Fire Hydrant of Freedom
Politics, Religion, Science, Culture and Humanities => Politics & Religion => Topic started by: Crafty_Dog on December 22, 2021, 03:49:24 AM
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Microchips are macro important and seem to keep coming up so herewith I begin this thread:
What on earth can be holding up the House (the Dems) from passing the bill in question?!?
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Too little, too late for American-made microchips
Supply interruptions in Asia to delay manufacturing well into next year
BY JEFF MORDOCK THE WASHINGTON TIMES
Thousands of new cars are piling up at manufacturers’ lots, the price of electric toothbrushes has surged, coffee machines have disappeared from store shelves, and Apple has drastically cut its iPhone production.
The global computer chip shortage is showing no signs of abating heading into 2022, and the Biden administration’s proposed solution remains years away.
President Biden and his Cabinet have urged Congress to pass legislation that would invest $52 billion to increase U.S. semiconductor chip production.
Supply interruptions have depleted consumer product inventory, and offi cials say domestic chip production is critical.
The bill, known as the CHIPS for America Act, passed the Senate in July with bipartisan support but stalled in the House.
At a speech last month in Detroit, Commerce Secretary Gina Raimondo implored Congress to pass the bill so the U.S. can “immediately” begin ramping up chip production.
Even if Congress does act urgently, the legislation is no quick fix, analysts say. By the time U.S. semiconductor chip manufacturing can get up to speed, the crisis will have long passed.
“The chip shortage is going to get resolved in the second half of 2022. It takes three years for a new chip [factory] to come to production,” said Gaurav Gupta, vice president of semiconductors and electronics for Gartner, a technology research and consulting company.
Even if the U.S. increases production significantly, he said, it can’t completely remove itself from the global supply chain. The testing and packaging are
completed in Southeast Asia, where costs are much lower.
It costs 30% more to make a chip in the U.S. than in Asia, according to a 2020 report by the Semiconductor Industry Association. That could add $10 billion to $40 billion to production expenses.
“You’ll still send the chips back to Southeast Asia unless you are bringing the complete ecosystem here, and you won’t because it’s impractical to do that,” Mr. Gupta said.
It is not clear whether the federal dollars allocated under the CHIPS Act would be enough to support domestic production. The U.S. share of the global semiconductor manufacturing market dropped from 37% in 1990 to 12% in 2020, according to the industry association. Europe’s share dropped from 44% to 9% in the same time frame. Asia now holds 75% of the world’s semiconductor manufacturing capacity.
“There’s no special sauce down there except money,” said Paul Gratz, who teaches computer engineering at Texas A& M University.
In China, where it costs nearly 50% less to produce a semiconductor than it does in the U.S., the government is spending $150 billion to increase chip production. That is nearly triple the investment under the CHIPS Act.
Some fear the U.S. bid to increase domestic manufacturing will lead to a glut of chips in the market, resulting in falling prices and negative or zero revenue growth.
The revenue of the top 10 semiconductor firms, including Intel and Samsung, declined by 12% in 2019 because of oversupply, according to Gartner’s research.
The potential for overcapacity is on the horizon as automobile and smartphone makers slash inventory because of sluggish sales.
“You have to solve this problem in a systematic manner,” Mr. Gupta said. “You don’t have to go with political sentiment.”
U.S.-based Intel Corp. announced Thursday that it will spend $7.1 billion to build a massive packaging and testing facility in Malaysia, bucking the administration’s call for more domestic manufacturing.
The $7.1 billion is part of Intel’s overall $30 billion investment in Malaysia, which will include a sprawling complex to build chips for cars, computers and other industries.
Mr. Gratz said the U.S. needs to stop relying on Asian countries for semiconductor chips.
South Korea and Taiwan are the world’s two chipmaking powerhouses, combining for roughly 43% of the global market, according to the Semiconductor Industry Association. Both nations, however, are under global threats that could lead to instability. South Korea has repeated conflict with North Korea, and fears of a full Chinese invasion of Taiwan persist.
“In the long term, [the CHIPS Act] is probably beneficial for us because two countries that have the lion’s shares of the market are Taiwan and South Korea,” Mr. Gratz said. “By investing domestically, it is going to give us more of a cushion if there is a geopolitical shake-up.”
Instead of ramping up domestic production, Mr. Gratz said, companies should invest in technologies to use alternate chips.
That strategy would pay off for the auto industry, which has been devastated by the chip shortage.
Automaker Tesla has survived by developing its own semiconductors and changing its software to use fewer chips.
The chip shortage is expected to cost the global automotive industry $210 billion in revenue this year, but Tesla has shown a string of profitable quarters and a growing business.
“What Tesla did was very impressive,” Mr. Gratz said. “They were very flexible with respect to retooling and spent a lot more on software so they can use different processors into their cars.”
Tesla’s technology investment enabled it to increase production while other automakers slowed or shut down production because of the chip shortage.
Toyota cut production targets in the U.S. and overseas by 15% last month. Ford announced this summer that it has 70,000 partially built cars awaiting semiconductor chips. Ford did not respond to repeated requests for comment about the number of vehicles that have been completed.
Other manufacturers are looking into technological investments. General Motors said it will work with chip manufacturers to develop devices that combine several functions previously controlled by chips.
Ford and other automakers are seeking partnerships with semiconductor companies to give them more control over the supply and design of chips.
LIKE WATCHING GRASS GROW: With new cars idle, U.S. automakers can’t wait for President Biden’s CHIPS for America Act to get factories running. Meanwhile, Tesla has found its own solution to the shortage. ASSOCIATED PRESS
Southeast Asian nations will continue testing and packaging semiconductors even if the U.S. increases domestic production significantly. It costs 30% more to make a chip in the U.S. than in Asia, adding $10 billion to $40 billion to production expenses. ASSOCIATED PRESS
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Taiwan Should Destroy Island’s Semiconductor Plants If China Invades, Paper Says
The proposed deterrence strategy aims at hurting the Chinese economy
By Frank Fang January 5, 2022 Updated: January 5, 2022biggersmaller Print
A scorched-earth policy involving Taiwan destroying its own advanced semiconductor plants in the event of a Chinese invasion would be a good deterrence strategy for the self-ruled island against warmongering China, according to a recent paper published by the U.S. Army War College.
“In practice, this strategy means assuring China an invasion of Taiwan would produce a major economic crisis on the mainland, not the technological boon some have suggested would occur as a result of the PRC [People’s Republic of China] absorbing Taiwan’s robust tech industry,” the paper’s (pdf) authors state.
The key is to make Taiwan “unwantable,” the paper states, and the economic costs would “persist for years” even after the regime in Beijing had taken over the island.
The paper, titled “Broken Nest: Deterring China from Invading Taiwan,” was published in the last 2021 issue of the institution’s quarterly journal Parameters, an official U.S. Army periodical. Jared McKinney, chair of the department of strategy and security studies at the eSchool of Graduate Professional Military Education at Air University, and Peter Harris, associate professor of political science at Colorado State University, are the authors.
The strategy centers around China’s current heavy reliance on importing semiconductors, which are tiny devices that power everything from computers, smartphones, and electric vehicles, to missiles. According to China’s state-run media, Beijing imported over $350 billion worth of chips in 2020.
That year, only 5.9 percent of semiconductors ($8.3 billion) used in China were manufactured domestically, according to a report by U.S.-based semiconductor market research company IC Insights.
In October last year, IC Insights warned that the Chinese regime believes it can solve its problem of not being able to produce leading-edge semiconductors through “reunification with Taiwan.”
China claims Taiwan as a part of its territory even as the self-governing island is a de facto independent country with its own democratically elected officials, military, and currency.
Currently, Taiwan Semiconductor Manufacturing Corp. (TSMC), the world’s largest contract chipmaker, and Samsung in South Korea are the only companies in the world capable of making the most advanced five-nanometer chips. TSMC is scheduled to produce the next-generation three-nanometer chips in the second half of this year.
Epoch Times Photo
A chip by Taiwan Semiconductor Manufacturing Corp. (TSMC) at the 2020 World Semiconductor Conference in Nanjing, Jiangsu Province, China, on Aug. 26, 2020. (STR/AFP via Getty Images)
As chips get smaller in size, they deliver more performance-per-watt, meaning that they run at a faster speed while consuming less power.
The paper recommends that Taiwan “destroy facilities belonging to” TSMC in the face of a Chinese invasion, given that the Taiwanese chipmaker is China’s most important supplier. The challenging aspect of the strategy would be to make the scorched-earth strategy “credible” to the Chinese regime, according to the paper’s authors.
“If China suspects Taipei would not follow through on such a threat, then deterrence will fail,” they explain.
The authors recommend that Taiwanese authorities set up an “automatic mechanism” to destroy TSMC’s plants, to be “triggered once an invasion [by Beijing] was confirmed.”
Without Taiwanese chips, China’s economy would take a hit and Beijing would be unable to maintain sustained economic growth, hurting the Chinese Communist Party’s legitimacy to rule mainland China, according to the paper.
“The purpose here must be to convince Chinese leaders invading Taiwan will come at the cost of core national objectives: economic growth, domestic tranquility, secure borders, and perhaps even the maintenance of regime legitimacy,” the authors add.
The authors offered several other recommendations that could further deter China from invading Taiwan. These include the United States threatening to lead a global sanction campaign against any chip exports to China, or giving a green light for U.S. allies such as Japan, South Korea, and Australia to develop their own nuclear weapons, if the invasion takes place.
“If penalties for invading Taiwan can be made severe and credible enough, Beijing could still be deterred from choosing such a course of action,” the paper states.
The authors also note that they were told by a Chinese analyst with ties to China’s navy that Beijing’s goal for a successful invasion of Taiwan was 14 hours, and Beijing estimated that it would take 24 hours for the United States and Japan to respond.
“If this scenario is close to being accurate, China’s government might well be inclined to attempt a fait accompli as soon as it is confident in its relative capabilities,” the authors write.
In October last year, Taiwan’s defense minister warned that the Chinese regime will be capable of mounting a full-scale invasion of the island by 2025.
“If Taiwan fell to China, a successful democracy would be extinguished, and Beijing’s geopolitical position in East Asia would be enhanced at the expense of the United States and its allies,” the authors write.
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https://www.businessinsider.com/intel-ceo-chip-largest-silicon-manufacturing-location-plant-ohio-2022-1?fbclid=IwAR3SQfPvl4dgBCIwe9jGYuxuFDwy-3IZ6BqqFPCTfuWZ-cOVec6esyVvtF0
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https://www.msn.com/en-us/news/us/us-warns-that-chip-shortage-could-shut-down-factories/ar-AAT8d8Q?ocid=msedgntp
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China’s Automotive Chip Supply Shortfall Will Reach 20 Percent Due to US Sanctions, Outdated Technology: Trade Group
By Jenny Li January 30, 2022 Updated: January 31, 2022biggersmaller Print
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China’s chip supply will remain tight this year, and the automotive chip supply shortfall will widen to 20 percent, the country’s car manufacturing trade group said. The regime’s own experts have revealed that the key reason for China’s chip shortage is not the pandemic, but China’s outdated chip technology and U.S. sanctions against the Chinese Communist Party (CCP).
Luo Junjie, a spokesman for the Ministry of Industry and Information Technology of the CCP, said on Jan. 20 that the shortage of chips last year had the greatest impact on the auto industry, and many domestic auto companies experienced production cuts or short-term shutdowns.
In 2022, the shortage of chips in China looks set to continue to worsen. Data fed back by foundries and chip manufacturers show that this year, the automotive-grade microprocessors, storage, logic, and analog chips produced can only meet the production needs of 4 million new energy vehicles in China.
The China Association of Automobile Manufacturers (CAAM) predicted at the end of December 2021 that the sales of new energy vehicles in China will reach 5 million in 2022. Compared with the supply of auto chips, China’s new energy vehicle market will face a 20 percent demand gap.
Luo blamed the pandemic and the “sanctions and suppression” of the United States for the tight supply of chips in China. However, Yuan Chengyin, general manager of China’s National New Energy Vehicle Technology Innovation Center, told Bloomberg in January 2021 that the main reason for the shortage of automotive chips in China is not the impact of the pandemic, but the lack of domestic technical knowledge and ongoing geopolitical tensions. Yuan believes that if Chinese companies cannot produce their own semiconductors, the domestic supply chain will continue to be affected by international factors. He predicted that the shortage of automotive chips will continue for 10 years.
Hong Kong-based electronics industrialist Yuan Gongyi said in an interview with The Epoch Times that the threat of U.S. sanctions has made it difficult for Chinese companies to obtain chips.
“When the world is short of supply, all chip factories outside China will certainly put China at the bottom of their list. Why? The U.S. policy is changing every day. They say they want to sanction Chinese companies, so no one dares to help China. Most of these chips are custom chip fabrication. For example, the delivery may take place after six months. During the waiting period, if the U.S. government imposes sanctions, the chip products will not sell.”
The chip industry has become at the forefront of wrangling between the United States and China. The United States has sanctioned China’s telecom giant Huawei twice, once in 2019 and again in 2020, blocking Huawei’s access to chips. When explaining the U.S. sanction against Huawei, former U.S. Attorney General William Barr said in a speech at the Center for Strategic and International Studies in February 2020 that since the 19th century, America’s technological prowess has guaranteed its prosperity and security.
Yuan Gongyi said that the United States is now in a military confrontation with the CCP, and chips are an important component of weapons.
“Now you see that China has some supersonic missiles, and other high-tech weapons, all of which must have chips. Didn’t Japan have a meeting with the United States recently? In fact, it is about the materials used in the CCP’s chips. Many materials are Japanese manufactured … I think there is a great chance of actual military conflicts on the western side of the Pacific Ocean, especially in the Nansha district. Therefore, the United States must stop [the exports of] all equipment and raw materials related to chips. So this is not just a car problem, it is a problem regarding all of China’s chip supply.”
At the China Automobile Forum in June 2021, Ye Shengji, chief engineer and deputy secretary-general of the CAAM said that China’s semiconductor self-sufficiency is at 15 percent, of which the auto chip self-sufficiency is less than 5 percent. Among all kinds of chips, MCU control chips are the shortest in supply, and China’s MCU control chip companies are the weakest.
Microcontroller units, also known as microcontrollers or single chips, integrate peripheral interfaces such as memory, timers, USB, analogue to digital conversion and LCD driver circuits on a single chip, forming a chip-scale computer.
Today, an average car requires more than 40 chips. With the rise of new energy vehicles, the demand for chips has greatly increased. According to Deloitte survey data, the average demand for chips for fuel vehicles is 934, while the demand for new energy vehicles is 1,459.
In addition to low production capacity, Chinese chips’ technological level is also far behind Europe and the United States. State-funded media outlet “Chen Bo Observation” stated that Chinese chips are at least three generations behind the international level. At present, the most advanced mass-produced chips in the world are 5-nanometer chips, and the manufacturers are Taiwan Semiconductor Manufacturing Company (TSMC), Samsung of South Korea, and Intel of the United States.
TSMC and Samsung are working on 3-nanometer technology, which is expected to be launched in the first half of 2022.
China’s Semiconductor Manufacturing International Corporation started mass production of 14-nanometer chips in 2020. The next-generation technology after 14 nanometers is 10 nanometers, then 7 nanometers, and finally 5 nanometers. Therefore, Chinese chips are three generations behind the leading international level.
Mario Morales, vice president of technology and semiconductors at the International Data Corporation, also believes that Chinese chips may be “three to four generations” behind the world’s cutting-edge level.
Over the past three years, the Chinese regime has invested $2.3 billion in at least six major chip construction projects in China, including the Wuhan Hongxin and the Jinan Quanxin project, but all have failed.
Yuan Gongyi said: “The fundamental problem is that there is no individual creativity, so it will never catch up … All the things we see today are made by talented people, not by money. Why is the United States so successful? There are many independent thinkers in the United States.”
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European chipmaking. The European Commission on Tuesday launched a plan aimed at improving Europe’s microchip production capacity. The goal of the plan is to strengthen supply chains for products dependent on semiconductors, which have been in short supply worldwide for months now.
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China’s 5G Soars Over America’s
In some U.S. cities, it’s slower than the old 4G system. Washington should make it a priority.
By Graham Allison and Eric Schmidt
Feb. 16, 2022 6:27 pm ET
At this point, football fans have seen so many ads from AT&T and Verizon claiming to have the fastest and most reliable 5G service on the planet that those without a 5G smartphone might think they are really missing something. Don’t be misled. Unless you are traveling internationally, you won’t enjoy faster speeds with a new 5G-enabled smartphone than you’d get on a 4G phone streaming games from New York, Los Angeles or many other U.S. cities. AT&T’s and Verizon’s new 5G networks are often significantly slower than the 4G networks they replace. America is far behind in almost every dimension of 5G while other nations—including China—race ahead.
America’s average 5G mobile internet speed is roughly 75 megabits per second, which is abysmal. In China’s urban centers 5G phones get average speeds of 300 megabits per second. Though that’s not quite the fastest 5G in the world—South Korea claims that title at over 400 Mbps—it’s still fast enough to download a high-definition movie in two minutes. Mobile internet speed is a central advancement of 5G, which enables a new domain of breakthrough applications with potent economic and national-security implications. American 5G upload speeds are slower than those of many developed countries, including Israel, Singapore and Canada. In Boston, Chicago and New York City, AT&T’s 5G speeds are at least 10% slower than its 4G; in Washington, Los Angeles and Austin, Texas, Verizon’s 5G speeds are at least 20% slower than the company’s 4G.
The U.S. also trails China in the global market for 5G-related services. Although American sanctions have hurt Huawei, China’s national champion is still the global leader in supplying 5G infrastructure with 30% of the market, while no U.S. firms sell 5G infrastructure abroad. Strategically significant countries including Russia, Saudi Arabia, South Africa and Turkey have installed Huawei infrastructure and are already using it to deliver 5G services.
While Beijing has prioritized broadening its 5G network, Washington has a dysfunctional relationship with the U.S. mobile industry—as typified by the Federal Aviation Administration’s hysterics over the proximity of American airports to 5G services, which operate near scores of airports around the world with no problem. For its part, China has been rapidly allocating the most efficient part of the wireless spectrum, called midband, to 5G service providers. China has deployed at least three times as much midband to 5G providers as the U.S. has. AT&T and Verizon are using the same spectrum bands for both their 4G and 5G networks. As a result, as one industry analyst aptly put it, their 5G networks are “just 4G with sprinkles on it.”
Washington’s dithering has left America well behind China in the race to build 5G infrastructure. Because 5G signals have short wavelengths, reliable service requires proximity to many wireless base stations. China has installed more than one million 5G base stations, while the U.S. has built only 100,000. The American fiber-optic network is also less dense than that of many developed countries like Japan, making it more difficult for mobile operators to deploy these small cell sites.
China’s investment in 5G also dwarfs America’s. The Innovation and Competition Act, which Senate Majority Leader Chuck Schumer hailed as “the key to preserving America’s position on the world stage as a current and future technological leader in the 21st century,” would authorize $1.5 billion in spending on 5G mobile networks through 2026. China has already spent $50 billion to build out its 5G network and is on track to spend an additional $100 billion on 5G over the next five years.
The pathetic U.S. performance in the 5G race is a sign of America’s larger failure to keep up with China on strategically important technologies. China is also ahead of America in high-tech manufacturing, green energy and many applications of artificial intelligence. On current trajectories, by 2030 it will likely lead the U.S. in the number of semiconductor chips it produces and in applications of biotechnology to defeat diseases like cancer.
In 2019 the Pentagon’s Defense Innovation Board tried to sound the alarm, stating bluntly: “China is on a track to repeat in 5G what happened with the U.S. in 4G.” The transition from 3G to 4G made possible a previously unimaginable world of mobile computing, smartphones and applications from Google Maps and Uber to Facebook and Instagram. The step up to real 5G speeds will lead to analogous breakthroughs in autonomous vehicles, virtual-reality applications like the metaverse, and other areas that have yet to be invented. Applications abound that could advantage a country’s intelligence agencies and enhance its military capabilities.
It will take far more than an additional $1.5 billion investment from Congress to change this. The Biden administration should make 5G a national priority and take the lead in building digital highways across the country as the government did in creating our national highway system. Otherwise, China will own the 5G future.
Mr. Allison, a professor of government at Harvard, is author of “Destined for War: Can America and China Escape Thucydides’s Trap?” Mr. Schmidt was CEO of Google, 2001-11 and executive chairman of Google and its successor, Alphabet Inc., 2011-17 and is a co-author of “The Age of AI: And Our Human Future.”
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https://foreignpolicy.com/2021/04/17/smart-cities-surveillance-privacy-digital-threats-internet-of-things-5g/
There are reasons various governments wants 5G.
China’s 5G Soars Over America’s
In some U.S. cities, it’s slower than the old 4G system. Washington should make it a priority.
By Graham Allison and Eric Schmidt
Feb. 16, 2022 6:27 pm ET
At this point, football fans have seen so many ads from AT&T and Verizon claiming to have the fastest and most reliable 5G service on the planet that those without a 5G smartphone might think they are really missing something. Don’t be misled. Unless you are traveling internationally, you won’t enjoy faster speeds with a new 5G-enabled smartphone than you’d get on a 4G phone streaming games from New York, Los Angeles or many other U.S. cities. AT&T’s and Verizon’s new 5G networks are often significantly slower than the 4G networks they replace. America is far behind in almost every dimension of 5G while other nations—including China—race ahead.
America’s average 5G mobile internet speed is roughly 75 megabits per second, which is abysmal. In China’s urban centers 5G phones get average speeds of 300 megabits per second. Though that’s not quite the fastest 5G in the world—South Korea claims that title at over 400 Mbps—it’s still fast enough to download a high-definition movie in two minutes. Mobile internet speed is a central advancement of 5G, which enables a new domain of breakthrough applications with potent economic and national-security implications. American 5G upload speeds are slower than those of many developed countries, including Israel, Singapore and Canada. In Boston, Chicago and New York City, AT&T’s 5G speeds are at least 10% slower than its 4G; in Washington, Los Angeles and Austin, Texas, Verizon’s 5G speeds are at least 20% slower than the company’s 4G.
The U.S. also trails China in the global market for 5G-related services. Although American sanctions have hurt Huawei, China’s national champion is still the global leader in supplying 5G infrastructure with 30% of the market, while no U.S. firms sell 5G infrastructure abroad. Strategically significant countries including Russia, Saudi Arabia, South Africa and Turkey have installed Huawei infrastructure and are already using it to deliver 5G services.
While Beijing has prioritized broadening its 5G network, Washington has a dysfunctional relationship with the U.S. mobile industry—as typified by the Federal Aviation Administration’s hysterics over the proximity of American airports to 5G services, which operate near scores of airports around the world with no problem. For its part, China has been rapidly allocating the most efficient part of the wireless spectrum, called midband, to 5G service providers. China has deployed at least three times as much midband to 5G providers as the U.S. has. AT&T and Verizon are using the same spectrum bands for both their 4G and 5G networks. As a result, as one industry analyst aptly put it, their 5G networks are “just 4G with sprinkles on it.”
Washington’s dithering has left America well behind China in the race to build 5G infrastructure. Because 5G signals have short wavelengths, reliable service requires proximity to many wireless base stations. China has installed more than one million 5G base stations, while the U.S. has built only 100,000. The American fiber-optic network is also less dense than that of many developed countries like Japan, making it more difficult for mobile operators to deploy these small cell sites.
China’s investment in 5G also dwarfs America’s. The Innovation and Competition Act, which Senate Majority Leader Chuck Schumer hailed as “the key to preserving America’s position on the world stage as a current and future technological leader in the 21st century,” would authorize $1.5 billion in spending on 5G mobile networks through 2026. China has already spent $50 billion to build out its 5G network and is on track to spend an additional $100 billion on 5G over the next five years.
The pathetic U.S. performance in the 5G race is a sign of America’s larger failure to keep up with China on strategically important technologies. China is also ahead of America in high-tech manufacturing, green energy and many applications of artificial intelligence. On current trajectories, by 2030 it will likely lead the U.S. in the number of semiconductor chips it produces and in applications of biotechnology to defeat diseases like cancer.
