Chips Act

Almost every electronic device contains at least one chip: a small piece of silicon that computes or stores data. Such chips are manufactured in extremely expensive specialized factories, and most of these are located in Asia, above all in Taiwan, South Korea, and China. The governments in Washington and Brussels no longer liked this situation. They therefore passed laws that support the construction of such factories on their own territory with taxpayer money. These laws are called the Chips Act. There are two of them: the American one from 2022 and the European one from 2023.

Why states suddenly started paying for factories

Normally, companies decide for themselves where to produce. When it comes to chips, governments now consider this too risky. The trigger was the coronavirus period. At that time chips were in short supply worldwide, and car factories in Germany came to a standstill because small semiconductor components could not be delivered. Suddenly it became visible how much depends on a single supply chain.

On top of that comes politics. Almost all of the world’s most advanced chips are made by a single company on Taiwan, an island whose status China claims for itself. A conflict there could disrupt the supply of half the world economy. Chips are also found in weapons systems and in the data centers used to train AI models. Domestic production is therefore considered a matter of national security, not just economics.

The sums involved are correspondingly large. The US law provides around 52 billion dollars, of which about 39 billion goes directly to factories. The EU speaks of around 43 billion euros, though a large part of this comes from already planned funds and from money contributed by member states. The European figure is thus less fresh money than the number might suggest.

Money, conditions, and a 20 percent target

The state does not build a factory itself. It lowers the costs for companies that build voluntarily. For this there are three tools: direct grants, tax breaks, and favorable loans or guarantees. A modern chip factory can easily cost 20 billion dollars. A grant of a few billion can determine whether it is built in Arizona, Saxony, or after all in Asia.

Conditions are attached to the money. In the US, subsidized companies are not allowed to expand their most advanced production in China for a certain period. Very high profits must partly be shared with the state, and the funding may not be used for stock buybacks. The EU additionally pursues a stated goal: by 2030, one fifth of global chip production is supposed to come from Europe. In 2023, the share was about ten percent.

A common misconception is that this is only about factories. Both laws also fund research, pilot facilities, and training. Because a factory is of little use if there is no one there who can operate the equipment. In practice, this is often exactly where the biggest bottleneck lies.

From Magdeburg to the quarterly figures

The EU Chips Act became most visible in Magdeburg. There, the Taiwanese manufacturer TSMC wanted to build a factory together with partners; another project by Intel was postponed in 2024 and later stopped. Such news regularly appears in the business section, because thousands of jobs and billions in subsidies depend on a single plant.

In the US, grants went to, among others, Intel, TSMC, Samsung, and Micron. When a chip company presents its quarterly figures, the subsidies show up there as a line item. Investors pay attention to this because it affects profits. In 2025, in one case, funding even turned into a government stake: the US government took shares in Intel.

The Chips Act must be distinguished from export controls. These are bans on selling certain high-performance chips to China. Both belong to the same strategy but are legally separate: the Chips Act promotes domestic buildup, while export controls slow down the competition. In everyday life, neither of the two is directly noticeable. But when it comes to the prices of graphics cards, phones, and cars, it is precisely here that it is decided in the long run how stable the supply will remain.