimed at reducing potential harms to the environment and workers”, according to the New York Times.

But supporters say that semiconductor developments will still be subject to numerous federal, state and local environmental and permitting rules.

“NEPA reviews could take years, potentially causing delays in completing … projects, without providing significant additional environmental benefits,” the US Semiconductor Industry Association says. “The Building Chips in America Act will help ensure these new facilities get up and running in an expeditious and environmentally responsible way, which will help maximize the CHIPS Act’s positive impact on America’s economy, national security and supply-chain resilience.”

US environmental organization the Sierra Club says that semiconductor manufacturing is “notorious for its extensive use of the toxic ‘forever chemicals’ known as PFAS [per- and polyfluoroalkyl substances]”.

It claims that the Building Chips in America Act will “remove the last remaining federal lever to assess the impact of massive semiconductor fabs on drinking water, air quality, climate change and community health”.

The most senior Democrat on the US Natural Resources Committee, Raúl Grijalva, says it is “unconscionable” to allow semiconductor facilities “to completely bypass NEPA’s critical environmental review and public input processes”.

However, the bill’s co-author, Democratic Senator Mark Kelly, said it was “not a rollback of any environmental laws”, as developments will still need to meet key environmental protection laws such as the Clean Air Act and the Clean Water Act.

He also pointed out that the bill only exempts projects from NEPA reviews if they have started construction by the end of this year or if federal financial assistance does not make up more than 10% of their total cost, The New York Times reports.

Boosting semiconductor production has been a central plank of President Joe Biden’s economic policy. The reasons include “bringing semiconductor supply chains home, creating jobs, supporting innovation and protecting national security”, according to the White House.

Kelly says the Building Chips in America Act was devised “to make sure that the CHIPS and Science Act had the maximum impact on our economy and our national security”.

The bill’s other co-author, Republican Senator Ted Cruz, says that streamlining the permitting process by removing NEPA reviews is “a crucial step in onshoring jobs and making our country less dependent on China for semiconductors critical to national defence”.

Commerce Secretary Gina Raimondo told CNBC that the new legislation would allow companies to build semiconductor facilities more quickly. “Of course, we care deeply about clean air, clean water and the environment,” she commented. “That being said, this is a national security imperative. We have to act with urgency and go as fast as possible.”

World Economic Forum initiative Future-Proofing Global Value Chains: Country Preparedness and Beyond is helping manufacturing companies anticipate the ongoing reconfiguration of global value chains and identify the best responses to disruptions caused by three megatrends – emerging technologies, climate change and geopolitical tensions.

As the semiconductor industry becomes even more important all around the world, it will become increasingly important that it manages its ecological footprint as efficiently as possible. It will also have to work with governments and international bodies to ensure that supplies are able to reach every corner of the globe – whether through domestic manufacturing or international trade – to avoid the kind of shortages seen at the start of 2023.