In 2019 the Pentagon’s Defense Innovation Board tried to sound the alarm, stating bluntly: “China is on a track to repeat in 5G what happened with the U.S. in 4G.” The transition from 3G to 4G made possible a previously unimaginable world of mobile computing, smartphones and applications from Google Maps and Uber to Facebook and Instagram. The step up to real 5G speeds will lead to analogous breakthroughs in autonomous vehicles, virtual-reality applications like the metaverse, and other areas that have yet to be invented. Applications abound that could advantage a country’s intelligence agencies and enhance its military capabilities.
It will take far more than an additional $1.5 billion investment from Congress to change this. The Biden administration should make 5G a national priority and take the lead in building digital highways across the country as the government did in creating our national highway system. Otherwise, China will own the 5G future.
Mr. Allison, a professor of government at Harvard, is author of “Destined for War: Can America and China Escape Thucydides’s Trap?” Mr. Schmidt was CEO of Google, 2001-11 and executive chairman of Google and its successor, Alphabet Inc., 2011-17 and is a co-author of “The Age of AI: And Our Human Future.”
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Oh no! We've fallen behind Communist China in citizen surveillance!
Not completely true if you count Google and Facebook's work in the field - and merge it with government.
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"WSJ: America pathetically behind China in 5G"
George Gilder has been touting China's lead in this and other categories
We subscribed to a 2 newsletters for one yr.
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GM:
I have reached my free article limit at FP but would like to read the article you just posted. May I ask you to paste it here in its entirety?
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GM:
I have reached my free article limit at FP but would like to read the article you just posted. May I ask you to paste it here in its entirety?
‘Smart’ Cities Are Surveilled Cities
When everyone and everything is connected, the door is open to all kinds of digital threats.
By Robert Muggah, a principal at the SecDev Group and co-founder of the Igarapé Institute, and Greg Walton, a fellow at the SecDev Group and a researcher at the Oxford Internet Institute.
Pedestrians walk in China.
Pedestrians walk near a massive electronic screen supported by a face recognition system, which shows the image of a jaywalker at an intersection, in Nanjing, China, on July 4, 2019. Traffic police in Nanjing use facial recognition technology to capture jaywalkers. WANG FENG/IMAGINECHINA/REUTERS
APRIL 17, 2021, 6:00 AM
Cities around the world are getting smarter. A growing number even designated themselves “smart cities.” There are, of course, as many definitions of smart cities as there are cities professing to be smart. Very generally, smart cities deploy a host of information communication technologies—including high-speed communication networks, sensors, and mobile phone apps—to boost mobility and connectivity, supercharge the digital economy, increase energy efficiency, improve the delivery of services, and generally raise the level of their residents’ welfare. Becoming “smart” typically involves harnessing troves of data to optimize city functions—from more efficient use of utilities and other services to reducing traffic congestion and pollution—all with a view to empowering public authorities and residents.
However one defines them, data-enabled cities are booming. By one estimate, there are over a thousand smart city projects underway around the world. Rankings and indices are also proliferating, with such cities as Singapore, Helsinki, Seoul, and Zurich routinely topping the list. Notwithstanding global enthusiasm for hyperconnected cities, this futuristic wired urban world has a dark side. What’s more, the pitfalls may soon outweigh the supposed benefits.
That’s because “smart” is increasingly a euphemism for surveillance. Cities in at least 56 countries worldwide have deployed surveillance technologies powered by automatic data mining, facial recognition, and other forms of artificial intelligence. Urban surveillance is a multibillion-dollar industry, with Chinese and U.S.-based companies such as Axis, Dahua, Hikvision, Huawei, and ZTE leading the charge. Whether they are in China or elsewhere, smart cities are usually described in benign terms with the soothing promise of greener energy solutions, lower-friction mobility, and safer streets. Yet in a growing number of places from New York to Hong Kong, there are growing concerns about the ways in which supercharged surveillance is encroaching on free speech, privacy, and data protection. But the truth is that facial recognition and related technologies are far from the most worrisome feature of smart cities.
Part of what supposedly makes cities smarter is the deployment and integration of surveillance technologies such as sensors and biometric data collection systems. Electronic, infrared, thermal, and lidar sensors form the basis of the smart grid, and they do everything from operating streetlights to optimizing parking and traffic flow to detecting crime. Some cities are adopting these platforms more quickly than others. China, for example, is home to 18 of the top 20 most surveilled cities in the world. Shanghai, which achieved full 5G coverage in its downtown area and 99 percent fiber-optic coverage across the city, is covered by a veritable thicket of video surveillance. Identity collection devices are commonplace, having exploded across public and private spaces. Shanghai recently installed Alibaba’s City Brain public surveillance system, which oversees over 1,100 biometric facial recognition cameras. A combination of satellites, drones, and fixed cameras grab over 20 million images a day. The bus, metro, and credit cards of local residents are also traced in real time. And these tools are spreading. Chinese firms are busily exporting surveillance tech to Latin America, other parts of Asia, and Africa, helping enable what some critics call digital authoritarianism.
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A video surveillance camera
A video surveillance camera hangs from the side of a building in San Francisco on May 14, 2019. The city was the first in the United States to ban facial recognition technology by police and city agencies. JUSTIN SULLIVAN/GETTY IMAGES
Surveillance technologies are hardly confined to China. They are also widespread in U.S. cities. Throughout the 1990s and 2000s, law enforcement agencies and private companies deployed surveillance tools, ostensibly to improve public and private safety and security. The 9/11 attacks and subsequent U.S. Patriot Act dramatically accelerated their spread. Yet support for facial recognition systems appears to be ebbing. San Francisco was the country’s first major city to ban its agencies from using them in 2019. San Francisco was among the top five most surveilled cities in the United States when eight of the nine members of its Board of Supervisors endorsed the Stop Secret Surveillance Ordinance. Rolling back surveillance has proved difficult—digital rights advocates recently detected over 2,700 cameras still in use for police surveillance, property security, and transportation monitoring. In 2000, campaigners sued the city for tapping into private cameras to surveil mass protests, in defiance of the new ordinance.
Across North America and Western Europe, the tensions over smart cities can be distilled to concerns over how surveillance technology enables pervasive collection, retention, and misuse of personal data by everything from law enforcement agencies to private companies. Debates frequently center on the extent to which these tools undermine transparency, accountability, and trust. There are also concerns (and mounting evidence) about how facial recognition technologies are racially biased and inaccurate when it comes to people of color, discriminating particularly against Asian and African Americans. This helps explain why in the two years since San Francisco banned facial recognition technologies, 13 other U.S. cities have followed suit, including Boston; Berkeley and Oakland in California; and Portland, Oregon. By contrast, in China, racial bias seems to be a feature, not a bug—patented, marketed, and baked into national policing standards for facial recognition databases. What’s more, Chinese companies are bringing their technologies to global markets.
But a narrow preoccupation with surveillance technologies, as disconcerting as they are, underestimates the threats on the near horizon. Smart cities are themselves a potential liability—for entirely different reasons. This is because many of them are approaching the precipice of a hyperconnected “internet of everything,” which comes with unprecedented levels of risk tied to billions of unsecured devices. These don’t just include real-time surveillance devices, such as satellites, drones, and closed-circuit cameras. By 2025, there could be over 75 billion connected devices around the world, many of them lacking even the most rudimentary security features. As cities become ever more connected, the risks of digital harm by malign actors grow exponentially. Cities are therefore entirely unprepared for the coming digital revolution.
Baltimore office door
Baltimore’s information technology office lost dozens of time-sheet records in a 2019 ransomware attack. KENNETH K. LAM/THE BALTIMORE SUN VIA REUTERS
One of the paradoxes of a hyperconnected world is that the smarter a city gets, the more exposed it becomes to a widening array of digital threats. Already, large, medium, and small cities are being targeted for data theft, system breaches, and cyberattacks, all of which can undermine their operation and provision of essential services, and pose an existential threat. Hundreds of cities around the world have reported major digital disruptions to municipal websites, emergency call centers, health systems, and utilities delivering power or water. When city security is compromised and data privacy jeopardized, it undermines the faith of residents in digitally connected services and systems. As people feel more insecure, they may feel less inclined to participate in online health care, digitized utilities, remote learning opportunities, electronic banking services, or green initiatives—key tenets of the smart city. While not all digital threats can be countered, cities need to mount a robust capability to deter, respond to, and recover from attacks while preserving, as best they can, data protection and privacy.
To start, city authorities, companies, and residents need to design digital security into all domains of governance, infrastructure, commerce, and society. At a minimum, new smart city technologies must avoid reinforcing disproportionate surveillance that undermines basic freedoms, especially privacy. National, regional, and city governments should also mandate and enforce standards that require that all internet-enabled devices sold and deployed in their jurisdictions have minimum password protection, authentication, and encryption built in. It is essential that cities encourage digital literacy across the public, private, and civil society sectors, since many potential digital harms can be reduced through basic awareness and precautionary measures.
To get smarter, cities need to know their blind spots. This requires undertaking real-time monitoring to map the vulnerability of wireless devices in their environment. Passive monitoring across broad-spectrum wireless networks to detect data leakages will need to be routine—and properly explained to citizens. Cities will need to invest in automated incident response and in identifying and fixing their vulnerabilities in relation to networks and devices. Above all else, cities will need to take digital risks seriously and enforce security requirements across all connected devices, from the health watch to the ticket scanner to the internet-connected refrigerator, in a smart city ecosystem. The pursuit of smarter cities can and should not come at the expense of safety, privacy, or liberty. Indeed, the failure to prioritize both human well-being and security in a world of exponentially increasing complexity is a monumentally dangerous folly.
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Thank you.
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https://telecom.cioreview.com/cxoinsight/5g-and-china-lessons-from-a-surveillance-nation-nid-31353-cid-39.html
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https://telecom.cioreview.com/cxoinsight/5g-and-china-lessons-from-a-surveillance-nation-nid-31353-cid-39.html
https://www.newyorker.com/news/annals-of-communications/the-terrifying-potential-of-the-5g-network
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I had not considered 5G from this point of view.
Hypothetical: Assuming this to be correct and as a result we blow off 5G, what implications for our conflict with China?
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I had not considered 5G from this point of view.
Hypothetical: Assuming this to be correct and as a result we blow off 5G, what implications for our conflict with China?
I like retrotech and I don't need to download a movie on my phone in 4 seconds. Somehow I think we'd survive.
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Understood, but my question seeks to assess whether China having 5G and us not having it would in some way give them an advantage over us?
Seems to me this should be part of the analysis.
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Understood, but my question seeks to assess whether China having 5G and us not having it would in some way give them an advantage over us?
Seems to me this should be part of the analysis.
A better police state? Hard pass.
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Losing out to the CCP?
Hard pass.
To underline my point-- I am not advocating, I am saying a cost-benefit analysis needs to include this.
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Losing out to the CCP?
Hard pass.
To underline my point-- I am not advocating, I am saying a cost-benefit analysis needs to include this.
Competing with China for most high tech police state doesn't seem like a good policy.
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You fail to engage with my point. Moving on.
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Yes, it is a very bad thing that China is flying by us technologically and 5G is evidence of that.
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Yes, it is a very bad thing that China is flying by us technologically and 5G is evidence of that.
It’s almost like teaching American children that America is evil and racist and getting rid of academic rigor and gifted programs in the name of fighting racism has consequences.
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China competition bill set for final negotiations after delays
BY JOSEPH CLARK THE WASHINGTON TIMES
The Senate has forged ahead with a long-stalled bill to promote U.S. production of microprocessor chips to better compete with China, preparing to inch the legislation forward and into a tough round of negotiations with the House.
President Biden has pressed Congress for quick passage of the sweeping legislation but key differences remain between the House and Senate versions.
The Senate version is the $250 billion U.S. Innovation and Competition Act. The House counterpart is the $335 billion America COMPETES Act.
After months of stalls, Senate Majority Leader Charles E. Schumer set up the votes to get the legislation into a bicameral conference committee to begin reconciling the two bills.
“This legislation has been dissected and debated for well over a year now,” Mr. Schumer, New York Democrat, said on the Senate floor Tuesday. “But the need to pass this bill really boils down to two simple words: J-O-B-S, jobs and C-O-S-T-S costs.”
Both the House and Senate versions include a $52 billion boost for semiconductor manufacturing to combat a chip shortage.
“There’s nothing abstract about the shortage of chips,” Mr. Schumer said. “It impacts Americans’ abilities to buy cars, refrigerators, phones, and other household items. By passing bipartisan legislation that invests in domestic chip production, we can help alleviate this vexing chips crisis.”
The Senate version first passed in June with the support of 18 Republicans and 50 Democrats.
But the nearly 3,000-page House version also includes a hodgepodge of spending including $8 billion to help developing countries address climate change, funding to make the U.S. less reliant on Chinese solar technology and $45 billion to shore up U.S. supply chains.
House Republicans railed against the bill, which passed 222 to 210 last month, as a “foreign policy failure” that funnels taxpayer dollars into an “unaccountable U.N. slush fund” without addressing threats to U.S. national security posed by China.
House Republicans also voiced frustration with the process, saying they were sidelined while Democrats wrote the bill.
Sen. Todd Young, an Indiana Republican who worked on the Senate version, said he is committed to making the final bill more palatable for House Republicans.
The bill is a priority for Democrats and its passage would be a big win for Mr. Biden, who has been hobbled by a string of legislative defeats. Mr. Biden also has struggled to untangle a global supply chain hobbled by shipping delays and backlogs. And, the U.S. has been edged out of semiconductor manufacturing in recent decades by overseas producers.
On Monday, Commerce Secretary Gina Raimondo urged lawmakers to quickly move the legislation through Congress.
“The situation as it relates to semiconductors is quite dire,” Ms. Raimondo said in a call with senators of both parties.
Ms. Raimondo brought in former Trump administration officials, for the call including former national security adviser H.R. McMaster, to help sway lawmakers.
During the call, Mr. Young said he welcomed the start of formal negotiations between the House and Senate but wanted an open process “with input from all of my colleagues and consistent with what we call around here regular order.”
“I know the vote will not be unanimous and that both parties and members of both parties are going to have to make principled compromises, principled concessions, in order to get an agreement done,” he said. “That’s always what happens when you approach a negotiating table. But America and the world will be better off with a bipartisan, broadly supported final product.”
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https://www.vox.com/recode/23048906/chip-shortage-manufacturing-america-biden?fbclid=IwAR1UD1eSqr5mM2H7ZZiSMXbohXygpMPETq8LtrEYx4PMifHlRLHdUoMCv54
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By: Geopolitical Futures
Trucker strike. Approximately 1,000 South Korean truckers, angry about rising fuel costs, launched a strike in front of Hyundai Motors’ largest factory complex in Ulsan. They said they plan to curb shipments of raw materials for semiconductors that are produced in the city. The strike has totally suspended movement of containers at the Ulsan port in southeastern South Korea.
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US Chips Are Paving China’s Path to AI Superiority and There’s No Easy Fix
Patrick Tucker
BY PATRICK TUCKER
TECHNOLOGY EDITOR
JULY 1, 2022
CHINA
TECHNOLOGY
Chips designed by U.S. companies are helping China work toward its goal of becoming the world leader in artificial intelligence by 2030, according to a new report out this week from the Center for Security in Emerging Technology, or CSET. But fixing that isn’t as simple as just passing new controls.
Some 97 public records of Chinese military purchases of AI chips show that “nearly all of them were designed by Nvidia, Xilinx (now AMD), Intel, or Microsemi”—all U.S. companies, the researchers wrote. “By comparison, we could not find any public records of [Chinese military] units or stateowned defense enterprises placing orders for high-end AI chips designed by Chinese companies, such as HiSilicon (Huawei), Sugon, Sunway, Hygon, or Phytium.”
Moreover, those U-S-designed chips are largely manufactured in bulk by Asian companies such as Samsung in South Korea and the Taiwan Semiconductor Manufacturing Company in Taiwan—the self-governing island that U.S. Indo-Pacific Command leaders say could be invaded by China in the next five years.
Graphics processor units, or GPUs, designed by Nvidia are the international market leader in chips to run complex artificial intelligence applications. While the Chinese government has spent heavily to develop its own chips, the report says, “High barriers to entry, including a reliance on intrinsic knowledge and highly specialized equipment, have so far prevented Chinese companies from catching up.”
In 2020, the Trump administration imposed restrictions to keep U.S. chip designs out of China; the Biden administration has maintained those controls. But that hasn’t stopped the Chinese military from obtaining chips through a variety of avenues, including purchases by Chinese intermediaries and, in some cases, by setting up dummy corporations.
To curb the problem, the U.S. government could look at more controls but without a ramp up in the government’s enforcement and investigation capabilities, new controls by themselves likely won’t achieve their desired effect. “Chips themselves are hard to track. Although they are technically sophisticated, physical inputs to AI development, chips in transit do not carry an easily observable signature,” the authors write.
Instead, they say, the Commerce Department should should work with industry to better identify what chips might be most relevant to the Chinese military’s AI goals and “coordinate with partners to screen intended end-users and prevent their export.” And the U.S. intelligence community should bulk up its analysis of open source intelligence on Chinese chip contracts. The CSET researchers “identified seven Chinese military vendors which are not listed in U.S. end-user export control regimes. There is room for open-source analysis to address other security challenges.”
Taiwanese manufacturers are also pressing the United States for subsidies to speed the process of building new manufacturing facilities in the United States.
In January 2021, Congress passed the CHIPS Act–as part of the FY 2021 National Defense Authorization Act–to secure almost $52 billion to incentive the develop of chip manufacturing in the United States. But chip makers have complained that the funds aren’t moving fast enough.
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https://www.reuters.com/markets/europe/global-markets-wrapup-1-2022-07-07/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=daily-briefing&utm_term=07-07-2022
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US Chips Are Paving China’s Path to AI Superiority and There’s No Easy Fix
Patrick Tucker
BY PATRICK TUCKER
TECHNOLOGY EDITOR
JULY 1, 2022
CHINA
TECHNOLOGY
Chips designed by U.S. companies are helping China work toward its goal of becoming the world leader in artificial intelligence by 2030, according to a new report out this week from the Center for Security in Emerging Technology, or CSET. But fixing that isn’t as simple as just passing new controls.
Some 97 public records of Chinese military purchases of AI chips show that “nearly all of them were designed by Nvidia, Xilinx (now AMD), Intel, or Microsemi”—all U.S. companies, the researchers wrote. “By comparison, we could not find any public records of [Chinese military] units or stateowned defense enterprises placing orders for high-end AI chips designed by Chinese companies, such as HiSilicon (Huawei), Sugon, Sunway, Hygon, or Phytium.”
Moreover, those U-S-designed chips are largely manufactured in bulk by Asian companies such as Samsung in South Korea and the Taiwan Semiconductor Manufacturing Company in Taiwan—the self-governing island that U.S. Indo-Pacific Command leaders say could be invaded by China in the next five years.
Graphics processor units, or GPUs, designed by Nvidia are the international market leader in chips to run complex artificial intelligence applications. While the Chinese government has spent heavily to develop its own chips, the report says, “High barriers to entry, including a reliance on intrinsic knowledge and highly specialized equipment, have so far prevented Chinese companies from catching up.”
In 2020, the Trump administration imposed restrictions to keep U.S. chip designs out of China; the Biden administration has maintained those controls. But that hasn’t stopped the Chinese military from obtaining chips through a variety of avenues, including purchases by Chinese intermediaries and, in some cases, by setting up dummy corporations.
To curb the problem, the U.S. government could look at more controls but without a ramp up in the government’s enforcement and investigation capabilities, new controls by themselves likely won’t achieve their desired effect. “Chips themselves are hard to track. Although they are technically sophisticated, physical inputs to AI development, chips in transit do not carry an easily observable signature,” the authors write.
Instead, they say, the Commerce Department should should work with industry to better identify what chips might be most relevant to the Chinese military’s AI goals and “coordinate with partners to screen intended end-users and prevent their export.” And the U.S. intelligence community should bulk up its analysis of open source intelligence on Chinese chip contracts. The CSET researchers “identified seven Chinese military vendors which are not listed in U.S. end-user export control regimes. There is room for open-source analysis to address other security challenges.”
Taiwanese manufacturers are also pressing the United States for subsidies to speed the process of building new manufacturing facilities in the United States.
In January 2021, Congress passed the CHIPS Act–as part of the FY 2021 National Defense Authorization Act–to secure almost $52 billion to incentive the develop of chip manufacturing in the United States. But chip makers have complained that the funds aren’t moving fast enough.
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https://dailycaller.com/2022/07/15/pelosis-husband-massive-amount-in-chips-stock-before-expected-senate-vote-subsidies/?utm_source=piano&utm_medium=email&utm_campaign=2680&pnespid=ub18UTlVK6xK2vXf.CusTpKSpg28SpJrc_6k2utq8UNmE0JWsk6FYn_Jr3mvnyvjPjuT.2HJ
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Congress Goes All in for Chip Subsidies
Competing with China is the new excuse for corporate welfare.
By The Editorial BoardFollow
July 18, 2022 6:37 pm ET
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President Joe Biden holds a semiconductor chip.
PHOTO: JONATHAN ERNST/REUTERS
Industrial policy is back in fashion in Washington, or as it ought to be called, corporate welfare. The semiconductor industry is first in the queue, but it won’t be the last. Taxpayers should at least know they’ll be subsidizing highly profitable companies that don’t need the help and might end up regretting the political handcuffs they’re acquiring.
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The bill that will head to the Senate floor as early as Tuesday includes $52.2 billion in grants to the computer chip industry. But wait, there’s more. Congress is also offering a 25% tax credit for semiconductor fabrication, which is estimated to cost about $24 billion over five years. That’s $76 billion for one industry.
Republicans on the House Ways and Means Committee point out that for the same money Congress could double the research and development tax credit for all companies through 2025. It could also throw in 100% expensing for companies and allow immediate R&D deductions through 2025. But that would mean the politicians aren’t picking favorites, which is what they prefer to do.
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The impetus for the bill was a severe pandemic chip shortage that disrupted supply chains and raised the cost of autos and many other products. But the shortage is easing as global demand and the economy slow. South Korea, the world’s top producer of memory chips, last month said its national chip stockpile has increased by more than 50% over the past year as demand for electronics ebbs.
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Intel, the giant U.S. firm, froze hiring in its PC-chip division in June. Micron Technology CEO Sanjay Mehrotra warned a few weeks ago that “the industry demand environment has weakened” and it would cut back investment. Nvidia is scaling back hiring due to declining demand for its chips that are used in crypto mining and videogames.
As often happens, yesterday’s shortage may be tomorrow’s glut, as chip firms have expanded production without subsidies. Taiwan Semiconductor Manufacturing Co. (TSMC) tripled capital spending between 2019 and 2022. Intel nearly doubled capital spending during the pandemic, and Samsung last year increased its 10-year investment plan by more than 30%.
Global semiconductor capacity increased 6.7% in 2020 and 8.6% in 2021 and is expected to grow another 8.7% this year. The risk of over-capacity is growing as China heaps subsidies on its semiconductor industry as part of its Made in China 2025 initiative, and the U.S. and Europe race to compete.
Some 15,000 new semiconductor firms registered in China in 2020. Some have drawn investment from U.S. venture-capital firms. Intel has backed Chinese startups even as CEO Pat Gelsinger lobbies Congress for subsidies to counter Beijing. Intel has threatened to delay a planned Ohio factory unless Congress passes the subsidy bill.
The other claim for the bill is that the U.S. must subsidize domestic chip-making to compete with China, but this also isn’t persuasive. The companies like to point out that the U.S. share of the world’s chips has fallen to 12% from 37% in 1990. They don’t mention that the U.S. leads in chip design (52%) and chip-making equipment (50%). Seven of the world’s 10 largest semiconductor companies are based in the U.S. China trails American companies by years in semiconductor technology.
