The CHIPS Act is a landmark policy that has successfully attracted leading-edge manufacturing investment to the U.S., but its impact is severely limited by its failure to make high-volume mature node production economically viable domestically.
China's national strategy for semiconductor self-sufficiency is a fixed and determined policy that will persist regardless of U.S. export controls, which in turn forces Chinese firms to innovate around sanctions.
The extreme concentration of advanced semiconductor manufacturing in Taiwan, particularly at TSMC, represents the single greatest vulnerability in the global technology supply chain.
The economics of onshoring are brutal; new U.S. fabs face a significant cost disadvantage against fully depreciated Asian facilities, a gap that the 25% investment tax credit is insufficient to close for mature nodes.
There is a critical lack of awareness within U.S. industry about the deep penetration of Chinese-made mature node semiconductors in their supply chains, creating a hidden dependency.
Pre-2015
Describes the historical context where the U.S. share of global semiconductor manufacturing declined from nearly 100% to approximately 10%, driven by the rise of the TSMC-led foundry model.
2015
Identifies a turning point where China publicly announced its 'Made in China 2025' policy, aiming for complete semiconductor self-sufficiency. At this time, Kim notes only two individuals in the entire U.S. government were focused on the semiconductor sector.
October 2022
Highlights the imposition of U.S. export controls, which had immediate and severe operational impacts on companies like SK Hynix in China and spurred innovation from Chinese firms like SMIC.
Late 2022
Notes that the CHIPS Program Office formulated its initial strategy without foreseeing the explosive growth and strategic importance of AI chip companies like NVIDIA and AMD.
2022-2025
Served as Chief Economist in the Chips Program Office at the U.S. Department of Commerce, overseeing the implementation and economic analysis of the CHIPS and Science Act.
▶The CHIPS Act: A Strategic but Flawed InterventionMay 2026
Dan Kim provides a detailed breakdown of the CHIPS and Science Act, highlighting its structure of grants and tax credits. He credits the act with attracting all five leading-edge semiconductor firms to the U.S. but is candid about its significant failure to onshore high-volume mature node manufacturing, which remains critical for defense and industrial applications.
Investors should differentiate between the capital-intensive leading-edge projects, which have received significant support, and the mature node segment, where U.S. policy has not yet created a competitive economic case against depreciated Asian fabs, posing a continued supply chain risk.
▶US-China Semiconductor Rivalry and Unintended ConsequencesMay 2026
Kim frames the U.S.-China tech dynamic as a clash of fundamental policies, with China's drive for self-sufficiency being a non-negotiable goal. He notes that U.S. export controls, while impactful, have forced Chinese firms like SMIC to innovate around restrictions, and that Chinese commercial industries still prefer Western tech when available, revealing a government-industry priority split.
Analysts must consider the second-order effects of U.S. export controls, which may accelerate indigenous Chinese innovation in the long term, even as they create short-term disruptions for both Chinese and Western firms.
▶The Economics of Onshoring ManufacturingMay 2026
Kim emphasizes the harsh economic realities of rebuilding the U.S. semiconductor ecosystem. He points out that companies underestimated construction costs, that new U.S. mature-node fabs face a 2-to-1 cost disadvantage against depreciated Asian facilities, and that porting a chip design to a new foundry can cost hundreds of millions of dollars.
The success of U.S. onshoring efforts will depend less on initial subsidies and more on creating a sustainable, cost-competitive ecosystem, a challenge the CHIPS Act's current structure has not fully solved, particularly for mature technologies.
▶Extreme Concentration and Supply Chain Fragility
A core concern for Kim is the extreme geopolitical risk posed by supply chain concentration, with over 90% of leading-edge logic chips being made by TSMC in Taiwan. He also highlights a different vulnerability: the hidden dependency on low-cost Chinese mature node chips, which a recent government survey found many U.S. companies are unaware of.
Risk assessment models should account for vulnerabilities at both the high end (geopolitical risk in Taiwan) and the low end (market oversupply and hidden dependencies on Chinese mature nodes), as disruptions in either could have severe economic consequences.