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In order to understand the impact the CHIPS Act will have on car prices, it's important to first understand what the act does and why it was devised.

You also need to understand the role chips play in vehicle prices, and how they've affected the car market since the beginning of the pandemic. We can break it down for you.

What Is The CHIPS Act?

The CHIPS and Science Act is a massive technology package devised with the intent to reinforce the United States’s competitive position in the semiconductor market.

At its foundation, The CHIPS Act will permit Americans to continue purchasing and using their electronics in the future without fear of a global microchip shortage like that brought on during the pandemic.

  • Reinforce American Leadership in Semiconductors - By providing $52.7 billion for American semiconductor research, development, manufacturing, and workforce development. Included in this are billions of dollars worth of incentives for manufacturing, R&D, workforce development, and investment tax credit.

    These incentives are offered with the intent to secure domestic supply, create thousands of construction and manufacturing jobs, and galvanize hundreds of billions more in private investment.

  • Promote American Innovation in Wireless Supply Chains - 1.5 billion dollars of the CHIPS Act is designated for the promotion and deployment of wireless technologies that utilize open and interoperable radio access networks.

  • Advance American Global Leadership in Technologies of the Future - Establishing and maintaining the U.S. as leaders in technology such as artificial intelligence and biotechnology is paramount. It is a cornerstone upon which our future economic competitiveness and national security will rest upon.

Why Was The CHIPS Act Passed?

car parts in a circle

The CHIPS and Science Act was passed with the intent of strengthening the American private sector by encouraging investment into semiconductors. The semiconductor was invented in America, but the US only produces about 10% of the world’s supply (East Asia produces 75% of the global supply of semiconductors according to the White House).

Ultimately, the bill’s purpose is to reaffirm U.S. leadership in the semiconductor sector and prevent the effects of a chip shortage like the ones experienced during the Covid-19 pandemic.

As the entire world rebounds from the impact of the coronavirus pandemic, the United States is taking necessary measures to jumpstart its own economy.

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When Was The CHIPS Act Passed?

Congress passed the CHIPS Act of 2022 in July of the same year. The President signed that same bill into law on August 9, 2022.

What Does A Vehicle Microchip Do And Why Is It Needed?

Semiconductor chips (aka microchips) act as the central nervous system for modern vehicles. The semiconductor is usually made out of silicon, which conducts electricity, and used in the development of microchips.

These chips communicate across your vehicle, recording and relaying information.

They are the brain of your car and vehicles now require 40% more microchips than cars made before the pandemic — the average new vehicle possesses a whopping total of 298 semiconductor chips.

Microchips are needed in today’s vehicles because of how much information they relay to the driver and manufacturer.

They can provide advanced driver-assistance, increase fuel efficiency, and even regulate entertainment systems. Without them, your car is essentially a body without a brain!

How Will The CHIPS Act Bring Car Prices Down?

calculating costs for cars

For the last couple of years the price of both new and used cars has jumped up significantly. This is in part because of the Coronavirus pandemic, which has created a shortage of workers in the factories based across Asia that create the bulk of the world's semiconductor chips.

It was also attributed to the increase in demand for technologies like laptops and other smart devices that also use these chips as office workers transitioned to working from home.

Even as the country restabilized, the backlogged demand for vehicles — and the chips required to power them — has kept prices high due to the strain on the supply chain.

With inventory extremely limited, car dealerships have been allowed to (or even, in some instances, needed to) charge higher prices for their vehicles in order to maintain operations.

However, in an effort to support our economic restabilization, the CHIPS Act was recently signed into law by the President.

The focus on domestic production of microchips will help to alleviate the car shortages and, in turn, lower car prices.

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Frequently Asked Questions

What will the CHIPS Act do?

The CHIPS and Science Act is a massive technology package devised with the intent to reinforce the United States’s competitive position in the semiconductor market. It will permit Americans to continue purchasing and using their electronics in the future without fear of a global microchip shortage like that brought on during the pandemic.

Who will benefit from the CHIPS Act?

Americans will benefit from the CHIPS Act. Consumers that purchase anything with a microchip in it (like cars) will see prices decrease as availability increases. Those looking for great paying jobs in construction and manufacturing will find opportunities opening up for them.
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