Chip fabrication has moved to South Korea and Taiwan because many chips are commodities with low margins. But chip makers are working to diversify their manufacturing bases to avoid future supply disruptions and have announced $80 billion in new U.S. investments through 2025. Samsung plans to build a $17 billion factory in Texas. TSMC has a $12 billion plant under construction in Arizona.
One unfortunate impetus behind this bill is that, for all their talk of competing with China, many politicians believe that Beijing’s economic planning is superior to the U.S. free-market system. It reminds us of the 1980s when legendary Intel CEO Andrew Grove warned that Japan was going to dominate the chip industry and the future of global technology.
As former Cypress Semiconductor CEO T.J. Rodgers explained on these pages last year, the government set up the Sematech chip consortium that “was obsolescent when it opened.” But Intel innovated with more advanced chips, and no one is talking now about Tokyo’s central-planning genius.
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History shows that easy government money can undermine competitiveness. It often leads to inefficient spending and investment. The politicians will also attach their own strings, perhaps with limits on stock buybacks and dividends. Wait until Bernie Sanders is heard from on the Senate floor.
The chip bill isn’t needed to compete with China, and it will set a precedent that other industries will follow. Anybody who can throw up a China competition angle will ask for money. Why Republicans want to sign up for this is a mystery, especially when they might control both houses of Congress in six months.
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Shortage. Marketing intelligence firm Cru Group has warned of a growing shortage in fiber optic cable. Over the past 16 months, Europe, India and China have also seen a 70 percent increase in prices. The situation is related to a surge in demand over the past two years, particularly from government 5G development projects and infrastructure initiatives led by companies like Amazon, Google, Meta and Microsoft. It’s also due to a shortage of helium, a critical input material for manufacturing fiber optics.
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Shortage. Marketing intelligence firm Cru Group has warned of a growing shortage in fiber optic cable. Over the past 16 months, Europe, India and China have also seen a 70 percent increase in prices. The situation is related to a surge in demand over the past two years, particularly from government 5G development projects and infrastructure initiatives led by companies like Amazon, Google, Meta and Microsoft. It’s also due to a shortage of helium, a critical input material for manufacturing fiber optics.
https://www.thestockdork.com/helium-stocks/
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The CHIPS Act Won’t Reduce the U.S.’s Strategic Reliance on the Global Semiconductor Sector
7 MIN READJul 28, 2022 | 20:16 GMT
The latest U.S. bill to support the domestic semiconductor industry will struggle to reduce the United States’ reliance on foreign chipmakers and suggests Congress is unwilling to impose strict controls on companies looking to invest in China. On July 27, lawmakers in the U.S. Senate passed the $280 billion the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, which subsidizes U.S.-made semiconductor chips and boosts investments in cutting-edge science and technology initiatives. U.S. President Joe Biden strongly supports the bill, which he argues will create more jobs for Americans by incentivizing more firms to manufacture chips in the United States. The U.S. House of Representatives passed the bill on July 28, sending it to Biden’s desk.
The CHIPS Act portion of the bill allocates $50 billion in subsidies for the CHIPS for America fund to bolster the U.S. semiconductor industry — including by building new chip fabrication plants, expanding research and development (R&D) efforts, and supporting workforce development — as well as an additional $2 billion in subsidies for the CHIPS for America Defense fund to bolster projects specific to the U.S. defense sector. The CHIPS Act portion also includes $700 million in subsidies for various other semiconductor-related funds.
The science portion of the bill includes a wide range of measures, including increasing financial support for several programs being run by the U.S. Department of Energy, like those related to carbon storage and nuclear power. The bill also establishes new mechanisms and incentives designed to boost the United States’ STEM workforce, and provides additional funding for a number of NASA programs.
The passage of the bill in Congress comes after more than a year of legislative debate and dialogue with U.S. business leaders on how to support the semiconductor industry in the wake of the disruptive global chip shortage and the growing competition with China. For lawmakers, the chip shortage was a visible example of how far the United States had fallen in semiconductor manufacturing, despite its dominance in key areas of the industry like semiconductor design and R&D. The bill itself borrows from a number of predecessor bills that have been introduced but not passed, including the Endless Frontiers Act and the United States Innovation and Competition Act (USICA), since the semiconductor shortage began in 2020. However, the CHIPS and Science Act stands a greater chance of passage in part because it represents a watered-down version of previous bills. It is also more likely to pass because U.S. officials have pointed to the hollowing out of the U.S. semiconductor industry as a national security risk, particularly as China tries to make strides in developing its semiconductor industry. Even so, some Republicans and Democrats have still criticized the new CHIPS and Science Act, highlighting how divisive the issue has become and the number of iterations it has gone through.
Between 1990 and 2021, the U.S. share of global semiconductor production fell from 37% to just 12%, according to data from the U.S. Semiconductor Industry Association. This drop has coincided with the rise of chip manufacturing in Asia, which now accounts for roughly 75-80% of global semiconductor production.
Democratic Senator and former presidential candidate Bernie Sanders has criticized the bill for what he accuses of enabling “crony capitalism” by providing subsidies to companies that are already making billions of dollars in profits.
Republican and fiscally conservative voices in the United States have also expressed concern about the cost of the new CHIPS and Science Act, which expands on what was originally a $76 billion bill for semiconductors subsidies and tax credits to authorize billions of dollars of more funding for other projects — with The Wall Street Journal’s editorial board recently calling it a “spendorama.”
If signed into law by Biden (as expected), the CHIPS Act portion of the bill will increase domestic semiconductor manufacturing. But this is unlikely to significantly reduce the United States’ overall reliance on the global semiconductor industry. Intel and other semiconductor manufacturers will certainly take advantage of the extra financial assistance offered by the tax credits and subsidies to boost production in the United States. But any new investments in U.S. fabrication plants are likely to still pale in comparison to global investment in the sector. While $52 billion is a large sum, it can cost anywhere between $10-15 billion to build a single semiconductor manufacturing facility, illustrating the limits of the bill’s funding. Taiwan’s TSMC, for example — the largest contract semiconductor manufacturer — is planning to invest $100 billion alone over the next three years to keep up with demand. The semiconductor industry is also highly segmented as different companies concentrate on specific parts of the industry or types of chips, which makes it difficult for Washington to create legislation that supports all of the necessary areas of investment. Moreover, chip fabrication is just one of many parts of the semiconductor value chain. Even if the United States has more fabrication plants, semiconductor packaging and testing, key raw material inputs and manufacturing equipment would still need to be imported.
The recent global energy shortage and rise in oil prices offer a cautionary tale about how domestic production does not necessarily isolate a country from global market conditions in a globalized industry. From 2012-2020, U.S. politicians lauded the growth of domestic oil and gas production, saying it boosted U.S. energy security. But the 2021-22 energy crunch, highlighted how that domestic growth failed to significantly protect the United States from international market conditions during global crises (like the COVID-19 pandemic and the war in Ukraine). The same would likely be true in the semiconductor industry, which, like the energy sector, is also highly globalized.
Proposals that were ultimately left out of the final version of the bill also highlight that Congress may not have enough support for more aggressive measures to slow the advancement of China’s semiconductor industry, as well as deter U.S. (and Western) companies from investing in strategic industries in China. The final version of the bill left out a proposal to create an outbound screening mechanism for foreign direct investments that would have allowed a new review board to block investments into countries like China over national security concerns. The mechanism would have been similar to one that currently allows the U.S. government to review the national security risks of investments in the United States, such as if a Chinese company sought to acquire a U.S. semiconductor firm. However, various business leaders and some U.S. lawmakers in Congress criticized the outbound investment screening mechanism for giving the government too big of a role in the private sector. Moreover, there were also concerns over the vagueness of what would constitute a national security risk, given that former President Donald Trump had placed tariffs on steel and aluminum on U.S. allies with what most observers called a dubious national security argument. To assuage these fears, the final version of the bill only scrutinizes outbound investments in the semiconductor industry itself, rather than more holistically covering outbound investments in other key emerging technologies. It does so in the context of wanting to ensure that the government funding provided by the act does not lead to investments in China. Tech companies, however, will still be free to invest in other strategic Chinese sectors, which is why some U.S. lawmakers have called for a broader mechanism than what is currently included in the bill.
If Biden signs the the CHIPS and Science Act into law, companies that seek funding under the bill must enter an agreement with the U.S. Commerce Department that they will not make transactions that lead to a “material expansion” in China’s semiconductor manufacturing capacity over the next ten years. But the bill includes clear exemptions for investments into legacy chips (defined as those from the 28-nanometer generation or older).
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https://www.theepochtimes.com/house-passes-280-billion-chips-act-without-china-provision-sending-bill-to-bidens-desk_4628943.html?utm_source=China&utm_campaign=uschina-2022-07-29&utm_medium=email&est=mWo4kQxROchzIqJl%2F6gLWRArUENaQ3WYxAjbhyqgjeYMGFztLeYfLVPLYVLHdHRzaukI
ARE YOU FG KIDDING ME?!?
"However, many legislators disagree with that statement because Democrats removed a provision of the legislation at the last minute that would have prevented U.S. companies from outsourcing subsequent technologies to China. Because of the removal of that provision, tech companies in the United States will be able to research new semiconductor technologies using billions of dollars in taxpayer funds, then outsource the production of those new technologies to China."
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third
Semiconductor Independence and the Failure of US Sanctions
John Mac Ghlionn
John Mac Ghlionn
July 28, 2022 Updated: July 28, 2022
Commentary
Unless you happen to live under a rock, you’re no doubt aware that the world is in the midst of an “everything” crisis. With global shortages of gas and grains, baby formula, and bananas, it’s time to add semiconductors to this ever-expanding, rather eclectic-sounding list. According to analysts at McKinsey, the semiconductor industry accounts for $450 billion dollars in direct annual revenues. To put that number in perspective, that’s almost the combined GDP of New Zealand and Finland. Semiconductors are the heartbeat of modern society; without them, no laptops, no phones, no health care, no military systems, no transportation. In other words, no life.
The chips are down; according to Intel’s Pat Gelsinger, and they’ll remain down for the foreseeable future. He expects the industry to suffer supply shortages until 2024. This is bad news for the United States. Although the current administration is planning to open up a host of new chip factories, these facilities won’t be ready in time to address the current crisis. Reactive in the extreme, the United States now finds itself closing the barn door long after the horse has bolted. Moreover, infrastructure projects take time; in the United States, they take an ungodly amount of time. The chips are coming, just not any time soon.
Meanwhile, 11,500 kilometers away, in China, the Chinese Communist Party (CCP) is attempting to achieve “semiconductor independence.” With huge companies like Baidu, Alibaba, Huawei, and Oppo all moving into the chip-making market, China is fast becoming the global leader in semiconductors. By 2024, when the shortage is expected to be addressed, China looks likely to control a huge portion of the global chip market. (Interestingly, Taiwan is home to TSMC and MediaTek, two of the biggest chip manufacturers on the planet, perhaps explaining why China is so obsessed with the island). As the United States struggles to strengthen its domestic chip industry, Chinese power moves ahead.
Interestingly, in an attempt to maintain its ascendancy and growing dominance, the CCP has zeroed in on Europe, a key player in the semiconductor sector.
The Netherlands is a country synonymous with a number of rather random things: windmills, vertically unchallenged citizens, cheese, bicycle lanes, and understandably irate farmers. In recent times, however, the Netherlands has become more synonymous with semiconductor chips—a fact that is not lost on China. The Netherlands is home to NXP, one of the largest chip manufacturing plants in Europe. In 2019, NXP executives announced that the company had signed a highly-lucrative deal with Hawkeye Technology, a Chinese company specializing in automotive radars.
The Netherlands is sandwiched between Belgium and Germany, two other countries also supplying chips to China. In 2019, the Interuniversity Microelectronics Centre (IMEC), headquartered in Leuven, Belgium, announced that it was building a new research facility in Wuxi National Hi-Tech District, close to the city of Shanghai. Besides researching and creating semiconductors, IMEC also focuses on microsystems, wireless communications, and bioelectronics.
When it comes to the manufacturing of semiconductor chips, Infineon Technologies, a German company, is perhaps the most important player in Europe.
Epoch Times Photo
An Infineon Technologies AG memory chip plant in Suzhou, Jiangsu Province, China, on Sept. 23, 2004. (Wu Niu/Bloomberg via Getty Images)
A little over a decade ago, Infineon opened a huge facility in the Beijing Economic and Technological Development Area. Since then, the company’s ties with China have only grown stronger. Last year, as the South China Morning Post reported, members of China’s Ministry of Commerce held extensive talks with Infineon, Intel, and STMicroelectronics, a Franco-Italian multinational semiconductors manufacturer, in the hope of facilitating” cross-border semiconductor investment.” Like Infineon, STMicroelectronics is a company with real clout. With a gigantic factory in Shenzhen, the Silicon Valley of China, the European manufacturer is fueling China’s tech-based dominance.
What does all of this mean for the United States?
Although the United States and China are not engaged in traditional warfare, they are engaged in a war of ideas, trade, and technology. On all three levels, China appears to be winning. In an effort to stop its biggest rival from gaining even more chip-fueled momentum, the Biden administration has attempted to dissuade European partners from enabling China. Again, though, all of this smacks of desperation, a reactive measure that is a decade too late.
As author David P. Goldman recently noted, the “Biden administration’s belated attempt to suppress China’s semiconductor industry appears to have backfired.” He’s right. Last year, China produced 33 percent more chips than it did in 2020. Moreover, by strategically partnering with major European manufacturers and proactively focusing on the aforementioned idea of “semiconductor independence,” the CCP has “found workaround technologies that bypass the aging American IP that Washington has embargoed,” Goldman added.
To compound matters, despite U.S. sanctions, the Chinese are figuring out how to manufacture 7-nanometer chips. Intriguingly, the chips appear to be a very “close copy” of the ones manufactured by TSMC, the aforementioned Taiwanese company. The chips, we’re told, will likely be used to advance China’s military. The CCP found itself backed into a corner and appears to have responded in a highly-aggressive manner. In this game of high-stakes poker between the United States and China, there’s a real chance that the Chinese will be the ones holding all the chips.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.
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https://www.theepochtimes.com/house-passes-280-billion-chips-act-without-china-provision-sending-bill-to-bidens-desk_4628943.html?utm_source=China&utm_campaign=uschina-2022-07-29&utm_medium=email&est=mWo4kQxROchzIqJl%2F6gLWRArUENaQ3WYxAjbhyqgjeYMGFztLeYfLVPLYVLHdHRzaukI
ARE YOU FG KIDDING ME?!?
"However, many legislators disagree with that statement because Democrats removed a provision of the legislation at the last minute that would have prevented U.S. companies from outsourcing subsequent technologies to China. Because of the removal of that provision, tech companies in the United States will be able to research new semiconductor technologies using billions of dollars in taxpayer funds, then outsource the production of those new technologies to China."
The election of Trump was Democrats fault. This kind of governance by insiders is what elects the outsider to clean it up - if there is anything left to clean up.
Brought to you by the people who sent plane loads of cash to the terror sponsoring regime of Iran.
In one post we recognize them as our enemy and in the next, same day, we help them develop military technology.
There used to be a word for aiding and abetting the enemy, treason, punishable by hanging.
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https://www.theepochtimes.com/house-passes-280-billion-chips-act-without-china-provision-sending-bill-to-bidens-desk_4628943.html?utm_source=China&utm_campaign=uschina-2022-07-29&utm_medium=email&est=mWo4kQxROchzIqJl%2F6gLWRArUENaQ3WYxAjbhyqgjeYMGFztLeYfLVPLYVLHdHRzaukI
ARE YOU FG KIDDING ME?!?
"However, many legislators disagree with that statement because Democrats removed a provision of the legislation at the last minute that would have prevented U.S. companies from outsourcing subsequent technologies to China. Because of the removal of that provision, tech companies in the United States will be able to research new semiconductor technologies using billions of dollars in taxpayer funds, then outsource the production of those new technologies to China."
The election of Trump was Democrats fault. This kind of governance by insiders is what elects the outsider to clean it up - if there is anything left to clean up.
Brought to you by the people who sent plane loads of cash to the terror sponsoring regime of Iran.
In one post we recognize them as our enemy and in the next, same day, we help them develop military technology.
There used to be a word for aiding and abetting the enemy, treason, punishable by hanging.
The people in power see you and me as the enemy.
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Superficial article that leaves out mention of the gaps and loopholes:
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Biden signs ‘once-in-a-generation’ semiconductor bill into law
BY JOSEPH CLARK THE WASHINGTON TIMES
President Biden on Tuesday signed Congress’ $280 billion technology spending bill aimed at boosting domestic semiconductor manufacturing and spurring scientific research, lauding it as a “once-in-a-generation investment in America itself.”
“America invented the semiconductor,” Mr. Biden said during a ceremony on the South Lawn of the White House. “And this law brings it back home.”
The House gave final passage to the bill, which includes a $52 billion payout to semiconductor manufacturers, in a 243-187 vote last month, one day after the Senate passed the measure 64-33 in a key legislative win for the administration.
Proponents of the bill, which includes more than $50 billion in the next five years for chip manufacturing and a 25% tax credit through 2026 for new chip production, say it will reduce America’s dependence on China and resolve a major supply chain issue that has contributed to high inflation.
Passage of the bill in the narrowly divided Congress marked a legislative win for the White House and for Democrats hungry for a policy victory ahead of the Nov. 8 midterm elections.
Mr. Biden was joined by Senate Majority Leader Charles E. Schumer, New York Democrat, and House Speaker Nancy Pelosi, California Democrat, and Commerce Secretary Gina Raimondo for the signing ceremony.
Mr. Schumer lauded the Senate’s progress on Democrats’ key legislative priorities in recent weeks, including the semiconductor legislation and the party’s $740 billion health care, climate, tax and spending package passed by the chamber over the weekend. The Senate is divided 50-50, with Vice President Kamala Harris providing the tie-breaking vote.
“All too often, government and businesses are accused of thinking too short term,” Mr. Schumer said. “But this is one of the most significant long-term thinking bills in ages. I firmly believe our grandchildren will work in jobs we can’t even envision now because of these great investments.”
“Today we are laying the foundation for a bold future by enacting the Chips and Science Act,” he said. “We are making clear we believe another great American century lies on the horizon.”
Mrs. Pelosi said by signing the bill, Mr. Biden has “declared our economic independence” and is returning “American semiconductor production to world leadership status.” The bill’s passage capped months of tense negotiations on the long-stalled $52 billion incentive for chip manufacturers.
The White House had been in a full-court press for weeks to get the measure passed, urging lawmakers to shed a bevy of tough-on-China measures to get the broadly supported semiconductor funding to his desk before industry heavyweights take their money elsewhere.
Ms. Raimondo, who led classifi ed briefings last month on Capitol Hill to compel lawmakers to move the stalled chip funding across the finish line, has warned the U.S. is running out of time to woo chip manufacturers as other countries begin to roll out similar incentives.
“This could not have come at a more urgent moment,” she said during the signing ceremony. “The linchpin of our economy and our national security, and our over-reliance on foreign manufacturers is a real vulnerability. With these investments, that changes right now.”
Without a steady flow of semiconductors, which are used to manufacture a variety of goods such as smartphones, washing machines and advanced weapons, proponents warn that the U.S. will be severely hobbled in maintaining economic stability.
Opponents, including some Republicans and self-described Democratic socialist Sen. Bernard Sanders of Vermont, labeled as “corporate welfare” the bill’s $52 billion of funding for the chip manufacturing industry.
Several semiconductor heavyweights have hinged further investment in the U.S. on the federal subsidies included in the bill.
Micron announced this week that it would spend $40 billion in domestic semiconductor manufacturing, creating 5,000 new high-tech jobs, the Boise, Idaho firm said. Micron says its investment will boost the U.S. share of chip production from 2% to 10% over the next decade.
Qualcomm this week has also agreed to buy $4.2 billion in chips produced from GlobalFoundries’ upstate New York factory. Global-Foundries is expected to expand its domestic chip manufacturing footprint to benefit from the federal subsidies under the legislation
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Biden team vows to closely watch funds for semiconductors
BY JOSEPH CLARK THE WASHINGTON TIMES
Secretary of Commerce Gina Raimondo on Tuesday promised to impose strict guardrails on the $52 billion payout to semiconductor manufacturers that President Biden signed into law last month.
She said the government would “look after every nickel of taxpayer money.”
The Commerce Department is starting to dole out the funds that include $28 billion in “leadingedge” semiconductor manufacturing, $10 billion in new manufacturing capacity and $11 billion to strengthen U.S. leadership in semiconductor research.
Ms. Raimondo sought to tamp down criticism that the funding amounted to corporate welfare for already profitable companies.
“This is not a blank check for companies,” Ms. Raimondo told reporters. “There are clear guardrails on this money and the Department of Commerce intends to be vigilant and aggressive in protecting taxpayers.”
She added that the money could not be used for stock buybacks and that the government dollars are meant to enhance rather than replace private investment, and the U.S. taxpayer dollars cannot go to develop leading-edge semiconductor technologies in China.
“These are some of the most stringent taxpayer protections and guardrails we’ve ever had,” Ms. Raimondo said. “We’re going to look after every nickel of taxpayer money.”
The government also can claw back funds from companies if they are misspent or if companies fail to put them to use, according to Ms. Raimondo.
“Make no mistake about it, we will use that clawback authority if, after giving the money to a company, they fail to start their project on time, fail to complete their project on time, or fail to see the commitments that they’ve made,” she said.
Ms. Raimondo led classified briefings on Capitol Hill during the administration’s final push to move the stalled chip funding bill across the finish line. She warned lawmakers that the U.S. is running out of time to woo chip manufacturers to its shores as other countries offer similar incentives.
The funding was approved by Congress as part of a $280 billion technology spending bill that Mr. Biden lauded as a “oncein- a-generation investment in America itself.”
“America invented the semiconductor,” Mr. Biden said when signing the bill into law. “And this law brings it back home.”
Passage of the bill in the narrowly divided Congress marked a legislative win for the White House and for Democrats hungry for a policy victory ahead of the Nov. 8 midterm elections.
Proponents of the bill, which includes more than $50 billion in the next five years for chip manufacturing and a 25% tax credit through 2026 for new chip production, say it will reduce America’s dependence on China and resolve a major supply chain issue that has contributed to high inflation.
Without a steady flow of semiconductors, which are used to manufacture a variety of goods such as smartphones, automobiles, washing machines and advanced weapons, proponents warn that the U.S. will be severely hobbled in maintaining economic stability.
Opponents, including some Republicans and self-described democratic socialist Sen. Bernard Sanders of Vermont, labeled it “corporate welfare.”
Several semiconductor heavyweights have linked further investment in the U.S. to the federal subsidies included in the bill.
Micron announced after funding was approved by Congress that it would spend $40 billion in domestic semiconductor manufacturing, creating 5,000 new high-tech jobs, the Boise, Idaho, firm said. Micron says its investment will boost the U.S. share of chip production from 2% to 10% over the next decade.
Qualcomm has also agreed to buy $4.2 billion in chips produced from GlobalFoundries’ upstate New York factory. GlobalFoundries is expected to expand its domestic chip manufacturing footprint to benefit from the federal subsidies under the legislation.
Later this week, Mr. Biden will attend a groundbreaking ceremony in Ohio for Intel’s planned $20 billion semiconductor complex. The groundbreaking was initially scheduled for July, but Intel delayed the start of construction on the new facility until Congress’ final passage of the semiconductor funds.
“These investments have been made by these companies, because the CHIPS Act passed, and they have confidence now that the money will be put out the door,” Ms. Raimondo said
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"Biden team vows to closely watch funds for semiconductors"
- Nobody watches over wasteful crony government spending more closely than that Biden team. They will watch, watch, watch until they are certain every dollar and more go to their political cronies.
A neat trick, they have found if you silence and jail all opponents, money can be more efficiently steered to the right people.
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"Biden team vows to closely watch funds for semiconductors"
- Nobody watches over wasteful crony government spending more closely than that Biden team. They will watch, watch, watch until they are certain every dollar and more go to their political cronies.
