Michigan could be a top beneficiary of CHIPS Act, auto industry insiders say

LANSING, Mich. — As President Joe Biden signed the CHIPS and Science Act - or CHIPS Act - this week, investing $52 billion into made-in-American semiconductor manufacturing, Michigan lawmakers declared the legislation a victory for the state.

“The new CHIPS Act is a big deal for us in Michigan,” said U.S. Sen. Debbie Stabenow, who pushed for the passage of the CHIPS Act along with fellow Democratic Michigan Sen. Gary Peters. "It really is about lowering costs for consumers. It's about bringing jobs home. And it's really about making things in America, because for too long we have been dependent on other countries for these parts that are essential. Now, we're gonna make 'em in America."

The CHIPS Act is an attempt to address the semiconductor shortage that has been plaguing multiple industries, including the auto industry, for more than a year. The shortage was sparked in part by changes in demand due to the COVID-19 pandemic and one of the auto industry's major semiconductor factories in Japan burning in a March 2021 fire. Chips are used in everyday devices such as cell phones, cars, laptops, and more.

While the semiconductor manufacturing legislation has been lauded as a win, how much good will it do for the Great Lakes State?

At this point, it's too early to know, auto experts said. Companies will have to apply to get a slice of the pie, but Michigan is set up for success as a potential investment state.

“There’s the opportunity for Michigan to become a center for producing microchips based on tax incentives, or subsidies, that the CHIP [sic] Act will be providing,” said Tim Nash, an auto industry expert currently serving as director for the McNair Center for the Advancement of Free Enterprise and Entrepreneurship at Northwood University.

A third of the chips produced in the world use polysilicon produced by Hemlock, Mich.'s Hemlock Semiconductors, the company said. Last week, Biden visited the company virtually to celebrated the passage of the CHIPS Act. Originally scheduled to attend the celebration in person, Biden was forced to back out after testing positive for COVID-19 again.

“A lot of people don’t know what Hemlock does," said Phil Dembowski, senior vice president and chief commercial officer at Hemlock. "They have no idea that Michigan is at the forefront of the semiconductor supply chain. And so now some of that is becoming apparent.”

Michigan "put America on wheels," as the saying goes, but the auto companies that continue to operate out of the state have been hit hard by the chip shortage. Across the state, brand new cars stack up in parking lots, waiting for chips that can get them to dealerships and onto the roads.

General Motors' Director of Federal Affairs Guillermo Godoy has been following the CHIPS Act from its inception more than a year ago. Godoy said more money for chips is also an investment in electric vehicles, which need more semiconductors to operate than standard vehicles.

“As we continue to electrify and autonomise our product fleet, we’re just going to need more semiconductors,” he said. “Currently, there are anywhere from 1,400 to 1,600 chips in a vehicle and we forecast, we see that number doubling in the next ten years.”

Industry insiders emphasized that the CHIPS Act is not a silver bullet, and it could take up to four years to see factories built and begin creating products.

For auto makers who have been facing an uphill battle to get their own products out through the chip shortage, however, it's a sign of hope.

“It’s a great step in the right direction, but obviously it’s going to take time for these [fabrication plants] to be built and be able to actually start producing more semiconductors,” said Godoy, who estimates that the chip shortage could continue to impact Michigan-made vehicles until the end of 2023.