How Supply Chains Gain from the CHIPS Act and Its Risk-Mitigation Stand

February 9, 2024

Article

Is your business taking advantage of the CHIPS Act? While it boosts the U.S. economy and national security by bringing semiconductor manufacturing onshore, the law also offers a cost-efficient set of opportunities to bolster supply chain resilience and gain a competitive advantage.

What Is the CHIPS Act?

When it was signed into law in summer of 2022, the CHIPS and Science Act (CHIPS Act) was hailed as a strategic stake in the ground for the semiconductor industry and national security. At that time, the United States was only producing about 10% of the world’s supply of semiconductors—and none of the most advanced chips.

The CHIPS Act makes funding available for large-scale manufacturing projects and facility upgrades to expand U.S. production. It also funds smaller projects (under $300M) for domestic suppliers who provide equipment, gases, chemicals and other materials that help manufacture semiconductors in the U.S.

“The smaller supply chain projects enabled by this funding will play a crucial role in creating a sustainable U.S. semiconductor ecosystem, providing large chipmaking facilities with access to the equipment, materials, and supplies required to boost U.S. domestic manufacturing,” said Under Secretary of Commerce for Standards and Technology and NIST Director Laurie E. Locascio.

Several industries rely on semiconductors, including defense, telecommunications, aerospace, automobiles, and consumer appliances. Many types of businesses stand to benefit from the CHIPS Act, due to their connections to semiconductor supply chains — and need for supply chain risk-mitigation solutions. The still-emerging impact of the law could transform industry best practices that stabilize domestic supply ecosystems, boosting competitive gains for most businesses with multi-tier supply chains.

Focus on 5 Opportunities

The CHIPS Act presents several opportunities for nearly all procurement, risk, and supply chain professionals. Here are five specific opportunities:

1 – Diversification of supply chains: The CHIPS Act encourages companies to bring their manufacturing processes back to the United States. This opens up new channels for procurement professionals to diversify their supply chain and source parts and services domestically.

Supply chain diversification is top priority for nearly half (47%) of supply chain and procurement professionals today, especially for overall cost reduction and increased resilience. The CHIPS Act provides an avenue for many businesses to find alternative suppliers in the U.S. and make strides toward supply chain diversification.

2 – Enhanced supply chain resilience: The CHIPS Act emphasizes the importance of supply chain resilience and risk management. This provides an opportunity for supply chain professionals to implement proactive processes to safeguard their supply chains to mitigate potential disruptions.

In fact, documenting established processes for supply chain risk management and resilience are requirements for funding (see page 30 of the CHIPS incentives program). The steps required here are all part of ongoing best practices to safeguard supply chains today.

3 – Access to funding: Companies that meet the criteria of the CHIPS Act can apply for funding to upgrade their facilities, add new machinery, or build new facilities. Procurement professionals can leverage this opportunity to secure funding for their projects and drive growth and innovation within their organizations.

4 – Increased focus on cybersecurity: The CHIPS Act requires companies to have a cybersecurity program as part of their application. This presents an opportunity for risk professionals to strengthen cybersecurity measures and ensure the security of their supply chain.

Enhancing cybersecurity is, of course, important for all supply chains. It’s also critical for being a trusted supplier to the U.S. government.

5 – Market awareness and competitive advantage: The CHIPS Act has gained significant attention in the news, creating awareness about the importance of cybersecurity, supply chain resilience, and domestic manufacturing. Procurement, risk, and supply chain professionals can leverage this awareness to position their organizations as leaders in these areas — gaining an advantage, for example, with a more resilient supplier network that’s less dependent on foreign vendors.

It’s never too early to get ahead on enhancing supply chain resilience. For more, see these six factors for boosting resilience in 2024.

Laurie E. Locascio, Under Secretary of Commerce for Standards and Technology and NIST Director

A Platform for Building Supply Chain Resilience

Managing supply chain risks — a key requirement for CHIPS Act funding — is integral to ensuring business continuity, maintaining reputation, and fulfilling regulatory requirements. Investing in supply chain risk management has a strategic component that can drive revenue and ensure longevity in the marketplace.

The 1Exiger platform uses proprietary AI and machine learning technology to deliver end-to-end visibility that drives risk management clarity for multi-tier supply chains. The platform tracks nearly 17 million supply chains, with an extensive database that aggregates 7 billion source records of supply chain installations and 1.3 billion contract records. It also categorizes and risk-ranks the supply chain threats that could impact your organization’s operations and reputation.

The platform provides item-level visibility that is critical for sourcing all materials and parts that go into semiconductor production. Exiger’s technology lets users source materials all the way to the hole in the ground and discover key details that inform strategic and cost-saving decisions.

As a strategic partner of the U.S. Partnership for Assured Electronics (USPAE), Exiger is committed to secure U.S. and allied supply chains for critical electronic components and guard against sabotage, attacks and undue influence from adversarial actors.

Overall, the CHIPS Act and its requirements provides an opportunity for procurement, risk mitigation, and supply chain professionals to enhance their processes, secure funding, and strengthen their organizations’ resilience and competitiveness.

Contact us to learn more about how Exiger can help your organization build supply chain resilience and benefit from the CHIPS Act.

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