A neat trick, they have found if you silence and jail all opponents, money can be more efficiently steered to the right people.
Heh!
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iden Admin Unveils Tough Restrictions on Semiconductor Exports to China
By Andrew Thornebrooke October 7, 2022
The Biden administration unveiled sweeping new export controls on Oct. 7, in an effort to hamstring the military modernization of an increasingly hostile China.
Among the new export rules is a measure that will cut communist China off from certain semiconductor chips that are made with U.S. technologies, regardless of whether the chips were manufactured in the United States.
The move is likely to be seen as a natural follow-up to the CHIPS and Science Act, which Biden signed into law in August. That law allocates billions of dollars of investments into domestic manufacturing of advanced semiconductor chips.
“China is trying to move way ahead of us in manufacturing [advanced chips],” President Biden said during an Oct. 6 speech. “It’s no wonder, literally, the Chinese Communist Party actively lobbied against the CHIPS and Science Act that I’ve been pushing in the United States Congress.”
“The United States has to lead the world in producing these advanced chips.”
Advanced semiconductor chips are used to make everything from pickup trucks to hypersonic missiles. Currently, more than 60 percent of the world’s supply of chips is produced in Taiwan, many of them with the help of American research and design.
The rules announced by the administration this week will build on restrictions developed earlier in the year which effectively require some companies to halt shipments of equipment to Chinese-owned factories producing advanced chips.
US Asserts Strength With New Rules
The move to cut off China from American research and design presents a vast expansion of the White House’s efforts to retard the Chinese Communist Party’s (CCP) military modernization and associated technological advances in quantum computing and artificial intelligence.
If effective, the new rules could set China’s domestic chip manufacturing industry back years by compelling American and foreign companies that use U.S. technologies to cut off support for China’s leading factories and chip designers.
The move is also likely to ameliorate previous fears about the CHIPS and Science Act over the issue of whether some companies might develop new chips with taxpayer money and then export their manufacture to China.
Senior government officials said in a Thursday briefing that many of the rules sought to prevent foreign firms from selling advanced chips to China or supplying Chinese firms with tools to make their own advanced chips.
“We’re going to make sure that companies that take these taxpayers’ dollars do not turn around and make investments in China investments that undermine our supply chains and national security,” Biden said. “That’s a guarantee.”
“The future of the chips industry is going to be made in America.”
“The supply chain is going to start here and end here in the United States.”
Officials conceded that they have not yet secured promises from allied nations to implement similar measures. Discussions to create a multinational effort toward that end were ongoing.
“We recognize that the unilateral controls we’re putting into place will lose effectiveness over time if other countries don’t join us,” one official said.
The expansion of U.S. powers to control chip exports to China is based on a broadening of the so-called “foreign direct product rule.”
The rule was previously expanded to give the U.S. government authority to control exports of chips made overseas to Chinese telecommunications giant Huawei.
The new regulations will also severely restrict the export of U.S. equipment to Chinese chip makers and effectively formalizes letters sent to Nvidia and AMD earlier in the year restricting shipments to China of chips required for supercomputing systems that could be used to develop nuclear weapons and other military technologies.
Reuters contributed to this report.
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U.S. Suppliers Halt Operations at Top Chinese Memory Chip Maker
Tool makers are pulling out staff and pausing work as they assess the impact of Commerce Department restrictions on semiconductor exports to China
U.S. export control measures restrict companies sending chips and chip-making equipment to China.
PHOTO: FLORENCE LO/REUTERS
By Yoko KubotaFollow
and Raffaele HuangFollow
Updated Oct. 12, 2022 10:44 am ET
BEIJING–U.S. chip equipment suppliers are pulling out staff based at China’s leading memory chip maker and pausing business activities there, according to people familiar with the matter, as they rush to assess the impact of Commerce Department semiconductor export restrictions.
State-owned Yangtze Memory Technologies Co. is facing a freeze in support from key suppliers including KLA Corp. KLAC -1.80%▼ and Lam Research Corp., LRCX -0.84%▼ the people said. The suspensions follow last week’s sweeping curbs imposed by the U.S. on China’s chip sector, ostensibly to prevent American technology from advancing China’s military power, though the impact might reach further into the industry.
The U.S. suppliers have paused support of already installed equipment at YMTC in recent days and temporarily halted installation of new tools, the people said. The suppliers are also temporarily pulling out their staff based at YMTC, the people said.
U.S. chip equipment manufacturers have dozens of employees stationed at YMTC’s factory. They play a crucial role in operating the factory and developing its manufacturing capabilities, as they bring in expertise on highly technical chip production tools, people familiar with the situation said. If the halt is extended, customers such as YMTC face being cut off from upgrades, maintenance expertise and future technology they need to develop chips.
While the moves might be temporary, they are immediate signs of business disruptions facing Chinese chip makers and U.S. technology suppliers as Washington escalates its efforts to stifle China’s emerging semiconductor industry. The U.S. export control measures, which restrict companies sending chips and chip-making equipment to China, are some of the broadest the U.S. has enacted against China’s semiconductor industry. They veer from previous actions that often targeted individual companies and a narrower subset of technology.
The new rules, announced Friday by the Commerce Department, add new license requirements for advanced semiconductors and chip-making equipment destined to a facility in China. Licenses for facilities owned by U.S. and U.S.-allied firms would be decided on a case-by-case basis, while Chinese-owned facilities would face a presumption of denial.
Some foreign companies in ally countries are expected to get exemptions to keep their China-based facilities running, with South Korea’s SK Hynix the first to reveal such an approval on Wednesday.
U.S. tool makers are assessing what they need to do to comply with the new restrictions in working with Chinese clients, and the longer-term impact is still unclear, people familiar with the matter said.
American companies dominate the global chip-production equipment supply chain, with a combined share of 41%, while China’s is 5% or lower, according to a Boston Consulting Group analysis.
The Commerce Department’s measures are far reaching because they restrict the ability of “U.S. persons” to support the development or production of some of the most cutting-edge chips in China.
“U.S. persons” would include those with American passports and green-card holders as well as U.S. companies, said Kevin Wolf, a former Commerce Department official and a partner at Akin Gump Strauss Hauer & Feld LLP.
KLA is known for its inspection and testing equipment and Lam Research for etching machines. Another major American supplier to China’s chip industry, Applied Materials Inc., produces tools including those that deposit layers of materials on wafer surfaces—all critical steps in producing chips. China, the biggest market for the three U.S. chip equipment suppliers, contributes around 30% of the companies’ revenues.
Share prices of Applied Materials, KLA and Lam Research have all dropped by more than 20% over the past month.
Applied Materials didn’t respond to a request for comment.
Beyond the broad new restrictions targeting China’s chip sector, the U.S. last week placed YMTC on a list of companies the Commerce Department is concerned about, called an unverified list. Companies on the list could be added to a more restrictive export blacklist if its concerns aren’t allayed.
Based in China’s central Hubei province, YMTC is a maker of flash memory chips used for storage, and China’s largest maker of memory chips overall. It is responsible for about 6% of global memory output, according to market tracker TrendForce.
The company last year began shipping a type of advanced memory chip containing 128 layers, putting it within the scope of new U.S. restrictions. More layers allow a chip to store more data.
YMTC is controlled by the Hubei government and China’s national integrated circuit fund. Previously, it was a unit of Chinese chip conglomerate Tsinghua Unigroup Co., which in recent years has been heavily indebted and completed a yearlong asset restructuring in July.
Asa Fitch contributed to this article.
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China’s Threat to Taiwan Semiconductors
Why aren’t American asset managers paying attention to the risks from an invasion of the island?
By Vivek Ramaswamy and Mike Pompeo
Oct. 10, 2022 1:28 pm ET
Xi Jinping’s all-but-certain installation for a third term as leader of the Chinese Communist Party marks an important milestone in the party’s progress toward annexing Taiwan. That creates significant risks for U.S. investors—many of which have been overlooked.
Mr. Xi has unambiguously stated that reacquiring Taiwan is a pillar of his national rejuvenation platform and a vital national objective. It’s also critical to his personal legacy. Mr. Xi’s ambitions have been checked by his need to secure a third term, as he likely feared international backlash that could threaten his grip on power. After this month, his calculus may change. Taiwan’s annexation could allow him to assert dominance and divert attention away from China’s domestic problems. Mr. Xi may be disinclined to wait, given the risk of a more assertive president in Taipei in May 2024 or Washington in January 2025. Beijing’s recent rhetoric has been consistent with this hypothesis.
Taiwan’s primary defense is its economic influence, not its military. The country’s dominant position in the semiconductor industry—what President Tsai Ing-wen calls Taiwan’s “silicon shield”—serves as a useful protection against Chinese aggression. The Taiwan Semiconductor Manufacturing Co. produces more than half of the world’s advanced semiconductors and 90% of the most advanced chips. TSMC is the exclusive producer of the most advanced semiconductors that power Apple’s iPhones, AMD’s advanced CPUs and Qualcomm’s snapdragon chip used in many Android phones.
If China were to invade Taiwan, TSMC’s lights would likely go out. “If you take a military force or invasion, you will render the TSMC factory inoperable,” TSMC chairman Mark Liu told CNN in July. A material disruption to the industry would send shock waves across global supply chains, rendering manufacturers unable to make everyday products.
Though financial analysts and think-tank experts have suggested this could deter China from invading Taiwan, there are other ways for Beijing to achieve its aims without jeopardizing TSMC’s capabilities. A naval blockade, for example, could bully Taiwan’s leadership into surrendering without Chinese troops setting foot on the island.
No matter how it is achieved, the annexation of Taiwan would spell disaster for U.S. interests. If TSMC can’t produce chips, the global economy will tank. If TSMC is still able to produce chips but China dictates the terms of access, companies that rely on TSMC and other Taiwanese semiconductor companies will be left at the mercy of Beijing’s demands.
The U.S. has already experienced the pain of such scarcity. A chip shortage in 2021 cost the auto industry an estimated $210 billion in revenue. A recent study estimates that a one-year disruption in the production of semiconductors in Taiwan would lead to a $490 billion drop in revenue for electronic-device makers, not counting fallout for sectors that aren’t directly reliant on semiconductors.
U.S. semiconductor stocks may offer a reasonable hedge for investors, but only if the companies are sufficiently prepared. U.S. companies should invest in semiconductor technology now to meet the demand that’s expected to grow 80% by 2030. If China annexes Taiwan, U.S. manufacturers could seize on a market dislocation by increasing domestic production while chip prices soar. Though America’s semiconductor industry isn’t as advanced as Taiwan’s, increased investments could change that. And if China bides its time until the U.S. Navy retires more ships as part of its “divest to invest” strategy in the coming years, that will afford U.S. manufacturers even greater flexibility to prepare.
If such investments aren’t made and China annexes Taiwan, U.S. semiconductor firms will face pain in the market and punishment from plaintiffs’ lawyers for failing to act on a known material risk factor.
The better prepared U.S. semiconductor companies are to fill the supply gap created by Chinese annexation of Taiwan, the more reluctant China may be to follow through on its plans. Mr. Xi’s motivations aren’t principally economic, but a rational leader weighs costs and benefits before taking action.
Yet amid rising tensions, the world’s largest asset managers, many of which regularly warn U.S. portfolio companies about risks relating to climate change and board diversity, are conspicuously silent about Taiwan-related risks. The most notable example is BlackRock, whose website raves about the importance of Chinese investments with little mention of Taiwan. In July the firm told investors that “geopolitical events typically have a modest and short-lived impact on markets and economies” and that “we do not see a military confrontation [between China and Taiwan] as imminent.” This came even as China announced military exercises in response to House Speaker Nancy Pelosi’s trip to Taiwan.
BlackRock’s behavior is unsurprising and may itself be part of China’s long-term strategy of influencing U.S. companies to advance its geopolitical goals. BlackRock has been eyeing the lucrative Chinese asset-management market for years. In 2019 CEO Larry Fink described China as “one of the largest future growth opportunities for BlackRock” and said the firm is “focused on building an onshore presence.”
But access doesn’t come cheap. Following Mr. Fink’s comments, BlackRock lobbied the U.S. government for policies favorable to China, such as lower tariffs. In August 2020, BlackRock became the first foreign company to win preliminary approval to offer mutual funds in China. In summer 2021, at the height of the selloff in Chinese stocks, China’s securities regulator summoned BlackRock executives to a meeting, after which BlackRock urged investors to triple their assets allocated to Chinese companies. Two weeks later, BlackRock launched its Chinese mutual funds. BlackRock would endanger its business if it alienated the Chinese government by openly warning U.S. investors and companies about Taiwan-related risks.
The effect of these admonitions is subtle but real. BlackRock is the second-largest shareholder of Intel, one of America’s largest and most advanced semiconductor companies. BlackRock includes Intel in its “Climate Focus Universe”—a selection of companies that BlackRock has targeted to demand “climate adaptation strategies” and “rigorous GHG [greenhouse-gas] emissions reduction targets.” This campaign has proved fruitful: Intel regularly touts its sustainability efforts, including committing to net-zero emissions by 2040, but it says little about the company-specific risks and opportunities posed by Taiwan’s potential annexation.
BlackRock’s silence demands a market response. While the consequences of China’s annexation of Taiwan would go far beyond stocks or the economy, market actors can make a difference. U.S. semiconductor companies and their investors can protect against Taiwan-related risks now by investing in a silicon shield of their own.
Mr. Ramaswamy is executive chairman of Strive Asset Management, which holds semiconductor companies through its new U.S. Semiconductor ETF, SHOC. Mr. Pompeo served as director of the Central Intelligence Agency (2017-18) and secretary of state (2018-21).
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China, Philippines: Beijing Looks to Shore Up Ties With Manila
2 MIN READOct 13, 2022 | 15:57 GMT
What Happened: China and the Philippines have agreed to cooperate under the Belt and Road Initiative on semiconductors, electronics and energy, the South China Morning Post reported Oct. 13. To that end, they will build complementary industrial parks that offer tax breaks and other incentives, the first of which will be built in China's Fujian province, from which many ethnically Chinese Filipinos originate, with a corresponding park located in the Philippines.
Why It Matters: As the United States continues to decouple more of its operations from China and limit the export of U.S. semiconductor technology to China, Beijing is looking to establish alternative production bases, integrate existing supply chains and boost innovation. China's efforts to court the Philippines are therefore due to Beijing's desire to use the country's geographic position to maintain supply chains across the Pacific, as it lies between the Americas and continental Southeast Asia. The Philippines is unlikely to side with either China or the United States amid their strategic competition, especially while territorial disputes in the South China Sea persist, but the country will continue to maintain strong economic ties with both world powers.
Background: On Oct. 7, the United States added more restrictions to the export of supercomputing and artificial intelligence chips and components to China, as well as exports of semiconductor equipment that can be used to make advanced logic and memory chips. Washington also made it easier for the U.S. Commerce Department's Bureau of Industry and Security to add companies to its Entity List, which is the bureau's toughest export control blacklist. Philippine President Ferdinand Marcos Jr. reaffirmed the U.S.-Phillippine partnership and alliance when he spoke with U.S. President Joe Biden in September, spooking China.
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https://www.youtube.com/watch?v=tQ_HeCalYq8
https://www.youtube.com/watch?v=tochLfjWuM4&t=206s
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yes this sounds good
as long as we don't lose Taiwan which would negate some of the upside to this.
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New Chip Ban Accelerates US Decoupling From China: Experts
By Alex Wu October 16, 2022 Updated: October 18, 2022biggersmaller Print
The United States expanded its semiconductor ban on China and issued a China-focused “National Security Strategy” five days before the beginning of the Chinese Communist Party’s (CCP) party congress on Oct. 12.
Experts believe these unprecedented moves will accelerate the United States’ decoupling from China and that the “new Iron Curtain” may have fallen.
Experts believe that the Biden administration is moving to ensure and all-round containment of the CCP. Moreover, the sanctions in the semiconductor field are likely just the beginning. If similar sanctions expand to other fields like finance and biotechnology, the decoupling of the United States and China will truly take effect.
Chip Ban Extended to ‘Talents’
The U.S. Department of Commerce announced (pdf) on Oct. 7 that it imposed new export restrictions on advanced semiconductors and chip-manufacturing equipment to prevent American technology from being used for China’s military development.
The swiping ban also effectively prohibits U.S. persons from supporting the development or production of chips covered by the restrictions. Under this rule, U.S. nationals in Chinese chip-related companies will face a choice between losing U.S. citizenship or quitting jobs in China.
U.S. export controls to China for years have only been on technologies, products, companies, or organizations, and the new ban extends export controls to individual U.S. citizens and green card holders for the first time. It is considered to be the most restrictive ban on China’s semiconductor industry.
According to Radio Free Asia, on the day the ban took effect, hundreds of Chinese-Americans working in semiconductor companies resigned from Yangtze Memory Technologies, Changxin Memory Technologies, Shanghai IC R&D Center Jiading Factory, Hefei Changxin Memory Technologies, and others.
Chiou Jiunn-Rong, an Economics professor at National Central University in Taiwan, told The Epoch Times on Oct. 14: “It’s very likely to form a trend. Previously, capital was leaving China, and the next trend is technology professionals leaving China.”
Chiou said that the indirect effect is that after the chip industry is hobbled, China’s overall economy will be impacted, which will affect other fields, and even people in the field of business and business management will probably also leave China.
The United States also announced the National Security Strategy on Oct. 12, which focuses on the CCP and Russia, calling the latter an “immediate threat” and that the CCP was the only competitor with the intention and ability to reshape the national order.
Doong Sy-Chi, deputy chief executive of a Taiwanese think tank, told The Epoch Times on Oct. 14 that the United States has determined to set the CCP as a strategic competitor in all aspects. The trade competition that used to be focused on enterprises has now become on individuals. The Biden administration has made a larger strategic setting.
Decoupling Accelerated
Tsai Ming-fang, an Economics professor at Tamkang University, told The Epoch Times on Oct. 12 that from the new ban it can be seen that the trend of decoupling between the United States and China is more clear and certain. He predicts that “Taiwan factories will no longer help Chinese manufacturers but will help more brands in democratic countries.”
Shen Rongqin, a professor at York University in Canada, told The Epoch Times that the Biden administration has attached great importance to technological sanctions of China from the very beginning. Republican lawmakers have used the entity list to contain the CCP before. But what Biden has done is more radical and comprehensive than many Republican congressmen have suggested. “Starting from the Trump administration, now Biden has accelerated the trend of decoupling between China and the United States in semiconductor technology,” said Shen.
U.S.-based current affairs commentator Li Linyi told The Epoch Times on Oct. 14 that the Biden administration’s actions this time are much tougher than before.
He said: “These measures are likely to be just the beginning for the U.S. government. If these measures are extended to other fields such as finance, biotechnology, etc., it will really become a headache for the CCP. That is the U.S.-China decoupling is really happening.”
Chiou Jiunn-Rong pointed out that the tension between the United States and China seems to be very high now, but not in the military situation unlike the U.S.-Soviet relationship during the Cold War. The first will be economic wars and technological wars.
Xia Song, Luo Ya, Yi Ru, Li Xinan, and Zhang Yuanzhang contributed to this report.
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U.S. interests at stake if chips are down in China attack
Island aims to protect prosperity, civil liberties
Second of three parts
BY GUY TAYLOR THE WASHINGTON TIMES
HSINCHU, TAIWAN
Hulking white factory buildings tower over the plush vegetation lining the road that snakes through this city, a place long known as Taiwan’s “Silicon Valley” but increasingly identified as ground zero in a widening cold war between the United States and China.
More than 400 of Taiwan’s highest-level private tech companies are located in Hsinchu, and several of America’s most iconic and influential brands — including Apple, Intel, Microsoft and Lockheed Martin — are deeply invested in and or heavily reliant on the advanced microchips made here.
“The clients come from everywhere,” said Scott Huang, a researcher at Hsinchu Science Park, whose most prominent tenant is the Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s top producer of chips used in everything from smartphones to F-35 fighter jets. As China intensifies its threat to absorb Taiwan and force it under the control of the Chinese Communist Party, Taiwanese officials cite the chip manufacturing sector as the linchpin of the island democracy’s strategic relevance. It is a major piece of the argument of why Americans should care about the fate of what might otherwise seem like a distant geopolitical fight for Washington to avoid.
Security analysts point to other aspects of Taiwan’s strategic value. The island has one of the more vibrant democracies in East Asia — a bastion of political free speech and U.S.-connected free market capitalism that is located closer to China
than any other nation in the region. Its prosperity and civil liberties offer daily rebukes to Beijing’s arguments about the superiority of the mainland’s stateguided economic model.
Taiwan’s location, halfway down China’s 9,000-mile coastline and directly between the East Sea/Sea of Japan and the South China Sea, is also vital. Chinese military control over the island could one day give Beijing naval dominance over the shipping of a massive flow of goods around the world.
In any argument about U.S. commitments to Taipei, the government of Taiwanese President Tsai Ing-wen highlights these factors, but it also emphasizes the island’s manufacturing of some 90% of the world’s most advanced microchips.
“If Taiwan’s semiconductor industry is disrupted in any sense, I think it’s going to impact upon the rest of the world,” said Taiwanese Foreign Minister Joseph Wu.
The global supply chain issues of the COVID-19 era hobbled the U.S. auto industry and other major industrial sectors for months, but Mr. Wu said those would seem minor compared with the shortages a Chinese attack on Taiwan could trigger.
Chinese President Xi Jinping has been aggressively pushing Beijing’s goal of absorbing Taiwan since 2019 and has warned that China reserves the right to use force at any time to dissolve the democracy. A recent spike in Chinese military drills and China’s neutrality toward Russia’s invasion of Ukraine has sparked fresh concerns that Mr. Xi is preparing for war.
The concerns dovetail with fears that China, which lacks the capability to produce microchips at the level of sophistication of Taiwanese manufacturers, wants to take over the ecosystem in Hsinchu or at least bring its most dominant companies under Communist Party control.
U.S. analysts warn about Chinese control of increasingly advanced chips, which are widely seen as the gateway to the future. Rapidly advancing processing speeds are expected to revolutionize human society and weaponry in the coming decades, thrusting the microchip industry into the center of U.S.-Chinese tensions.
The Biden administration is scrambling to block U.S. companies and their Taiwanese partners from selling the most advanced semiconductors — artificial intelligence chips — to buyers in China.
Early this month, the White House authorized the Commerce Department to impose sweeping export controls that also would prohibit sales to China-based firms of elite manufacturing equipment needed for AI chip production.
U.S. lawmakers on both sides of the aisle have pushed for diversification of chip manufacturing and supply chains beyond Taiwan. The effort galvanized in August with President Biden’s signing of the CHIPS and Science Act, which provides some $52 billion in subsidies for companies to build semiconductor manufacturing facilities in the United States.
“The only country in the world that is a source of the most advanced semiconductors is Taiwan, and I would regard that as a resilience risk and also a national security risk,” Treasury Secretary Janet Yellen told an event hosted by The Atlantic in late September. In addition to increased domestic manufacturing, she said, the U.S. is making efforts to work with other “trusted partner countries” to diversify supply chains.
Taiwanese officials say they are not threatened by these developments, but rather seek to embrace them as an opportunity to shift the island away from its trade dependence on China, whose companies purchase substantial numbers of lower-level microchips manufactured in Taiwan.
Taiwanese companies have been scrambling in recent years to increase investments in other countries, including the United States. TSMC began constructing a $12 billion microchip manufacturing plant in Arizona in 2020.
Debate in Washington over Taiwan’s strategic relevance has intensified since August, when China expanded the scope of its military drills and missile tests near the island to protest House Speaker Nancy Pelosi’s visit. The United States has backed Taiwan militarily since the 1950s, but Mrs. Pelosi’s visit was the highest-level official U.S. visit in a quarter century.
The Biden administration responded to the increased Chinese activity by sending U.S. warships through the 110-mile-wide Taiwan Strait between China and Taiwan.
