The CHIPS Act and the Inflation Reduction Act

How two 2022 laws launched a major U.S. industrial policy for semiconductors and clean energy, and the debates over their effects.

In 2022, the United States passed two major laws that marked a shift toward active industrial policy: using government support to build particular industries.

The CHIPS and Science Act

Signed in August 2022, the CHIPS and Science Act provided around 52 billion dollars to support semiconductor manufacturing and research in the U.S., plus a tax credit for chip factory investment. Its goals were to reduce dependence on chips made in Taiwan and elsewhere, strengthen national security and compete with China. Companies such as Intel, TSMC, Samsung and Micron announced major new U.S. factories.

The Inflation Reduction Act

Despite its name, the Inflation Reduction Act, also signed in August 2022, was mainly a climate and energy law. It offered large tax credits for:

Clean electricity, such as solar and wind.
Electric vehicles, with conditions on where batteries and minerals come from.
Batteries, solar panels and other clean energy manufacturing.
Home energy efficiency.

Early estimates put its clean energy spending at around 370 billion dollars over a decade, but because many credits were uncapped, later estimates were much higher.

Effects

Investment in U.S. factories, especially for batteries, solar and semiconductors, rose sharply after 2022. Many projects were located in states that had not previously been manufacturing centres.

Criticism and changes

Trading partners, especially in Europe and Asia, complained that local content rules discriminated against their companies.
Cost: critics worried about the fiscal cost of uncapped tax credits.
Efficiency: some economists doubted the government’s ability to pick winners.

In 2025, a new U.S. law scaled back or ended many of the Inflation Reduction Act’s clean energy tax credits, particularly for electric vehicles and wind and solar power, reflecting a change in government priorities.

A battery factory in Georgia

Attracted by tax credits for battery production and demand from electric car makers, a company builds a battery factory in rural Georgia, creating thousands of jobs. The credits reduce its costs and make U.S. production competitive with imports. Whether such projects remain viable depends on how long the policy support lasts and on demand for electric vehicles.

Thinking industrial policy is new to the United States

The U.S. has long supported industries, from railroads and agriculture to defence and the early internet. What was new in 2022 was the scale and explicit focus on manufacturing and clean energy.

Key takeaways

The 2022 CHIPS and Science Act provided around 52 billion dollars for U.S. semiconductor manufacturing and research.
The 2022 Inflation Reduction Act offered large tax credits for clean energy and manufacturing.
Factory investment in batteries, solar and chips rose sharply after 2022.
A 2025 law scaled back many clean energy credits, showing how policy can shift.