The move underscored Taiwan’s geographic significance to the security of major maritime shipping routes. A Chinese disruption could endanger the free flow of goods to international markets and badly damage the economies of the U.S. and its allies.
“The waters surrounding Taiwan are home to the busiest shipping lane in the world,” Wang Mei-hua, Taiwan’s minister for economic affairs, said at a recent event hosted by the Center for Strategic and International Studies.
“China, Japan, South Korea and many other countries all depend on the shipping lanes to deliver their goods to the world and vice versa,” Ms. Wang said.
She noted that Taiwan’s location “at the center of the ‘First Island Chain’ of the West Pacific … serves several strategic purposes both offensive and defensive.”
“If Taiwan were to become under threat or be in crisis, it would not only have a severe impact on global shipping and logistics, but it would also have an impact on the political and economic order of the Indo-Pacific.”
Regional analysts emphasize Taiwan’s democracy and free market connectivity as counterpoints in the face of rising Chinese economic and military power.
“Taiwan is the first authentic Chinese democracy and a rival political enterprise to the Chinese Communist Party,” said Andrew Scobell, a distinguished fellow with the China program at the U.S. Institute of Peace. “Taiwan shows up Beijing’s lie that without the Communist Party there is no new China and that China isn’t ready for the kind of democracy that the rest of the world has.
“Taiwan is living proof that Chinese people want democracy and it works quite well,” Mr. Scobell said.
He said Taiwan’s vibrant democracy “influences the calculus in Washington” as Americans view the cross-strait tension as a confrontation between an “oppressive dictatorship and a little democracy.”
Although the Taiwanese population is less than 24 million, the island ranked 16th among the world’s economies in terms of merchandise trade in 2021. What remains to be seen is whether the ranking will improve or decline as Taiwan diversifies its economy by investing in semiconductor operations in democratic countries.
More than 1 million people of Taiwanese descent are living in the U.S., and even a brief visit illustrates how Taiwan embraces aspects of American culture in nuanced ways.
One of the signature labels of Taiwan’s vaunted Kavalan Whiskey distillery uses American white oak casks imported from Kentucky.
Taiwanese officials say the island’s status as a democracy ties directly to its prowess on the global semiconductor manufacturing landscape and its relevance to the future of a U.S.-aligned global economy.
Mr. Wu told a group of international journalists visiting Taiwan through a program sponsored by the Taiwanese Ministry of Foreign Affairs that other countries “understand the value of having a semiconductor industry or ecosystem, so they would like to have Taiwan make investments.”
“So far, we have been receiving requests to make investments in Japan, in the United States, in Germany, in India, or in Central and Eastern European countries,” the foreign minister said.
“The U.S. demands more and more serious discussions with us, not only with Taiwan but also with Korea and Japan — the so-called ‘Fab Four’ — to form an alliance to make sure that the democracies have [their] own supply chain and it’s not conditioned by the authoritarian country — which is China — and that we are not providing computer chips for China to use in its weapons systems.”
Despite Taiwan’s technological and geographical advantages, some U.S. analysts say Washington should avoid a confrontation with Beijing, the world’s second-biggest economy and the thirdlargest U.S. trading partner after Canada and Mexico.
Christopher McCallion, a fellow at Defense Priorities, wrote in a recent analysis that fears that China could “seize Taiwan’s chip-manufacturing capacity and leapfrog the U.S. technologically are overblown.”
If China invades Taiwan, Chinese companies would be cut off from vital U.S. and other inputs to the chip manufacturing industry and would be “unable to resume chip production under new management,” he said.
The U.S. should “avoid provoking” China and “seek to dial down the temperature with Beijing,” Mr. McCallion said.
He said U.S. efforts to deter China might encourage Beijing to use force, resulting in a military clash Washington hopes to prevent.
“A war between the U.S. and China would be exponentially costlier than any potential semiconductor supply shock resulting from a cross-strait invasion [by China],” he wrote.
It’s hard to predict how an invasion would impact Taiwan’s high-tech hub. Mr. Huang went to great lengths to credit robust U.S. investment in building up the island’s microchip industry.
“We thank the Americans a lot,” he said.
Mr. Wu echoed the foreign ministry’s sentiment. The “supply chain for Taiwan’s semiconductor ecosystem cannot get away from the United States,” he said.
The foreign minister described Taiwan as part of a “democratic supply chain” and said the “source of our technology is coming from the United States.”
“The United States,” he said, “has supported Taiwan to build this whole ecosystem.”
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How Silicon Valley Lost the Chips Race
Money Alone Won’t Revive the U.S. Semiconductor Industry
By Chris Miller
October 19, 2022
https://www.foreignaffairs.com/united-states/how-silicon-valley-lost-chips-race
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Thanks to the CHIPS and Science Act, signed into law in August 2022, the U.S. government has $52 billion in new funding to try to reinvigorate the country’s semiconductor industry. Although semiconductors were invented in the United States and their design and manufacture still generally require U.S. software and tools, most chips are now manufactured elsewhere, largely in East Asia. But in the face of escalating U.S.-China competition—and with Washington rolling out sweeping new restrictions on China’s access to advanced computing technologies—improving the U.S. position in chip-making has become a national security priority. That the most advanced processors can be fabricated only outside the United States, mainly in Taiwan, adds to the sense of risk.
Rebuilding the U.S. role in manufacturing will be expensive, as the CHIPS and Science Act recognizes. TSMC, Samsung, and Intel—the three biggest companies producing processor chips—are all likely to receive funds for new semiconductor manufacturing facilities in the United States. But an influx of new money alone can’t solve the problem at the core. A cultural change is needed, too, in Silicon Valley and in Washington, to prioritize the challenges faced by firms in advanced manufacturing, including chip makers and their key suppliers.
Silicon Valley has strayed too far from its manufacturing roots, focusing on apps and the Internet, while policymakers in Washington are fixated on consumer-focused Big Tech firms rather than on the hardware on which all computing depends. As the U.S. government tries to revitalize the semiconductor industry, it will succeed only if it learns lessons from Silicon Valley’s early days. This isn’t the first time U.S. chip firms have faced intense foreign competition amid fears that they were falling behind. In the 1980s, leading U.S. semiconductor manufacturers such as Intel stood on the brink of bankruptcy. Intel was rescued by CEO Andrew Grove, who was driven by the realization that advanced technology depends not only on creativity and innovation but also on ultra-efficient precision manufacturing. To help the U.S. chip industry, policymakers in Washington need to start by adjusting their definition of “tech” to encompass advanced manufacturing, too.
HOW DID WE GET HERE?
The United States’ long decline in the production of processor chips has a complex set of causes. Multiple factors have driven up the cost of chip-making in the United States relative to other countries. Environmental regulations governing the toxic chemicals involved in chip-making have grown stricter in the United States. U.S. labor costs are higher than those in parts of East Asia, although labor represents a smaller share of the cost of fabricating semiconductors than it does of many other types of manufacturing.
Most important, however, is that other governments have offered substantial tax incentives for chip-making that the United States, until recently, has failed to match. China’s surge of subsidies available through its Made in China 2025 program and other government initiatives represents the latest step in a semiconductor subsidy arms race that has nothing to do with market competition.
Meanwhile, the chip industry has undergone relentless consolidation. Several decades ago, two dozen companies could fabricate advanced processor chips, but today only three firms produce the most advanced processors: Taiwan’s TSMC, South Korea’s Samsung, and the United States’ Intel. Each company keeps most of its production in its home country. For that reason, the fate of the United States’ domestic chip-making capabilities depends in no small part on the trajectory of a single company: Intel.
Grove, the Budapest-born refugee who led the company for several decades, saw manufacturing as the core of Intel’s identity. After becoming the firm’s president in 1979, he pulled it back from the brink of bankruptcy amid an onslaught of Japanese competition. Within a decade, Intel’s processor chips were inside more than half of all the computers that had ever been built. Since then, the company has earned over $250 billion in profit.
When Grove first became president of Intel, its primary business was selling memory chips used mostly in corporate mainframe computers. But Japanese firms had entered the sector in the mid-1970s, learning to fabricate chips that were less expensive to produce and had fewer defects than chips made by U.S. peers. Watching this, Grove knew the firm had to get out of commoditized memory chips and refocus on higher-value products such as the advanced microprocessors that IBM was putting in a new device it called “the personal computer.”
The United States has lost the ability to manufacture the most advanced processor chips.
Exiting the memory-chip market felt impossible to many at Intel, like Ford deciding to stop making cars. But Grove eventually mustered the courage to jettison the memory-chip business, laying off a quarter of Intel’s workforce and shuttering multiple facilities. Alongside this restructuring, Grove adopted a second strategy: ruthlessly improve manufacturing quality. Grove described his philosophy in a bestselling book, Only the Paranoid Survive: “Fear of competition, fear of bankruptcy, fear of being wrong and fear of losing can all be powerful motivators.” After a long day of work, it was fear that kept Grove flipping through his correspondence or on the phone with subordinates, worried he’d missed news of product delays or unhappy customers.
At Grove’s reinvigorated Intel in the late 1980s and 1990s, workdays started at 8 a.m. sharp. A freewheeling Silicon Valley culture was replaced by drill sergeant discipline. Grove launched a new policy called “copy exactly,” by which the company would determine the best manufacturing process and then teach its engineers to replicate it in all their facilities. Many chafed at being told to implement rather than to invent. Yet as each of the company’s plants began to function less like a research lab and more like a finely tuned machine, productivity rose and costs fell.
Grove’s hard-driving management, however, explains only part of Intel’s resurgence during the 1980s. Intel succeeded not only by optimizing manufacturing, although this was crucial, but also by intertwining leading-edge manufacturing with top-notch chip design. Intel called this the “tick-tock” method: each “tick”—a manufacturing process improvement—was coupled with a “tock,” a more efficient chip design. The close interaction between manufacturing, software, and system design kept Intel atop the PC processor business for three decades.
After Grove retired from Intel in 2005, the company began to drift. Because Intel’s core business of building chips for personal computers was so profitable for so long, the company’s culture of discipline began to slip, according to interviews I conducted with former employees. Years of profits dulled the sense of Groveian paranoia that had once permeated the company. Longtime employees noticed that, with each passing year, executives’ shirts got whiter as chemists and physicists lost influence to the finance department. A company that had been an icon of American technology slid into a decadelong decline. After Grove’s departure, the company failed to make big, bold, risky bets. Its chip-making capabilities, which had been the world’s most advanced, fell behind TSMC and South Korea’s Samsung, which are now able to produce chips with more precision than Intel can. The company missed key industry shifts, failing to foresee smartphones and the rise of artificial intelligence. “It had the technology, it had the people, it just didn’t want to take the margin hit,” one former finance executive at Intel told me.
LESS LIKING, MORE BUILDING
After he retired, Grove voiced concern that the United States’ advanced manufacturing capabilities were eroding. “Abandoning today’s ‘commodity’ manufacturing can lock you out of tomorrow’s emerging industry,” he noted in 2010, warning that Silicon Valley’s fixation on software at the expense of hardware was misguided.
Grove saw the electric battery industry as a case study in how losing manufacturing capability risked eroding innovative capacity. The United States “lost its lead in batteries 30 years ago when it stopped making consumer electronics devices,” Grove said in 2010. Back then, American companies had failed to innovate in manufacturing batteries for personal computers; now, they are far behind rivals, notably in South Korea and China, in producing batteries for electric vehicles. “I doubt they will ever catch up,” Grove predicted, with depressing accuracy.
But Grove’s warnings about the importance of advanced manufacturing in the broader “tech” ecosystem were ignored. Most of Silicon Valley wrote him off as representative of a bygone era. After all, he had built Intel before the Internet existed. Facebook, founded in 2006, soon became several times more valuable than Intel, despite manufacturing nothing and selling little besides advertisements. Intel could retort that the Internet’s data was processed on its chips. Yet producing chips was less profitable than selling ads on apps. Over time, however, the United States has lost the ability to manufacture the most advanced processor chips. Chips crucial to applications from smartphones to artificial intelligence in data centers can now only be made offshore.
After a supply chain shock and amid an intensifying rivalry with China, U.S. political and business leaders are beginning to grasp what is at stake. The passage of the CHIPS and Science Act shows that, for the first time in decades, Washington is willing to spend substantial sums of money to support chip makers. This is a crucial first step, but political leaders also need to improve the business environment for manufacturing. Construction permits, environmental rules, and tax policies are critical determinants of the viability of a manufacturing facility. Innovation alone isn’t enough to revitalize U.S. chip-making unless manufacturing chips is economically viable, too
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The U.S. Deals China's Semiconductor Sector With Its Biggest Blow Yet
12 MIN READOct 21, 2022 | 21:28 GMT
New U.S. export controls on China's semiconductor industry will shatter Chinese President Xi Jinping's ambitions to close China's gap with global peers in the short term. They could also lead to more aggressive Chinese retaliation once his political leadership is cemented. On Oct. 7, the U.S. Commerce Department announced new regulations to block China's access to chipmaking technology and gear that can be used to manufacture cutting-edge logic and memory chips. The regulations also block exports to China of artificial intelligence (AI) and high-performance computing chips (i.e., chips used in supercomputers). Although the regulations have been in the works for months, the announcement came less than 10 days before the opening of the 20th National Congress of the Communist Party of China, during which Xi is expected to formally be granted a third five-year term as the Party's leader. The timing of the moves meant that China's semiconductor industry — a cornerstone sector of Xi's technology strategy — saw significant business continuity disruptions in the week leading up to the twice-a-decade political meeting, demonstrating just how little China has reduced its reliance on foreign semiconductors and associated technologies.
The new export bans target equipment and other technology used to fabricate 16 nanometer (nm) chips using non-planar transistor architectures (such as FinFET process technology), 18 nm or more advanced dynamic random-access memory (DRAM) chips, and NAND flash chips with 128 layers or more. Foreign companies operating fabrication plants in China building such chips are allowed to apply for licenses to continue shipping equipment for such products, and some licenses have already been granted.
In a separate Oct. 7 announcement, the U.S. Commerce Department also added 31 Chinese companies — including China's leading memory chip maker Yangtze Memory Technologies Co. (YMTC) — to its Unverified List of companies that the United States can inspect for end-use violations of export controls. In a policy shift attached to the announcement, the U.S. Commerce Department said any company that did not complete an end-use check upon request would be added to the unverified list, after which those companies — including YMTC — would have 60 days to complete such a check before the bureau would begin the interagency process of adding them to the so-called Entity List, its toughest export control blacklist.
Given the dominance of U.S.- and Western-developed technology, the new U.S. restrictions will severely disrupt China's semiconductor industry. The scope of the export controls includes lithography machines and other physical equipment needed to manufacture advanced chips, electronics design automation and other software used in designing and producing chips, as well as U.S. citizens employed as engineers and other positions. By targeting semiconductor manufacturing technology, the restrictions will likely be effective in further stymying the development of China's chipmaking sector. Indeed, a number of U.S. companies have already pulled out of China or suspended their operations in the country in just the two weeks since the new export controls were announced. While China has made progress in building some chips using a 14 nm or high-resolution FinFET process, Chinese companies have not moved these into mass production, and virtually all of the crucial chip-making equipment and software are still imported and use some level of U.S. technology. Given how some of these tools, particularly expensive advanced lithography machines, are perhaps the most advanced pieces of technology in the industry and are only manufactured by a handful of companies, China is unlikely to create a homegrown alternative this decade. China's most advanced indigenous lithography machine manufacturer, Shanghai Micro Electronics Equipment, only has a 90 nm resolution — a technology commercialized by global leaders starting in 2002. While the company has long been developing a 28 nm machine, it has suffered from delays; but even if Shanghai Micro Electronics Equipment introduces the new machine, it would still take time to scale up beyond prototyping into mass production for use in Chinese fabrication plants.
In response to the new rules, California-based chip equipment manufacturer KLA Corp. plans to stop exporting certain supplies and services to Chinese companies, as well as the South Korean memory chipmaker SK Hynix Inc. (which has memory chip plants in China), according to sources cited in an Oct. 11 Reuters report.
The U.S. Commerce Department's announcement has reportedly already prompted the Netherlands-based ASML Holding (which is the world's only manufacturer of extreme ultraviolet lithography machines) and the U.S.-based Lam Research Corp. to pull their U.S. engineers from China. ASML also reportedly circulated an internal memo asking U.S. employees (or green card holders) to refrain from serving customers in China, both directly and indirectly.
Apple, which previously had been considering using YMTC's memory chips in up to 40% of its iPhones, has allegedly halted plans to source the Chinese company's chips as well, likely as a precaution in case YMTC is added to the Entity List under the Commerce Department's new 60-day requirement to complete an end-use check.
While the new U.S. rules focus on only the most advanced chips, they could also disrupt China's more mature chip industry. There are signs that the restrictions and the compliance risks associated with them are already having an impact beyond the technology directly targeted by the new rules. Even ASML — a non-U.S. company — asked all of its U.S. employees to stop serving customers in China at large while it reviews the new rules. Given how U.S. technology and employees can work on multiple projects or segments of companies at once, it will take time for ASML and other companies to put into place internal controls protecting their U.S. employees from violations. Moreover, U.S. companies like KLA Corp. and Lam Research may struggle to service the greater Chinese market due to challenges in verifying their technologies' end use in certain cases, and may decide to cut or severely reduce their roster of Chinese clients.
The Wall Street Journal reported that more than 40 Americans holding key executive positions in Chinese semiconductor firms, ranging from CEO to vice president to chairman, may be forced to resign or (in extreme cases) renounce their U.S. citizenship and stay in China to remain in their positions under the new rules. If their company produces any sort of advanced chip covered by the new rules, it would be virtually impossible for their jobs from that particular product set.
Companies based in other Asian countries that do not emulate the U.S. restrictions for fear of Chinese retaliation will be forced to differentiate their operations geared toward China from those servicing the rest of the world. Through the new rules, Washington is demonstrating that it is willing to expand restrictions across the board on the Chinese semiconductor industry. Just before the Commerce Department's announcement, foreign manufacturers in China — including South Korea's SK Hynix and Taiwan Semiconductor Manufacturing Co. (TSMC) — were reportedly issued last-minute U.S. export licenses that, at least for now, will allow them to continue receiving equipment and support from U.S. staff and other suppliers. But it appears those authorizations could eventually be withdrawn or not extended, meaning companies with Chinese operations will likely still start contingency planning. Moreover, U.S. restrictions on exports to China of AI and high-performance computing (HPC) chips could also be expanded in the future as cloud computing and logic chips become more advanced. Because of this, non-U.S. semiconductor manufacturing companies like Samsung Electronics Co., Ltd., SK Hynix and TSMC, as well as suppliers and vendors like ASML, will need to develop supply and production lines with minimal — if any — U.S. engineers, technology and supplies in order to continue selling to companies like SMIC. In the future, the United States may also consider expanding restrictions on leading Chinese technology companies at large, which would broaden the ban even more.
Already, the United States has effectively cut off Chinese telecommunications giant Huawei from the advanced chip market through sweeping export bans. Washington could eventually target other leading Chinese electronics companies (such as Xiaomi Corp. or Lenovo) or cloud computing and AI firms (such as Alibaba Group Holding Ltd. or Tencent Holdings Ltd.) with similarly severe restrictions.
With little way to directly counter the impact of the restrictions, Beijing will likely instead focus on cleaning up corruption in the sector in hopes of improving efficiency. China will double down on its efforts to reduce reliance on foreign technology, but the slow pace of Chinese innovation in the semiconductor industry — whether it is due to corruption, sanctions or sheer technology challenges — will lead to intense scrutiny of the industry by China's leadership in the coming months. Even prior to the announcement of the latest U.S. export controls, there were signs that Chinese authorities had begun cracking down on leaders in the industry, ostensibly due to corruption and other challenges that undermine efficiency. Tighter government oversight, however, may do more harm than good for China's semiconductor sector, as it risks causing even more internal upheaval at a time when companies are already struggling to adjust to tighter U.S. restrictions.
In July, Chinese leaders received an assessment that found the country's chipmakers often overstated their technological progress, pace of innovation and competitiveness with international peers. Such overstatement of success is common in China's top-down, state-led, key performance indicator-dominated economy. However, the assessment's findings clearly painted a picture to Xi and China's leadership that changes were needed. On July 30, the head of China's biggest semiconductor fund was arrested in connection with an anti-corruption investigation. According to a Bloomberg report published shortly after the arrest, China's leaders were allegedly ''unhappy'' and ''frustrated'' with the slow growth in the country's semiconductor industry, despite billions of yuan worth of state support.
More broadly, the United States' latest export controls signal a strategic shift toward using more sector-wide restrictions to slow China's rise as a technological peer, as well as a renewed U.S. focus on equating national security with economic security. Much like its predecessor, the administration of U.S. President Joe Biden's national security strategy doctrine explicitly links economic security — and specifically emerging technologies — to national security and uses it to justify restrictions. Although the United States has aggressively targeted China's semiconductor and technology industries with a raft of restrictions over the last five years, virtually all of them focused on export controls targeting a company or a small segment of the Chinese market, such as the 2019 listing of Huawei on the Entity List or developing a new list of Chinese military companies. Although Washington will continue targeting individual companies such as YMTC, which will likely be added to the Commerce Department's Entity List in the future. But the new restrictions signal that Washington will also consider more expansive restrictions, if necessary.
On Sept. 15, the White House sent a new presidential directive outlining specific criteria for the first time for the Committee on Foreign Investment in the United States (CFIUS), which is tasked with reviewing foreign investments on national security, to use when reviewing whether a foreign investment into the United States is a national security risk. Specifically, CFIUS must take into account ''a given transaction's effect on U.S. technological leadership in areas affecting U.S. national security, including but not limited to microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy, and climate adaptation technologies.'' Although it continues to be delayed and remains highly controversial among U.S. business leaders, the United States appears poised to eventually adopt a mechanism similar to CFIUS to screen outbound investments, which almost certainly would adopt similar criteria and potentially block a number of investments by U.S. firms — as well as affiliates of U.S. firms — in China's semiconductor and other industries.
On Oct. 12, the Biden administration also released its national security strategy foundational document, which explicitly stated that the United States ''must ensure strategic competitors cannot exploit foundational American and allied technologies, know-how, or data to undermine American and allied security,'' and that the administration was ''therefore modernizing and strengthening [the United States'] export control and investment screening mechanisms, and also pursuing targeted new approaches, such as screening of outbound investment, to prevent strategic competitors from exploiting investments and expertise in ways that threaten our national security.'' The document's strong language further indicates that the United States will continue to block China's access to U.S.-developed technology, regardless of the field.
In response to Washington's escalating campaign against China's chip sector, Chinese President Xi may finally be in a strong enough political position to more aggressively retaliate against the United States and U.S. business interests. Despite its trade war with the United States and Washington effectively destroying Huawei's consumer electronics business, China's retaliation against American business interests inside and outside of China has so far been somewhat limited. China's restrictions have largely focused on tit-for-tat retaliation over narrow issues, such as boycotting Nike over shunning Xinjiang-produced cotton. But during this time, China has built an arsenal of legal tools that it can use against foreign firms to pressure them and retaliate against U.S. restrictions, including the 2021 Anti-Foreign Sanctions Law and its own ''unreliable entities list.'' China has been slow to use these mechanisms, likely due to a recognition that their use is unlikely to deter U.S. moves and may only invite more, in addition to creating domestic economic disruptions and detracting from key events (including the 2022 Beijing Olympics and the current 20th Party congress where Xi is setting up his third term). But once China's new pro-Xi political leadership is in place after March 2023 and the next ''two sessions'' legislative meetings, one of those roadblocks will be removed; with Xi's political future and third term cemented and a new premier taking office, he may have the power to push through more aggressive retaliation, even if it results in limited economic disruptions at home. The other limitations — particularly China's weak economy — may moderate any initial retaliation, but the United States' latest salvo may compel Beijing to act.
China's retaliation would likely focus on less strategic, but still iconic, foreign firms and their presence in the United States, as China would not want to alienate U.S. technology companies even further and give them even more of an incentive to divest from China. But any U.S. semiconductor firm in the process of reducing their exposure or exiting China, particularly in the wake of the new U.S. sanctions, could be targeted directly with economic restrictions or a wide range of informal tactics, such as arbitrary detentions of U.S. executives and regulatory red tape.
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Connected Content
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New rules. Top Chinese chipmaker Yangtze Memory Technologies Corp. has asked several American employees in key positions to resign from the company in order to comply with new U.S. export controls. The rules, which require any U.S. citizen or entity to seek permission from the Department of Commerce to provide support to a Chinese plant, have halved the number of candidates for senior chipmaking and toolmaking positions at YMTC.
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New rules. Top Chinese chipmaker Yangtze Memory Technologies Corp. has asked several American employees in key positions to resign from the company in order to comply with new U.S. export controls. The rules, which require any U.S. citizen or entity to seek permission from the Department of Commerce to provide support to a Chinese plant, have halved the number of candidates for senior chipmaking and toolmaking positions at YMTC.
Backing up a second, I was wondering if the new chip law was a (rare) example of the Biden Administration doing something right.
They called it bipartisan but only a couple dozen R's voted for it.
https://www.cnn.com/2022/07/28/politics/house-vote-chips-bill-semiconductor/index.html
I favor "free trade" and oppose government getting in bed with private companies. But trade with China at this point is not free trade. We need the decoupling, but was there some better way of doing this?
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If I have it right, there are two things here:
1) The new Chip law. My readings tell me it had plenty of flaws but I can't rule out that on the whole it was a good thing.
2) The recent EO. FWIW my take is that this was pretty much a good thing, period, witness for example the particulars of my preceding post.
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“If any one of the steps in the semiconductor production process is interrupted, the world’s supply of new computing power is imperiled. In the age of AI, it’s often said that data is the new oil. Yet the real limitation we face isn’t the availability of data but of processing power. There’s a finite number of semiconductors that can store and process data. Producing them is mind-bogglingly complex and horrendously expensive. Unlike oil, which can be bought from many countries, our production of computing power depends fundamentally on a series of choke points: tools, chemicals, and software that often are produced by a handful of companies—and sometimes only by one. No other facet of the economy is so dependent on so few firms. Chips from Taiwan provide 37 percent of the world’s new computing power each year. Two Korean companies produce 44 percent of the world’s memory chips. The Dutch company ASML builds 100 percent of the world’s extreme ultraviolet lithography machines, without which cutting-edge chips are simply impossible to make. OPEC’s 40 percent share of world oil production looks unimpressive by comparison.”
— Chip War: The Fight for the World's Most Critical Technology by Chris Miller
https://a.co/88qp807
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https://www.defenseone.com/ideas/2022/11/ban-these-chinese-chipmakers-pentagon-purchases/379823/
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Chips. Taiwanese chipmaker TSMC began mass production of its advanced 3-nanometer chips. TSMC’s chairman said the chips, which consume 30-35 percent less power compared to 5nm ones, can be used in data centers, high-speed internet, mobile devices, and augmented reality and virtual reality devices. He added that the company is working on 2nm technology. The announcement sought to allay concerns that TSMC’s substantial investment in chip production in the U.S. could weaken Taiwan’s own strategically important semiconductor industry amid tensions with China.
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second
https://www.theepochtimes.com/mkt_app/us-chip-ban-on-china-requires-strict-enforcement-to-thwart-circumvention-by-beijing-experts_4915905.html?utm_source=China&src_src=China&utm_campaign=uschina-2022-12-30&src_cmp=uschina-2022-12-30&utm_medium=email&est=rZXauNXhtFvuTxyxwNxKlmDUBo%2FqjsmN5Pu08ijNQH22EExGauLrVazLet4j%2Ff8zilR3
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https://www.msn.com/en-us/money/news/us-hit-turning-point-with-china-intel-ceo/ar-AA16rouH?ocid=msedgntp&cvid=35cb1dc0d83b4d019e12617315589b9e
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https://www.youtube.com/watch?v=fFCJoq9iaik
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February 8, 2023
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Mexico Will Benefit From Washington’s Chip Focus
The U.S. wants to build a North American semiconductor supply chain.
By: Allison Fedirka
The United States is prioritizing the creation of a regional semiconductor production chain to give itself alternatives to Asian firms, especially those with ties to China. Even for the country that invented the semiconductor, this is a massive task. The manufacture of cutting-edge chips is incredibly expensive and complicated, and just a few companies around the world are dominant. If the U.S. is going to succeed in its chips drive, it will need to involve Mexico.
Chip Race
Today, semiconductors are used in everything from consumer goods (computers, cellphones, automobiles, etc.) to military equipment and communication satellites. But despite the ubiquity of chips in modern technology, the manufacturing equipment for more than three-quarters of the global chip supply comes from just five companies. Three of these firms (Applied Materials, Lam Research Corp. and KLA Corp.) are in the United States, and the other two are in U.S. allies: the Netherlands’ ASML and Japan’s Tokyo Electron. ASML holds a monopoly on the machinery needed to make the most advanced semiconductors.
The U.S. is determined to defend and extend this advantage over China. In 2022, Washington passed the CHIPS and Science Act, which allotted $52.7 billion for the research, development and manufacturing of microchips. It also passed the Inflation Reduction Act, which supports the manufacture of electric vehicles and relevant chips in North America. Internationally, the U.S. in late January convinced Japan and the Netherlands to work with it on restricting semiconductor technology sales to China. This builds on a 2019 agreement that banned ASML from exporting its most advanced machinery to China. The latest agreement expands these restrictions, although details have not been released. The U.S. is likely trying to strike a balance between pressuring China and not spurring Beijing to accelerate development of domestic capabilities.
Over time, Washington wants to reduce its own reliance on foreign firms, particularly those tied to China as well as companies like ASML. According to the Semiconductor Industry Association, from 1990 to 2021, the U.S. share of global semiconductor manufacturing capacity fell to 12 percent from 37 percent. Most of it is now in Asia. The U.S. is now trying to coax chipmakers into moving to North America. Major players like GlobalFoundries, Intel, Samsung Foundry, TSMC and Texas Instruments are building new semiconductor production facilities in the United States, especially New York, Texas, Arizona and New Mexico. Washington is mainly focused on the automotive sector, where the U.S. is highly integrated with Canada and Mexico. This sector plays a major role in driving the U.S. and Mexican economies. The three countries agreed to develop a joint chipmaking initiative, including coordinating supply chains and investments. They also want to work together to map critical minerals.
Typical Global Semiconductor Production Pattern
(click to enlarge)
Mexico’s Advantages
About 40 percent of U.S. semiconductor plants are in states along its southern border, a significant opportunity for Mexico. Likewise, many of Mexico’s manufacturing hubs, especially for high-end manufacturing and automobiles, are in northern border states. Mexico’s foreign minister estimates that a quarter or more of imports from Asia could be replaced by North American production, boosted by the U.S.-Mexico-Canada free trade agreement.
Nearshoring Opportunities in Latin America
(click to enlarge)
The Mexican government has already begun laying the diplomatic groundwork to support its chip ambitions. At the beginning of the year – prior to the U.S.-Japan-Netherlands agreement – Japan’s foreign minister was in Mexico discussing trade and semiconductors. Later in January, a Dutch delegation along with U.S. officials visited the northwestern Mexican state of Baja California for talks on investment opportunities, with a focus on agro-industry, electric vehicles, semiconductors, supply chains and energy.
Talks are also underway between the Mexican government and the business community. Firms like Intel, Skyworks Solutions, Texas Instruments and Infineon Technologies are already operating in Mexico and working on chip R&D and test manufacturing. Conversations with Taiwanese chipmakers like TSMC are ongoing. Foxconn, the world’s biggest contract electronics manufacturer, already established a headquarters in Mexico in order to be closer to clients (mostly in the electronic vehicles sector) in North America. Mexico is also working with the Inter-American Development Bank to identify semiconductor opportunities, and with the National College of Professional Technical Education to produce more skilled workers to serve in chip manufacturing. Finally, Mexican industry and higher education institutions have partnered with Arizona State University to boost the production of semiconductors in North America through training and increased production capacity in northwest border states.
FDI Inflows to Mexico
(click to enlarge)
Some in Mexico hope that Washington’s semiconductor drive will help develop the country's southern region. This would help the government solve one of its biggest challenges, but the initiative is no quick fix. Currently, Mexico’s chip industry is limited to lower-skill roles like assembly, testing and packaging – ideal starting points for the development of more skilled, formal work in Mexico’s underdeveloped south. Moreover, chipmaking uses large amounts of water, which is more plentiful in southern Mexico. But although the south is close to the narrow Isthmus of Tehuantepec, giving exporters quick access to the Atlantic and Pacific, its transportation (and energy) infrastructure is poor. Existing Mexican industrial complexes, particularly for automobiles, are farther north, in Guadalajara, Nuevo Leon, Baja California, Aguascalientes and Chihuahua. Semiconductor manufacturing will probably stay close to these clusters to leverage existing infrastructure and shorter distances to the United States.
Rules and Rivals
While Mexico is on paper a promising location for chipmakers, there are several challenges it must address to play a major role in the U.S. semiconductor manufacturing chain. First, the U.S. and Mexico are at odds over the government’s management of the electricity sector. A stable and secure electricity supply is critical for chipmaking, but future investments in the Mexican electricity network are in jeopardy because of these disputes, which adds risk for manufacturers. Similarly, U.S. companies have taken issue with Mexico’s labor laws. This recurring point of contention generally occurs at the company or plant level and cannot be ruled out. Foreign firms also want Mexico to alter its regulations and incentives to make itself a better business environment for semiconductor manufacturing.
However, the main threat to U.S.-Mexican cooperation is increasing Chinese investment in Mexico. The U.S. will expect Mexico to restrict Chinese firms from entering the Mexican segments of the North American chip supply chain. This is a major reason Washington wants much closer coordination with Mexico City on strategic goods. It is also why the U.S. is starting with less sophisticated chips used in things like cars rather than high-end products related to defense. The U.S. can leverage its relationships with Japan and South Korea – which already relocated some manufacturing to Mexico – to encourage non-Chinese investment in the country. And of course, the U.S. can threaten to restrict investment, trade, remittances, etc. to its southern neighbor to drive its point home.
None of Mexico’s challenges are insurmountable. And the U.S. interest in becoming self-sufficient in semiconductor production, as well as the importance of the auto industry to the U.S. economy, means the U.S. will be very willing to work with Mexico to find solutions.
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Have not had a chance to read this closely yet:
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February 23, 2023
HEATHER COX RICHARDSON
FEB 24
At Georgetown University’s School of Foreign Service today, Commerce Secretary Gina Raimondo spoke on “The CHIPS Act and a Long-term Vision for America’s Technological Leadership.” She outlined what she sees as a historic opportunity to solidify the nation’s global leadership in technology and innovation and at the same time rebuild the country’s manufacturing sector and protect national security.
Congress passed the CHIPS and Science Act in August 2022 by a bipartisan vote, directing more than $52 billion into research and manufacturing of semiconductor chips as well as additional scientific research. Scientists in the U.S. developed chips, and they are now in cars, appliances, and so on. But they are now manufactured primarily in East Asia. The U.S. produces only about 10% of the world’s supply and makes none of the most advanced chips.
That dependence on overseas production hit supply chains hard during the pandemic while also weakening our national security. The hope behind the CHIPS and Science Act was that a significant government investment in the industry would jump-start private investment in bringing chip manufacturing back to the U.S., enabling the U.S. to compete more effectively with China. In the short term, at least, the plan has worked: by the end of 2022, private investors had pledged at least $200 billion to build U.S. chip manufacturing facilities.
Today, Raimondo framed the CHIPS and Science Act as an “incredible opportunity” to enable the U.S. to lead the world in technology, “securing our economic and national security future for the coming decades.” In the modern technological world, “it’s the countries who invest in research, innovation, and their workforces that will lead in the 21st century,” she said.
Raimondo described the major investment in semiconductor technology and its manufacture as a public investment in the economy that rivals some of the great investments in our history. She talked of Abraham Lincoln’s investment in agriculture in the 1860s to cement the position of the U.S. as a leader in world grain production, Franklin Delano Roosevelt and Harry S. Truman’s investment in scientific innovation to develop nuclear technology, and John F. Kennedy’s investment in putting a man on the moon.
Each of those massive investments sparked scientific innovation and economic growth. Raimondo suggested that “the CHIPS and Science Act presents us with an opportunity to make investments that are similarly consequential for our nation’s future.”
The vision Raimondo advanced was not one of top-down creativity. Instead, she described the extraordinary innovation of the silicon industry in the 1960s as a product of collaboration between university scientists, government purchasing power, and manufacturing. Rather than dismissing manufacturing as a repetitive mechanical task, she put it at the heart of innovation as the rapid production of millions and millions of chips prompted engineers to tweak manufacturing processes a little at a time, constantly making improvements.
“This relentless pace of lab-to-fab[rication] and fab-to-lab innovation became synonymous with America’s tech leadership,” she said, “doubling our computing capacity every two years.” As the U.S. shipped manufacturing jobs overseas, it lost this creative system. At the same time, inability to get chips during the pandemic hamstrung the U.S. economy and left our national security dependent for chips on other countries, especially China.
Reestablishing manufacturing in the U.S. will spark innovation and protect national security. It will also create new well-paying jobs for people without a college degree both in construction and in the operations of the new factories. With labor scarce, Raimondo called for hiring and training a million women in construction over the next decade, as well as bringing people from underserved communities into the skilled workforce to create “the most diverse, productive, and talented workers in the world.”
Raimondo warned that the vision she laid out would be hard to accomplish, but “if we—as a nation—unite behind a shared objective…and think boldly,” we can create a new generation of innovators and engineers, develop the manufacturing sector and the jobs that go with it, rebuild our economy, and protect our national security.
Just “think about what's possible 10 years from now if we are bold,” she said.
Later, Raimondo told David Ignatius of the Washington Post: “This is more than just an investment to subsidize a few new chip factories…. We need to unite America around a common goal of enhancing America’s global competitiveness and leading in this incredibly crucial technology.… Money isn’t enough. We all need to get in the same boat as a nation.”
Part of the impetus for the bipartisan drive to jump-start the semiconductor industry is lawmakers’ determination to counter the rise of China, which has invested heavily in its own economy. As the U.S. seeks to swing the Indo-Pacific away from its orientation toward China, Raimondo will travel to India next month to talk about closer economic ties between the U.S. and India, including collaboration in chip manufacturing as India, Japan, and Australia are launching their own joint semiconductor initiative.
For the Biden administration, the investment in chips and all the growth and innovation it promises to spark, especially among those without college degrees, is also an attempt to unite the nation to move forward. Theirs is a heady vision of a nation that works together in a shared task, as Lincoln’s United States did, or FDR’s, or JFK’s.
Their orientation toward the future, growth, and prosperity is a striking contrast to the vision of today’s Republicans, who look backward resolutely and angrily to an imagined past. In the short term, many of them continue to relitigate the 2020 presidential election, long after the Big Lie that Trump won has been debunked and the rest of the country has moved on.
In the New York Times yesterday, Luke Broadwater and Jonathan Swan reported that one of the reasons House speaker Kevin McCarthy handed access to more than 40,000 hours of video from the U.S. Capitol from January 6, 2021, to Fox News Channel personality Tucker Carlson was that McCarthy had promised the far right that he would revisit that event but did not want to have the Republican Congress tied to the effort. His political advisors say swing voters want to move forward.
In the longer term, today’s Republicans are out of step with the majority of Americans on issues like LGBTQ rights, climate change, gun safety, and abortion. Although Republicans are pushing draconian laws to end all abortion access, today Public Religion Research Institute (PPRI), a nonprofit, nonpartisan organization, released a report showing that 64% of Americans say that abortion should be legal in most or all cases, while only 25% say it should be illegal in most cases and only 9% say it should be illegal in all cases. Less than half the residents in every state and in Washington, D.C., supported overturning the 1973 Roe v. Wade decision legalizing abortion, as the Supreme Court did with the Dobbs v. Jackson Women’s Healthdecision of last June.
In a speech in Des Moines, Iowa, yesterday, Senator Tim Scott (R-SC) echoed Trump’s “American Carnage” inaugural address with his description of today’s America as one full of misery and hopelessness. Florida governor Ron DeSantis traveled this week to New York City, Philadelphia, and Chicago to insist those Democratic-led cities were crime-ridden, although as human rights lawyer Qasim Rashid pointed out, Florida has a 19% higher rape rate, 66% higher murder rate, and 280% higher burglary rate than New York.
Another study released yesterday by the Anti-Defamation League, which specializes in civil rights law, noted that domestic extremist mass killings have increased “greatly” in the past 12 years. But while murders by Islamic extremists, for example, have been falling, all the extremist killings in 2022 were committed by right-wing adherents, with 21 of 25 murders linked to white supremacists.
President Biden’s poll numbers are up to 46% in general and 49% with registered voters. Perhaps more to the point is that in Tuesday’s four special elections, Democrats outperformed expectations by significant margins.
There are many reasons for these Democratic gains—abortion rights key among them—but it is possible that voters like the Democrats’ vision of a hopeful future and a realistic means to get there rather than Republicans’ condemnation of the present and vow to claw back a mythological past.
—
Notes:
https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/
https://www.nytimes.com/2023/01/01/technology/us-chip-making-china-invest.html
https://www.commerce.gov/news/speeches/2023/02/remarks-us-secretary-commerce-gina-raimondo-chips-act-and-long-term-vision
https://www.washingtonpost.com/opinions/2023/02/23/gina-raimondo-industrial-policy-support/
https://www.cnbc.com/2023/02/08/us-explores-working-with-india-to-increase-economic-competition-against-china.html
https://www.reuters.com/world/blinken-says-india-south-africa-are-slow-trajectory-away-alignment-with-russia-2023-02-23/
https://www.nytimes.com/2023/02/22/us/politics/tucker-carlson-jan-6-mccarthy.html
https://www.ndtv.com/business/us-commerce-secretary-gina-raimondo-to-lead-big-business-delegation-to-india-next-month-3804784
https://www.prri.org/research/abortion-attitudes-in-a-post-roe-world-findings-from-the-50-state-2022-american-values-atlas/
https://www.adl.org/resources/report/murder-and-extremism-united-states-2022
https://thehill.com/blogs/blog-briefing-room/3871053-extremism-related-mass-killings-spiked-in-past-decade-adl/
https://www.npr.org/2023/02/22/1158538798/poll-bidens-standing-improves-while-trump-slumps-with-republican-voters
https://www.washingtonpost.com/politics/2023/02/22/democrats-2023-primaries-special-elections/
https://www.nytimes.com/2023/02/20/nyregion/desantis-visit-nyc-philadelphia-chicago.html
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"At Georgetown University’s School of Foreign Service today, Commerce Secretary Gina Raimondo spoke on “The CHIPS Act and a Long-term Vision for America’s Technological Leadership.” She outlined what she sees as a historic opportunity to solidify the nation’s global leadership in technology and innovation and at the same time rebuild the country’s manufacturing sector and protect national security."
historic opportunity caused by total and historic American leadership BLUNDERS made by and including but not limited to her two pals Obama and Biden!!
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WSJ
he Chips Act Becomes Industrial Social Policy
Gina Raimondo uses semiconductor subsidies to impose progressive priorities via corporations.
By The Editorial Board
Updated Feb. 28, 2023 7:30 pm ET
Government subsidies are never free, and now we are learning the price U.S. semiconductor firms and others will pay for signing on to President Biden’s industrial policy. They will become the indentured servants of progressive social policy.
Democrats last year snookered Republicans into passing their $280 billion Chips Act, which includes $39 billion in direct financial aid for chip makers and a 25% investment tax credit. Republicans hoped this would satisfy West Virginia Sen. Joe Manchin, but after Chips passed he quickly flipped and endorsed the Inflation Reduction Act.
Now the Administration is using the semiconductor subsidies to impose much of the social policy that was in the failed Build Back Better bill. On Tuesday Commerce Secretary Gina Raimondo rolled out the new rules for chip makers and summed up the politics to the New York Times: “If Congress wasn’t going to do what they should have done, we’re going to do it in implementation” of the subsidies.
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Start with child care, which chip makers applying for more than $150 million in federal aid will be required to provide to their employees and construction workers. Finding workers to run child-care facilities, especially in rural areas, may prove even more challenging than finding workers to build and operate the plants. The U.S. child-care workforce is still 58,000 smaller than before the pandemic. By boosting demand for child care, Commerce’s mandate will increase costs for all parents living near a chip plant.
But not any child care will do. Chip makers will have to craft their “child care plans in tandem with community stakeholders, including state and local governments and local groups with expertise administering child care”—i.e., labor unions and progressive outfits. Start the woke indoctrination early.
Chip makers will also have to pay construction workers prevailing wages set by unions and will be “strongly encouraged”—i.e., required—to use project labor agreements (PLAs), which let unions dictate pay, benefits and work rules for all workers. States restricting PLAs may have to change their laws if they want to benefit from the federal largesse.
Companies will have to comply with the Administration’s “Good Jobs Principles” that guarantee “full-time and part-time workers are provided family-sustaining benefits that promote economic security and mobility,” including “paid leave and caregiving supports.”
In their applications, chip makers will have to describe their “wraparound services to support individuals from underserved and economically disadvantaged communities,” such “as adult care, transportation assistance, or housing assistance.” The Administration is imposing a cradle-to-grave welfare system via corporate subsidies.
Ms. Raimondo is no socialist, but here she is doing the bidding of the Democratic left. Does she have a promotion in mind? She justifies this gigantic intervention in the private economy by claiming that chip makers won’t be successful unless they “find a way to attract, train, put to work and retain women.” But companies don’t need the government to tell them how to attract and retain workers. Ms. Raimondo’s mandates will merely raise business costs.
The irony is rich because chip makers have shifted manufacturing to Asia to reduce costs. Producing chips in the U.S. is 40% more expensive than overseas. One reason is the U.S. permitting thicket. But chip makers that receive federal largesse will still have to comply with more regulation under the National Environmental Policy Act.
Oh, and Commerce is also demanding that companies receiving more than $150 million share “with the U.S. government a portion of any cash flows or returns that exceed the applicant’s projections above an established threshold.” No buying back stock for five years either. What a wonderful life if you’re a politician. First, pile on regulation that increase business costs. Then dangle subsidies to drive your social policy and demand a cut of business profits in the bargain.
Ms. Raimondo’s demands weren’t specified in the Chips Act, and they will do nothing to bolster national security, the ostensible purpose of the subsidies. The money may not even boost U.S. chip manufacturing by much. Goldman Sachs last autumn estimated the subsidies might increase the U.S. market share of global chip capacity by less than 1%.
***
We took a lot of grief from the big-government right for opposing the Chips Act, but these conservatives look like chumps for voting for an industrial policy that is now an engine for progressive policy. And one subsidy is never enough. The chip subsidies are “a good first step,” Semiconductor Industry Association president John Neuffer recently said.
Welcome to French industrial policy, where the government pays business to invest in what, where and how government wants. Let’s hope it turns out better here.
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https://www.foreignaffairs.com/united-states/how-silicon-valley-lost-chips-race
Foreign Affairs Magazine Homepage
How Silicon Valley Lost the Chips Race
Money Alone Won’t Revive the U.S. Semiconductor Industry
By Chris Miller
October 19, 2022
Thanks to the CHIPS and Science Act, signed into law in August 2022, the U.S. government has $52 billion in new funding to try to reinvigorate the country’s semiconductor industry. Although semiconductors were invented in the United States and their design and manufacture still generally require U.S. software and tools, most chips are now manufactured elsewhere, largely in East Asia. But in the face of escalating U.S.-China competition—and with Washington rolling out sweeping new restrictions on China’s access to advanced computing technologies—improving the U.S. position in chip-making has become a national security priority. That the most advanced processors can be fabricated only outside the United States, mainly in Taiwan, adds to the sense of risk.
Rebuilding the U.S. role in manufacturing will be expensive, as the CHIPS and Science Act recognizes. TSMC, Samsung, and Intel—the three biggest companies producing processor chips—are all likely to receive funds for new semiconductor manufacturing facilities in the United States. But an influx of new money alone can’t solve the problem at the core. A cultural change is needed, too, in Silicon Valley and in Washington, to prioritize the challenges faced by firms in advanced manufacturing, including chip makers and their key suppliers.
Silicon Valley has strayed too far from its manufacturing roots, focusing on apps and the Internet, while policymakers in Washington are fixated on consumer-focused Big Tech firms rather than on the hardware on which all computing depends. As the U.S. government tries to revitalize the semiconductor industry, it will succeed only if it learns lessons from Silicon Valley’s early days. This isn’t the first time U.S. chip firms have faced intense foreign competition amid fears that they were falling behind. In the 1980s, leading U.S. semiconductor manufacturers such as Intel stood on the brink of bankruptcy. Intel was rescued by CEO Andrew Grove, who was driven by the realization that advanced technology depends not only on creativity and innovation but also on ultra-efficient precision manufacturing. To help the U.S. chip industry, policymakers in Washington need to start by adjusting their definition of “tech” to encompass advanced manufacturing, too.
HOW DID WE GET HERE?
The United States’ long decline in the production of processor chips has a complex set of causes. Multiple factors have driven up the cost of chip-making in the United States relative to other countries. Environmental regulations governing the toxic chemicals involved in chip-making have grown stricter in the United States. U.S. labor costs are higher than those in parts of East Asia, although labor represents a smaller share of the cost of fabricating semiconductors than it does of many other types of manufacturing.
Most important, however, is that other governments have offered substantial tax incentives for chip-making that the United States, until recently, has failed to match. China’s surge of subsidies available through its Made in China 2025 program and other government initiatives represents the latest step in a semiconductor subsidy arms race that has nothing to do with market competition.
Meanwhile, the chip industry has undergone relentless consolidation. Several decades ago, two dozen companies could fabricate advanced processor chips, but today only three firms produce the most advanced processors: Taiwan’s TSMC, South Korea’s Samsung, and the United States’ Intel. Each company keeps most of its production in its home country. For that reason, the fate of the United States’ domestic chip-making capabilities depends in no small part on the trajectory of a single company: Intel.
Grove, the Budapest-born refugee who led the company for several decades, saw manufacturing as the core of Intel’s identity. After becoming the firm’s president in 1979, he pulled it back from the brink of bankruptcy amid an onslaught of Japanese competition. Within a decade, Intel’s processor chips were inside more than half of all the computers that had ever been built. Since then, the company has earned over $250 billion in profit.
When Grove first became president of Intel, its primary business was selling memory chips used mostly in corporate mainframe computers. But Japanese firms had entered the sector in the mid-1970s, learning to fabricate chips that were less expensive to produce and had fewer defects than chips made by U.S. peers. Watching this, Grove knew the firm had to get out of commoditized memory chips and refocus on higher-value products such as the advanced microprocessors that IBM was putting in a new device it called “the personal computer.”
The United States has lost the ability to manufacture the most advanced processor chips.
Exiting the memory-chip market felt impossible to many at Intel, like Ford deciding to stop making cars. But Grove eventually mustered the courage to jettison the memory-chip business, laying off a quarter of Intel’s workforce and shuttering multiple facilities. Alongside this restructuring, Grove adopted a second strategy: ruthlessly improve manufacturing quality. Grove described his philosophy in a bestselling book, Only the Paranoid Survive: “Fear of competition, fear of bankruptcy, fear of being wrong and fear of losing can all be powerful motivators.” After a long day of work, it was fear that kept Grove flipping through his correspondence or on the phone with subordinates, worried he’d missed news of product delays or unhappy customers.
At Grove’s reinvigorated Intel in the late 1980s and 1990s, workdays started at 8 a.m. sharp. A freewheeling Silicon Valley culture was replaced by drill sergeant discipline. Grove launched a new policy called “copy exactly,” by which the company would determine the best manufacturing process and then teach its engineers to replicate it in all their facilities. Many chafed at being told to implement rather than to invent. Yet as each of the company’s plants began to function less like a research lab and more like a finely tuned machine, productivity rose and costs fell.
Grove’s hard-driving management, however, explains only part of Intel’s resurgence during the 1980s. Intel succeeded not only by optimizing manufacturing, although this was crucial, but also by intertwining leading-edge manufacturing with top-notch chip design. Intel called this the “tick-tock” method: each “tick”—a manufacturing process improvement—was coupled with a “tock,” a more efficient chip design. The close interaction between manufacturing, software, and system design kept Intel atop the PC processor business for three decades.
After Grove retired from Intel in 2005, the company began to drift. Because Intel’s core business of building chips for personal computers was so profitable for so long, the company’s culture of discipline began to slip, according to interviews I conducted with former employees. Years of profits dulled the sense of Groveian paranoia that had once permeated the company. Longtime employees noticed that, with each passing year, executives’ shirts got whiter as chemists and physicists lost influence to the finance department. A company that had been an icon of American technology slid into a decadelong decline. After Grove’s departure, the company failed to make big, bold, risky bets. Its chip-making capabilities, which had been the world’s most advanced, fell behind TSMC and South Korea’s Samsung, which are now able to produce chips with more precision than Intel can. The company missed key industry shifts, failing to foresee smartphones and the rise of artificial intelligence. “It had the technology, it had the people, it just didn’t want to take the margin hit,” one former finance executive at Intel told me.
LESS LIKING, MORE BUILDING
After he retired, Grove voiced concern that the United States’ advanced manufacturing capabilities were eroding. “Abandoning today’s ‘commodity’ manufacturing can lock you out of tomorrow’s emerging industry,” he noted in 2010, warning that Silicon Valley’s fixation on software at the expense of hardware was misguided.
Grove saw the electric battery industry as a case study in how losing manufacturing capability risked eroding innovative capacity. The United States “lost its lead in batteries 30 years ago when it stopped making consumer electronics devices,” Grove said in 2010. Back then, American companies had failed to innovate in manufacturing batteries for personal computers; now, they are far behind rivals, notably in South Korea and China, in producing batteries for electric vehicles. “I doubt they will ever catch up,” Grove predicted, with depressing accuracy.
But Grove’s warnings about the importance of advanced manufacturing in the broader “tech” ecosystem were ignored. Most of Silicon Valley wrote him off as representative of a bygone era. After all, he had built Intel before the Internet existed. Facebook, founded in 2006, soon became several times more valuable than Intel, despite manufacturing nothing and selling little besides advertisements. Intel could retort that the Internet’s data was processed on its chips. Yet producing chips was less profitable than selling ads on apps. Over time, however, the United States has lost the ability to manufacture the most advanced processor chips. Chips crucial to applications from smartphones to artificial intelligence in data centers can now only be made offshore.
After a supply chain shock and amid an intensifying rivalry with China, U.S. political and business leaders are beginning to grasp what is at stake. The passage of the CHIPS and Science Act shows that, for the first time in decades, Washington is willing to spend substantial sums of money to support chip makers. This is a crucial first step, but political leaders also need to improve the business environment for manufacturing. Construction permits, environmental rules, and tax policies are critical determinants of the viability of a manufacturing facility. Innovation alone isn’t enough to revitalize U.S. chip-making unless manufacturing chips is economically viable, too.
CHRIS MILLER is an Associate Professor in the Fletcher School at Tufts University and Jeane Kirkpatrick Visiting Fellow at the American Enterprise Institute. He is the author of Chip War: The Fight for the World’s Most Critical Technology.
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Thank you Doug.
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By: Geopolitical Futures
Microchip restrictions. The Netherlands confirmed plans to impose additional restrictions on the export of advanced microchip technology to China over national security concerns, reportedly by this summer. The move would follow a similar decision by the United States aimed at slowing China’s chip manufacturing capabilities. In response, a spokesperson for China’s Foreign Ministry said Beijing firmly opposes the move and any action taken by the Dutch government to interfere in normal economic exchanges. This could be a major blow to the Chinese chipmaking industry, as the Netherlands is home to a leading manufacturer of chipmaking equipment, ASML. Japan, another key country in the chip supply chain, is likely to follow suit.
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https://www.foreignaffairs.com/china/chinas-hidden-tech-revolution-how-beijing-threatens-us-dominance-dan-wang?utm_medium=newsletters&utm_source=twofa&utm_campaign=China%E2%80%99s%20Hidden%20Tech%20Revolution&utm_content=20230310&utm_term=FA%20This%20Week%20-%20112017
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https://www.theepochtimes.com/rubio-introduces-bill-to-block-ev-tax-credits-to-fords-plant-using-chinese-technology_5116683.html?utm_source=China&src_src=China&utm_campaign=uschina-2023-03-13&src_cmp=uschina-2023-03-13&utm_medium=email&est=MNyxAtmG9Na%2BeQ3P8%2BfUzguAAac2H3VEzbNEBw9nGasy62H4%2FNq%2B8V1MpzHGwuGgrsWW
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https://www.thehindu.com/news/national/india-us-sign-mou-on-establishing-semiconductor-sub-committee/article66604653.ece
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https://www.msn.com/en-us/news/world/us-would-destroy-taiwan-s-semiconductor-factories-rather-than-letting-them-fall-into-china-s-hands-a-former-national-security-adviser-says/ar-AA18zENC?ocid=msedgntp&cvid=cfff94d8fd874ef196e0820e9b38fc74&ei=24
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Update: American-made semiconductors are still finding their way to Russia via manufacturers like Intel, Advanced Micro Devices, Texas Instruments, and others, according to a new report from Nikkei Asia published Wednesday and based on customs data from the past calendar year. Sale of the high-tech items were banned immediately after Russia invaded Ukraine in February 2022. "But Russia has continued to acquire chips through circuitous routes, with a large portion flowing through small traders in Hong Kong and mainland China," Nikkei reports.
One big problem: "Small trading companies in Hong Kong and elsewhere can continue to operate under new names even if subject to sanctions," one trade lawyer told Nikkei. And that's indeed what appears to be happening with several entities.
======================
Details"
https://asia.nikkei.com/Business/Tech/Semiconductors/Special-report-How-U.S.-made-chips-are-flowing-into-Russia
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https://www.theepochtimes.com/beijings-shift-to-military-for-chip-development-reason-for-oppos-chip-closure-analysts_5277564.html?utm_source=China&src_src=China&utm_campaign=uschina-2023-05-29&src_cmp=uschina-2023-05-29&utm_medium=email&est=xfLFcvfjnW%2BuARTP316rcn3X6oEjWiLIV2EPEolvycuXXP013%2FtM%2Bux8tHndbFmXz0Cp
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This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Jessica Mendoza: In recent years, the chip industry has exploded. You know, chips? The little pieces of tech that power all your electronic devices. Our colleague Asa Fitch says that by 2030, sales of chips are expected to hit more than a trillion dollars.
Asa Fitch: And that's roughly doubling within a decade. So there's just an enormous market for chips going forward. Just everybody's living more digital lives. Everybody's living in the digital sphere more, whether that's using VR headsets.
Speaker 3: Introducing Apple Vision Pro.
Asa Fitch: There's artificial intelligence.
Speaker 4: I am AI, brought to life by Nvidia.
Asa Fitch: Or whether it's just being on the internet more, we're interacting with smartphones and things like that.
Speaker 5: Meet the Google Pixel 7 and Pixel 7 Pro, smartphones built by Google and designed around you.
Asa Fitch: People predict that that sort of thing is only going to continue. People will demand more performance out of their devices and that is going to be driven by chips. So the demand for chips is just insatiable.
Jessica Mendoza: Right now the US relies mostly on foreign companies for these chips, but it wants to build up domestic chip manufacturing in case international conflicts choke off supply. And one of the companies the US hopes will step up is Intel.
Asa Fitch: Intel is sort of indispensable to the US. Policymakers in the US want a thriving domestic chip industry and the only really viable domestic supplier of the most advanced chips is Intel. So the US government and the US military sort of needs Intel to succeed at this point.
Jessica Mendoza: For decades, Intel was considered a titan in the tech industry. It was one of the big companies that helped drive the wide use of personal computers. But in recent years it's been struggling. Its CEO has even said that the company is in a, "mud hole."
Asa Fitch: It's behind a lot of its competition and it's trying to catch up. It's pulling out all the stops.
Jessica Mendoza: Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Thursday, June 8th. Coming up on the show, the US needs American chips. Can Intel deliver? When you think of Intel, what comes to mind?
Asa Fitch: You think of CPUs, central processing units, in your computer. Many people think of Intel Inside still, this marketing campaign they had years ago where a lot of the world's PCs were badged with Intel Inside.
Speaker 6: The upgraded Intel 486 processor, power for today's hottest software.
Jessica Mendoza: Yeah, I think of that little blue logo that they've had forever.
Asa Fitch: Exactly. I would say in the popular imagination that's where they come up, pretty much. And that's accurate. I mean, that's sort of an accurate reflection of what their bread and butter is. It's these chips that are at the heart of perhaps the computer that you're working on now.
Jessica Mendoza: Intel's chips were in almost every computer, and the company was helping push the modern tech revolution.
Asa Fitch: They were at the heart of the PC revolution. In the '80s and 90's PCs became essentially ubiquitous in many countries, and Intel's chips were at the heart of that. I mean, they were in the original IBM PC that essentially created the PC revolution. So that was just huge for the company. It became a tech titan. They were well in the lead on making the best chips in the world.
Jessica Mendoza: But then, in the 2010s, things started to take a turn.
Asa Fitch: They weren't able to advance in chip making as quickly as they thought they could. And that set them back a lot. There were a lot of delays in chip manufacturing advancements, especially in the latter half of the 2010s. And during that period, a couple of their rivals in Taiwan and South Korea caught up with them and surpassed them.
Jessica Mendoza: One of those rivals is the Taiwanese Semiconductor Manufacturing Company, also known as TSMC. The other is Samsung.
Asa Fitch: One way some people look at it is it's sort of a tortoise and the hare story. Intel tried to jump out ahead and was unsuccessful while its rivals were a bit slower and more methodical in the way they advanced in chip making, and they ultimately caught up and surpassed Intel.
Jessica Mendoza: Historically, Intel is a company that designs and makes its own chips, but Samsung and TSMC manufacture chips for other companies like Apple or Nvidia. This is called a foundry business.
Asa Fitch: Samsung and TSMC embraced a model where others could design the chips and they would manufacture them. So if you think about it, that opens you up to potentially a much larger market because if you're only making the chips that you design, the people who are designing chips to be made by others aren't coming to you. So it kind of limited Intel's ability to grow in this new world where people were focusing more on contract chip manufacturing, in other words, manufacturing chips for others in their factories.
Jessica Mendoza: So now Intel is trying to play catch up and make chips on contract for other companies, but it's having trouble making that transition. Intel's such a household name and they've produced chips before so why would that be a difficult thing for them?
Asa Fitch: They have produced chips before, but they haven't really done it for outsiders. And for them, that's like a big cultural problem. They haven't been a service business in the past and being a contract chip maker is a service business. So they're putting all their chips on the table, if you will. They're going all in trying to get back into the lead, which they hope to do by the end of next year
Jessica Mendoza: To get back ahead intel plans to overhaul its business model and it'll potentially spend hundreds of billions of dollars to do that.
Asa Fitch: They're trying to catch up in the race to make the best chips. And that's a big effort. They are planning to vastly expand their manufacturing footprint. It's extraordinarily ambitious.
Jessica Mendoza: But some of its biggest potential clients aren't sure if Intel is up to the task. That's coming up. Intel wants to better compete with its rivals to make chips for companies like Apple, Microsoft, and Nvidia.
Asa Fitch: They have a goal of becoming the world's second-largest contract chip maker by 2030. And in order to do that, Intel really needs to attract the biggest customers of those contract chip manufacturers.
Jessica Mendoza: The architect of the plan to get there is Intel's CEO Pat Gelsinger. Here he is on Bloomberg.
Pat Gelsinger: Every aspect of your lives is becoming more digital. Everything digital runs on semiconductors. We need this for our economy, we need it for our supply chains, we need it for our national security. And Intel is really the company that can step into this. We've said decisively-
Asa Fitch: So Pat Gelsinger at the age of 18 got a job at Intel. And he moved over to California to work there and he became a leading chip designer there, leading chip engineer, at Intel.
Jessica Mendoza: Gelsinger worked at Intel for 30 years and became its first Chief Technology Officer. He also designed a processor that became one of the company's most successful products. Gelsinger left Intel for about a decade and then in 2021 he returned to run the company.
Asa Fitch: He's kind of a link to Intel's successful past. He was there at a time when Intel was just such a roaring success and couldn't seem to miss a beat and he's kind of a representative of an earlier era when Intel was always on top. And so people kind of see him, I think, as the return of the old guard at Intel, the return of a successful era for the company.
Jessica Mendoza: Gelsinger's reputation is crucial to getting Intel back on top. His goals include making the most advanced processors in the world within the next couple of years, and doing that means spending a lot of money.
Asa Fitch: We're talking about hundreds of billions of dollars if all of these things that he wants to do are fully built out. I mean that's a big if, right? Because they're tailoring the build outs of some of these factories to demand for chips.
Jessica Mendoza: Right now, Intel has plans to build a facility in Ohio that could cost as much as $100 billion, another of a similar scale in Arizona, and potentially a factory in Europe. But its ambitions are sometimes running up against hard economic realities. Even though the long-term outlook for chips is strong, there's currently an oversupply in the market, and that's cutting into industry profits. In April intel posted the worst quarterly loss in its history.
Asa Fitch: The market for PCs has really fallen off a cliff in the past year or so, and that has really depressed their situation financially at a time when they're trying to grow in this dramatic way. I mean, the company has cut its dividend recently, it's tried to slash costs, and do other things to free up cash and spend money on this turnaround. I mean, Intel has been laying people off. They've promised investors that they're going to cut cost up to $10 billion by the end of 2025.
Jessica Mendoza: Wow.
Asa Fitch: Yeah. So this is a company that's trying to change itself around at a time when it doesn't have a lot of money to do it.
Jessica Mendoza: Intel has already had to slow down its plans. The company held off installing expensive chip making equipment in some of its factories. It also scrapped two big projects, a $200 million research center in Israel, and a $700 million lab planned in Oregon. And that's just part of the company's problem.
Asa Fitch: They've got to be able to find customers who are willing to manufacture chips in their factories. They've got to be able to book some of the biggest customers of contract chip makers in the world, the likes of Apple and Nvidia. They have a smattering of customers, but it's not like the biggest, most important customers in the foundry business or in the contract chip making business.
Jessica Mendoza: Yeah, it's not the companies that would change the game for them.
Asa Fitch: Right, exactly.
Jessica Mendoza: In the two years since Intel has tried to focus on making chips for other companies, it's only had two major customers. According to Asa's reporting, Intel has tried to land clients like Qualcomm, a big tech company, but those efforts haven't gone very well so far.
Asa Fitch: Qualcomm is perhaps a good example. They wanted to manufacture chips with Intel, and they engaged with Intel for a long time trying to do that, but toward the end of last year, they stepped away from that. They put that project on pause because Intel was not meeting their performance targets for these kinds of chips. So those are the kinds of struggles that they've been facing so far. The point is there are numerous customers who have engaged with Intel's foundry business, but then stepped away for various reasons.
Jessica Mendoza: According to Asa's reporting, Tesla also took a pass on Intel because it couldn't provide what the carmaker needed. Gelsinger declined to comment on Intel's relationship with either Qualcomm or Tesla. One bright spot for Intel? The US government is trying to grow the domestic chip industry, and it's opened up funding to make it happen, mainly through the so-called CHIPS Act.
Asa Fitch: The CHIPS Act was a piece of legislation that was passed last year and signed into law last summer by President Biden that allocates around $53 billion for the growth of the domestic chip industry. This program includes billions of dollars of grants for new chip projects in the US. So Intel is hoping to defray some of the costs of its big investments by getting these grants from the government essentially. It's applied for these grants, and they're not expected to be awarded until perhaps next year, but that's one way in which the company could try to expand when its core businesses is in some sort of trouble and it's trying to cut costs. The Department of Defense really wants a thriving US chip industry because they want to be able to source the most advanced chips in the world from a domestic supplier. A lot is riding on this plan working out.
Jessica Mendoza: So there are big plans and a lot of moving parts. Is Intel up to the task?
Asa Fitch: Well, that's sort of the big question that hangs over the company right now. The strategy that they've laid out is the type of corporate strategy where if it succeeds, it's probably going to succeed in spectacular fashion. If it fails, it's probably going to fail in spectacular fashion. It's one of these things where they've just pulled out all the stops and they're rushing forward to make it work. So they're doing absolutely everything they can to reinvigorate themselves.
Jessica Mendoza: That's all for today, Thursday, June 8th. The Journal is a co-production of Gimlet and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.
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Alan Estevez, the U.S. Commerce Department's undersecretary for industry and security, said the United States would renew export control exemptions for non-Chinese semiconductor fabrication plants in China for the foreseeable future, The Wall Street Journal reported on June 12....
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https://www.reuters.com/markets/commodities/china-restrict-exports-chipmaking-materials-us-mulls-new-curbs-2023-07-04/?utm_source=Sailthru&utm_medium=Newsletter&utm_campaign=Daily-Briefing&utm_term=070423
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Tech partnership. Japan’s economy minister met with India’s minister of electronics and information technology in New Delhi. They signed a memorandum of understanding on strengthening semiconductor supply chains. Japan is the second member of the Quad security alliance to officially work with India on semiconductors.
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What Stands in the Way of the EU's Chipmaking Dreams
13 MIN READAug 1, 2023 | 21:54 GMT
(L-R) Saxony Premier Michael Kretschmer, European Commission President Ursula von der Leyen and German Chancellor Olaf Scholz hold semiconductor wafers as Infineon CEO Jochen Hanebeck (second from right) looks on during a ground-breaking ceremony for a new semiconductor factory in Dresden, Germany, on May 2, 2023.
(L-R) Saxony Premier Michael Kretschmer, European Commission President Ursula von der Leyen and German Chancellor Olaf Scholz hold semiconductor wafers as Infineon CEO Jochen Hanebeck (second from right) looks on during a ground-breaking ceremony for a new semiconductor factory in Dresden, Germany, on May 2, 2023.
(Sean Gallup/Getty Images)
A multitude of financial and technical barriers will keep the European Union from building a self-reliant semiconductor industry, but the bloc's attempts to realize that vision will nonetheless help bolster Europe's resilience against supply shocks in case a crisis in Asia takes Taiwan's chips offline. On July 25, the European Council approved the European Chips Act, paving the way for 43 billion euros ($47.5 billion) in subsidies aimed at helping the European Union achieve its goal of producing 20% of the world's semiconductors by 2030 (up from 10% in 2020). As a part of these plans, Germany's economy ministry announced on July 25 that it would provide about 20 billion euros ($22 billion) in aid by 2027 in an effort to boost the country's semiconductor industry and the production of chips. The announcement comes after Berlin inked an agreement with U.S. chipmaking giant Intel in June that will see the company invest 30 billion euros ($33 billion) into leading node fabs in Magdeburg. As a part of the deal, Germany will provide more than 10 billion euros ($11 billion) in subsidies — nearly double what Berlin had originally offered Intel.
The European Chips Act aims to boost Europe's resilience and strategic autonomy in the semiconductor industry as global competition over the sector intensifies and European leaders try to find ways to insulate the Continent from another potential chip shortage. Without an increase in public support, the European Union's already small share of semiconductor manufacturing was poised to continue shrinking due to China's efforts to expand its own share of the market, along with U.S. efforts to court companies to build new fabrication plants in the United States. In recent years, European countries' reliance on U.S. technology has also left the Continent's limited semiconductor industry highly exposed to U.S. sanctions and export controls aimed at curbing China's technological rise, creating a strategic liability as the U.S.-China rivalry heats up. In October, for example, Washington imposed restrictions that effectively forced the Netherlands' ASML to stop exporting some of its most advanced chipmaking machines to China due to the amount of U.S. technology used in those machines. Additionally, the pandemic-induced global semiconductor shortage in 2020-22 hit the European Union particularly hard, as the chips used in cars and industrial applications were among the most affected. The chip shortages quickly reverberated through the bloc's manufacturing and automotive industries, forcing a number of European carmakers to reduce production levels as they struggled to find enough chips to power the various computers in their vehicles. Finally, the energy transition and the growth of AI will only make semiconductors more important in the future, exposing the European Union's limited domestic industry even further. The automotive industry itself will become increasingly computerized thanks to higher levels of AI driver assistance and the expanded production of electric vehicles, which typically have 2-3 times the number of semiconductors chips compared with fossil fuel vehicles.
The new plan comes as Europe's chip industry is seeing a surge in investor interest. Intel has said that its investment over the lifetime of the new fabrication plants it's building in Germany could top $100 billion. In June, Intel also announced plans to invest 4.6 billion euros ($5 billion) to build a semiconductor assembly and testing plant in western Poland, which would presumably handle many of the semiconductors produced at its fabs in Germany (along with Intel's plant in Ireland). Other chipmakers have recently announced plans to boost production in Europe as well. In February, Wolfspeed announced it would build a new facility in Saarland, Germany, focused on manufacturing silicon carbide semiconductors, which are often used in power management chips. In May, German chipmaker Infineon — which primarily manufactures industrial- and automotive-focused semiconductors — broke ground on a new 5 billion euro ($5.5 billion) fab in Dresden. In June, GlobalFoundries and STMicroelectronics finalized an agreement to build a new manufacturing facility in France that will see 7.5 billion euros ($8.3 billion) worth of investment. Together, this wave of new semiconductor projects fits perfectly into the EU Chips Act target of boosting investment into first-of-its-kind chipmaking capacity.
Intel is planning to equip its new fabrication plants in Magdeburg with its cutting-edge "Angstrom-era" technology — a term Intel uses to describe advanced chip manufacturing processes as the node size continues to decline and chip measurements are described in angstroms rather than nanometers (nm).
Chipmaking giant Taiwan Semiconductor Manufacturing Co. (TSMC) has also been negotiating with NXP Semiconductors Infineon and Robert Bosch GmbH on a potential $7 to $10 billion facility in Germany. Thus far, TSMC has said that no decision will be made until a board of directors meeting in August, but if it moves forward with building a project in Germany, the Taiwanese chipmaker is expected to receive some of the support that Germany announced on July 25.
But in attracting these semiconductor projects, Europe is also competing with many other territories, which could impede the Continent's ability to secure the massive amount of investments needed to achieve its goals. According to forecasts published by McKinsey & Company and other consultancies, the global semiconductor industry is expected to reach $1 trillion by 2030, with an annual growth rate of around 7%. In order for the European Union to hit its goal of doubling its share of global semiconductor production capacity by 2030, this means the bloc has less than seven years to roughly triple its global semiconductor production capacity in absolute terms. While the new Intel, Infineon, GlobalFoundries, Wolfspeed and STMicroelectronics plants are all multi-billion investments, this is just a drop in the bucket in the amount of capital spending seen in the industry. Last year, the Dutch chip design company NXP Semiconductors warned that reaching the European Union's target of producing 20% of the world's chips by 2030 would require 500 billion euros ($550 billion) worth of investments, which would likely require more state support than the 43 billion euros ($47.5 billion) in subsidies outlined in the European Chips Act. Further complicating matters is the fact that the European Union is far from the only player pouring billions of dollars into its chip industry. The United States, Japan, South Korea and Taiwan have all also announced their own mechanisms to boost their semiconductor sectors. The United States, in particular, enacted its own CHIPS and Science Act last year that includes $52 billion in subsidies for the chips industry, which Washington hopes will unlock $400 billion worth of investments overall by incentivizing more firms to manufacture semiconductors in the United States. But even before introducing these subsidies, the United States had been more successful than Europe in getting companies to invest in fabrication plants within its borders, with TMSC currently constructing two fabs in Arizona, Samsung building a new fab in Texas, and Intel announcing plans in 2022 to build a potential $100 billion mega-site in Ohio (on top of numerous similar announcements from companies like Wolfspeed, Micron, Texas Instruments and GlobalFoundries in recent years).
TSMC is already constructing one advanced fab in Japan and is considering building another in the country as well.
Europe also faces a number of constraints that may make it a less attractive destination for semiconductor investments. Critics of the European Chips Act question whether boosting investment into first-of-its-kind or leading node technologies is the best use of Europe's resources. For one, investments in high-end chips — which are often used in applications like AI and advanced computing devices (such as smartphones, PCs, GPUs and CPUs) — require significant capital expenditures, which has fueled questions about funding limitations in reaching Brussels' ambitious goals. The European Union's focus on boosting its production of advanced chips — for which there is relatively little demand by European chip design companies or device makers — has also cast doubt on the overall strategy behind Brussels' plan. Many of the world's leading chip design companies, particularly for leading node chips, are in the United States or Asia; Asia is also home to virtually all of the companies that put finished chips into electronic devices are in Asia. This means Europe does not have a large chip design industry where juggernauts are placing massive orders with contractors (like TSMC) to build high-end semiconductors, nor does it have a large base of consumers seeking to put those kinds of chips into devices. Given this reality, critics have argued that the European Union should focus more on securing more investment for power management, automotive chips and other chips that are more consistent with Europe's needs. European carmakers, for example, are increasingly using highly advanced chips in their vehicles, which could help fuel the development of Europe's AI industry. But it's unclear whether the Continent's AI sector will become competitive with the United States, which comparatively has much laxer restrictions when it comes to AI development. In addition to these issues, the EU suffers several other significant constraints in securing the level of investment needed to fulfill its chip ambitions:
Lack of skilled labor: One of the most significant challenges that Europe will face is securing the talent necessary to expand its semiconductor industry. To address this skills shortage, the European Chips Act aims to increase investment and support for training programs and universities. But engineers and technicians, which are needed in the industry, are among the largest areas that the European Labor Authority says there is a shortage of in the bloc. Even in the United States, TSMC has repeatedly complained about skilled worker shortages affecting the construction of its $40 billion fab in Arizona; on July 20, the Taiwanese chipmaker said the shortages had forced it to delay the start of production at the plant to 2025, and that it planned to start sending engineers to the United States to help train workers.
Lack of full supply chain investment: The semiconductor industry is heavily globalized, with a high degree of specialization and many different components produced by companies around the world. These components include precursor materials (like specialized chipmaking tools), design software, chip design, special chemicals, chip-testing equipment, packaging technologies, silicon (and other material wafer production), etching equipment and photoresists. Europe has a presence in several of these areas, including through Dutch firm ASML's dominance in chipmaking equipment and the German firm BASF's extensive production of chipmaking chemicals. But the European Chips Act is primarily focused on providing public support for fabs, not the entire supply chain, which would be nearly impossible to uproot given the high degree of specialization. This may make it more difficult for fabs that are constructed in Europe to remain competitive and avoid sourcing challenges for materials traditionally supplied to North America or Asia. Many of the semiconductors made in European fabs may also ultimately be shipped to Asia before being sold to end consumers, like people buying smartphones or electronics devices, or even installed in industrial plants or automobiles.
Water, energy and environmental challenges: The semiconductor industry is also likely to face energy, environmental, water and permitting challenges in Europe. Electricity can cost up to 30% of a fab's operating costs. And although the intensity of Europe's energy crisis has eased since peaking last year, electricity prices across the Continent will likely remain structurally higher than they otherwise would have been before Ukraine-related disruptions to Russian gas supplies forced Europe to start purchasing much more expensive LNG. This will increase the operational costs of maintaining a fab in Europe. Moreover, a fab uses millions of gallons of water a day to maintain its operations. For companies operating these plants, this need for water can increase the cost of doing business — both from a financial and reputational standpoint — as European countries often have vibrant environmental groups, as well as higher water and other permitting costs compared with most other places vying for semiconductor investments (such as the United States and Malaysia).
An ambitious timeline: The European Union's 2030 goal is also extremely ambitious as the semiconductor industry plans in long-term investment cycles. Constructing a state-of-the-art fab usually takes 3-5 years, and even then, ramping up production can take months. Moreover, chip designers and fabs often also work on a 2-3 year cycle of a certain generation of technology. This means that right now, companies are designing or already rolling out initial production for chips that will go into mass production in 2026 or 2027. The European Union's 2030 goal is thus really only one or two chip generations away, a fast time horizon in the industry.
Given these myriad constraints and challenges, the European Chips Act will likely fail to create a self-sufficient semiconductor industry. The need to source technology or materials from North America or Asia will keep Europe's semiconductor industry highly connected to the rest of the world, even if the European Union somehow fully realizes its 2030 production target. This means that if a crisis (like a potential conflict over Taiwan) creates another semiconductor shortage, the impact on Europe would remain large. Moreover, many semiconductors are designed to spec with a high degree of specialization, which means that if a disruption occurred in Taiwan, European chipmakers would not be able to quickly start building the same chips that had their production disrupted. There is often also little interchangeability of logic chips, such as those that Intel will be building. Beyond boosting semiconductor production capacity, the European Chips Act does include emergency measures in case of a supply shortage, such as joint procurement and stockpiling. But even those measures may not be enough to offer more than limited resilience. This is because semiconductors are made to certain specifications, which makes it difficult to stockpile logic chips and jointly procure them. Europe will thus largely remain beholden to the global trends of the semiconductor industry, barring a massively larger and more costly program that dwarfs the current European Chips Act and plays out over a longer period of time (which is unlikely due to the financial and political barriers to such a program). In addition, Europe's strategic autonomy from the United States will also see only marginal improvement under the Chips Act, since many European companies are co-developing technology with U.S. companies, which will leave them exposed to U.S. export controls and sanctions.
But if there's a conflict in Taiwan, Europe's efforts to boost its chipmaking capacity could nonetheless help mitigate the massive supply shocks. The global semiconductor industry is highly dependent on Taiwan, which is home to TSMC — the world's largest and most advanced contract chipmaker to which there is no alternative. The West is coming to terms with the stark reality that this reliance is a major liability should Beijing move to invade the island. Reunification could either result in a conflict damaging Taiwan's fabs, disrupting the global economy, or giving China control of them. This is why the European Union's investments cannot be viewed in isolation, as while the rest of the world's push to boost semiconductor investment will make it more difficult for Europe to achieve its ambitions, the greater global push for production capacity will more rapidly reduce Taiwan's role in the industry, even if that process takes decades.
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Why the White House Went to Wall Street to Revive the U.S. Chips Industry
Talent from Goldman Sachs, KKR and Blackstone will help determine how $39 billion in semiconductor chip subsidies are allocated
FOR THE WALL STREET JOURNAL
By Yuka Hayashi
Aug. 15, 2023 5:30 am ET
WASHINGTON—To revive the U.S. chip industry, the Biden administration has launched one of the most significant acts of government intervention since World War II—and it is relying on masters of the free market to deliver the goods.
Since the passage of the bipartisan Chips and Science Act last summer, the Commerce Department has been quietly building a small team of elite Wall Street financiers to help allocate $39 billion in taxpayer-funded manufacturing subsidies and other incentives to hundreds of companies.
The team members call it a startup within the government. The roughly three dozen professionals range in age from 23 to 64, and nearly half are women. They operate out of the cavernous Commerce Department building near the White House, in cramped rooms with steel furniture and tall partitions between cubicles.
The Biden administration has frequently tangled with American corporations over its economic policies. But when it comes to bringing advanced semiconductor manufacturing back to the U.S., administration officials say they need the skills of investment bankers, private-equity investors and management consultants.
“Markets don’t always work perfectly,” said Todd Fisher, a former executive at private-equity firm KKR who leads the investment team of the Chips Program Office.
“We are trying to correct a dislocation,” Fisher said, because “other countries put their thumb on the scale.”
Presidents have long gone to Wall Street to fill top jobs, with Federal Reserve chairman Jay Powell and former Treasury Secretary Steven Mnuchin among the recent examples. But the recruitment of an entire team of private-sector professionals is unprecedented, economists say, and reflects the central role chips play in modern economies—powering everything from household electronics to advanced weapons systems.
The intensifying technology and military rivalry with China was the crucial factor in last year’s passage of the Chips Act.
“The stakes are high and the world is watching,” says John Neuffer, head of the Semiconductor Industry Association. “It’s critical we get this big experiment in industrial policy right for America.”
The performance of Fisher’s team will be an early test of whether the government can bring back some of the most advanced manufacturing to America’s shores after decades of outsourcing. The U.S. makes only about 10% of global semiconductor supplies and none of the most advanced chips, which are mostly manufactured in Taiwan.
Some economists are skeptical of industrial policy whereby the government attempts to shape strategic industries using subsidies and tax incentives.
“Politics always takes over,” said Gary Clyde Hufbauer, a nonresident senior fellow at Peterson Institute for International Economics who has studied U.S. industrial policy.
The big challenge for the team, he said, is expected pressure from the White House and Congress to steer funds to favored constituencies. As the 2024 election season heats up, he predicts, the program will become “less on chips, and more on creating happy stories for job creation.”
Commerce Department officials say that the allocation won’t be based on politics and that one reason the government assembled the Wall Street team was to ensure careful rewarding of limited federal resources.
“We here at the Commerce Department fundamentally have to be good stewards of taxpayer dollars,” said Commerce Secretary Gina Raimondo, who described the team as “unbelievably talented and experienced.”
The team includes Sara O’Rourke, a former partner at McKinsey & Co., Farha Faisal, who previously worked at private-equity company Blackstone, and former Goldman Sachs bankers Kevin Quinn and Srujan Linga. Mary Alex Smith is an investment principal and a former JPMorgan banker.
The job is to pick winners and losers among some 460 applicants, including top semiconductor companies such as Intel, Samsung and Taiwan Semiconductor Manufacturing. Their choices will face heavy scrutiny—some of it by members of Congress.
“In an investment firm, nobody ever knows all the deals you didn’t do,” says Quinn, a senior relationship director who was co-head of global technology banking at Goldman before founding his own investment firm. “Here, you are accountable for all your no’s, and there are a lot of no’s.”
In Quinn’s cubicle—the first one he’s had since 1994—sits a copy of Chris Miller’s “Chip War.” Required reading for the team, the book examines the geopolitics surrounding semiconductors. Team members bought copies at their own expense. Accustomed to private-sector perks, Quinn shrugged his shoulders as he mentioned a requirement to fly coach for work trips to Asia.
With Raimondo—herself a former venture-capital executive—taking a hands-on role, the investment team works similarly to the way that Wall Street deal teams do.
Each Chips Act grant applicant is assigned a senior relationship director and investment officers. The team’s junior members work long hours crunching numbers to build quantitative models to see whether the projects will pencil out.
The team must ensure funded projects fulfill President Biden’s political agenda, including promoting a diverse workforce. Some in the chip industry have complained about strings attached to the program’s funding, including restrictions on expansion in China, limits on executive compensation, and mandatory daycare for workers’ children.
The investment team works closely with officials specializing in Biden strategies, including defense experts and economists. Investment team members report to Michael Schmidt, director for the Chips Program Office and a former New York state official.
Srujan Linga took a huge pay cut to join the team. PHOTO: DEPARTMENT OF COMMERCE
Officials won’t say when Chips Act funds will be awarded, but industry executives expect it could be as soon as late this year.
“We are literally designing the strategy, designing the organization and designing the investment process as we go,” said O’Rourke, the team’s operations chief.
The initial allocation will be just a first step. Compared with the industry’s long-term investment needs, the $39 billion in manufacturing incentives is a “rounding error,” says Stacy Rasgon, a senior analyst at Bernstein Research.
TSMC plans to spend $40 billion to build new advanced plants in Arizona. The industry needs to spend $3 trillion globally in research and equipment over the next decade to meet the demand for chips, according to a Boston Consulting Group estimate.
“We will not be successful if we don’t find ways to use our money to incentivize private capital,” Fisher said.
That task falls heavily on Linga, who leads the team’s financial structuring group. As a top banker specializing in asset-backed financing at Goldman, he helped airlines borrow by using frequent-flier programs as collateral and Sprint issue debt backed by wireless spectrum licenses.
An Indian immigrant who traded a $5 million annual paycheck for a $183,500-a-year government job, Linga said he realized the national security implications at stake when he bumped into an army general at Raimondo’s office during his job interview. “When the U.S. government offers you a role like this, it’s an honor,” he said.
Linga is looking for ways semiconductor suppliers can raise money from pension funds and insurance companies. To make lending more attractive, he says, loans can be secured by the value of equipment, intellectual property and infrastructure.
Some team members, including investment director Faisal, who used to work at Blackstone, say America’s reliance on foreign-made chips has become an Achilles’ heel, justifying government intervention—for now. Longer term, they say, the aim is to build an industry that can fund its own growth.
“We are going to do this because we want to spur the private sector to come in,” Faisal said.
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https://www.theepochtimes.com/opinion/30-billion-subsidy-to-huawei-at-center-of-us-china-tech-war-5480597?utm_source=China&src_src=China&utm_campaign=uschina-2023-08-29&src_cmp=uschina-2023-08-29&utm_medium=email&cta_utm_source=China&est=LluqlhBSw9WlCjPgXkUk965wXXpPezV6kGf3jxhg%2BNOuW7snZ7VlUOTzqddQYir6rujC
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https://www.yahoo.com/news/phone-sparks-worry-china-found-164319373.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cucGFyYWdvbnByaWRlLmNvbS8&guce_referrer_sig=AQAAAHEg49HcBiqSmsoIonD6Bs--OugYjl9wYLTvRcddtdvFTSLbV2fAlVCUyCLZLf8kigHLZEf7_gKczErCM2GXaYtYlCnUYy6D7wiqwUZPjt0G3_mLPHNZoPg7lWihnk-txEzKq75XmVuX9VmwK-DE9Z1s7fA_PWF2Vr20RxXG5oA8
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https://www.theepochtimes.com/china/us-trying-to-choke-chinas-military-by-restricting-superconductor-sales-commerce-secretary-5485706?utm_source=China&src_src=China&utm_campaign=uschina-2023-09-04&src_cmp=uschina-2023-09-04&utm_medium=email&cta_utm_source=China&est=Ovab0%2FFm8PswkUgh9Nd7lc5gfA%2BGLKFGalwIGoIPSM63FhNnaf%2B0H5Y2CCtEtS2N0NFP
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By: Geopolitical Futures
Chinese chipmaking. China reportedly plans to establish a $40 billion fund to support investments in domestic semiconductor manufacturing and research. It would be part of the government-backed China Integrated Circuit Industry Investment Fund, a major component of Beijing’s efforts to develop a self-sufficient semiconductor industry and reduce reliance on U.S. technology. The Chinese Ministry of Finance is reportedly considering contributing roughly $8 billion to the fund, but it’s unclear who the other investors would be. In 2022, regulators launched investigations into alleged corruption in the fund and its affiliates, but Chinese officials have been exploring alternatives to the costly subsidies that led to the creation of several unsuccessful chip companies.
Money for T
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https://www.theepochtimes.com/us/us-commerce-department-vows-to-protect-national-security-amid-huawei-chip-breakthrough-5488038?utm_source=China&src_src=China&utm_campaign=uschina-2023-09-09&src_cmp=uschina-2023-09-09&utm_medium=email&cta_utm_source=China&est=tAIdRNBIquDpsm3IXjOwHVnFlHPtKR6SeKsr8rFjrfQJ7PTfvhppyLJOCmbpI7O6m2WA
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https://www.theatlantic.com/international/archive/2022/10/taiwan-microchip-supply-chain-china/671615/?fbclid=IwAR0YV92dmq32u-HZ-ZT2mRIRffdEoC7AXcDdXvyOutF2elC7VgRZ-JgvS7M
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https://thehill.com/opinion/4517470-dei-killed-the-chips-act/
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I thought the issue here was national security, not economic efficiency. I wish the WSJ had addressed that.
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Intel and Industrial Policy in Action
The U.S. chip maker now says it will need even more subsidies, as it loses money on its foundry business.
By The Editorial Board
Follow
April 3, 2024 5:49 pm ET
Shares of Intel Corp. hit the skids Wednesday after it reported growing losses on its semiconductor foundry business. Politicians of both parties tout the U.S. chip maker as a national champion, but these days it looks more like an emblem of dubious government industrial policy.
Investors are getting their first close look at Intel CEO Pat Gelsinger’s ambitions to compete with TSMC and Samsung in chip manufacturing. They apparently didn’t like what they see. The Silicon Valley giant disclosed in a securities filing that it lost $7 billion on its foundry unit last year on $18.9 billion in sales, following roughly $5 billion in losses in each of the prior two years.
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Vertically integrated Intel has fallen behind in chip design and manufacturing. Most chip makers only do the former. Intel made a major bet on expanding its foundry business amid the pandemic chip shortage. Meanwhile, Nvidia surged ahead in designing artificial intelligence chips, which are upstaging Intel’s server semiconductors.
Mr. Gelsinger was among the loudest advocates for Washington’s $280 billion chips bill in 2022 to boost domestic chip manufacturing, though the U.S. leads the world in semiconductor research and design, which account for most value-added. No surprise, the chips bill has turned into a feeding frenzy for corporate rent-seekers.
After the Biden Administration in February awarded New York-based GlobalFoundries $1.5 billion, Senate Majority Leader Chuck Schumer crowed: “I have long said my CHIPS & Science Law would deliver big for New York, and I meant big with a capital ‘B.’” It was his bill, got that President Biden?
Mr. Schumer added: “When I wrote the CHIPS & Science Law, I made sure there was funding especially for the feature-rich, legacy chips that GlobalFoundries produces in Malta.” Recall that Members of Congress claimed the bill was needed to boost advanced, not legacy, chips. As usual their unexpressed purpose was to boost themselves.
Ohio’s House delegation and Sens. Sherrod Brown and J.D. Vance lobbied the White House to bankroll Intel’s Buckeye State foundry expansion. Last month the Administration announced $8.5 billion in direct funding for Intel, plus up to $11 billion in low-cost loans for projects in Ohio, Arizona, New Mexico and Oregon.
Intel says it also plans to pocket federal tax credits from the chips bill that could offset up to 25% of its estimated $100 billion U.S. expansion. “It’s going to transform the semiconductor industry,” Mr. Biden said at Intel’s campus in Arizona when he announced the taxpayer gift alongside Mr. Gelsinger.
“In January of 2022, Pat came to the White House, where we announced the historic investment to build a state-of-the-art semiconductor factory in Ohio,” Mr. Biden said. In March 2022, “Pat was my guest at the State of the Union” and that September “I joined Pat in Ohio and—to break ground for the new factory.” How could Pat say no to the new boss?
***
It’s a shame to see Intel, a legendary U.S. company, being captured by government like this. All told, Intel could pocket some $50 billion in federal subsidies. Yet Mr. Gelsinger wants more. American chip manufacturing “doesn’t get fixed in one three- to five-year program,” the CEO said last month. “I do think we’ll need at least a CHIPS 2 to finish that job.”
Maybe two or three more chips funding bills will be needed if Intel foundries keep bleeding red ink. On Tuesday Intel disclosed that it doesn’t expect its foundry business to break even until “midway” between now and the end of 2030. One problem is demand for Intel’s server and PC chips is slackening as more tech investment flows into AI.
Earlier this year Intel said it is delaying work on its Ohio plant owing to “business conditions” and “market dynamics.” The factory—which is also getting up to $2 billion in state subsidies—now isn’t expected to be operational until 2027 or 2028, two to three years later than projected.
Industrial policy sounds nice when it’s sold as patriotic nationalism, but it typically ends in special-interest pleading with business answering to politicians. Capital is steered for political reasons, rather than for its most productive use. Its proponents on the right are now all but conceding this, though they claim they would be smarter than Mr. Biden at handing out government money.
Politicians always think they’re better stewards of capital than business. They never are.