Author Topic: Microchips, semiconductors-- and related industrial policy  (Read 6321 times)

Crafty_Dog

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ET: Taiwan and Microchips
« Reply #50 on: October 19, 2022, 01:31:26 AM »
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.”

Crafty_Dog

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FA: How Silicon Valley Lost the Chips Race
« Reply #51 on: October 19, 2022, 11:59:16 AM »
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

Crafty_Dog

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Stratfor: US deals China semi sector biggest blow yet
« Reply #52 on: October 21, 2022, 07:40:12 PM »
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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Crafty_Dog

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Re: Microchips
« Reply #53 on: October 25, 2022, 08:47:18 AM »
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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Re: Microchips
« Reply #54 on: October 25, 2022, 10:05:50 AM »
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?

Crafty_Dog

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Re: Microchips
« Reply #55 on: October 25, 2022, 11:48:30 AM »
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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Re: Microchips
« Reply #56 on: October 25, 2022, 02:04:52 PM »
“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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GPF: TMSC
« Reply #58 on: December 30, 2022, 08:01:49 AM »
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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RANE: Mexico will benefit from US chip focus
« Reply #62 on: February 08, 2023, 04:46:20 PM »
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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Re: Microchips, semiconductors
« Reply #63 on: February 24, 2023, 03:10:26 PM »
Have not had a chance to read this closely yet:
===================================

Open in app or online
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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Re: Microchips, semiconductors
« Reply #64 on: February 24, 2023, 05:34:46 PM »
"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!!

Crafty_Dog

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We were warned
« Reply #65 on: March 01, 2023, 01:16:42 PM »
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.

***
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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FA: How Silicon Valley lost the Chips Race
« Reply #66 on: March 02, 2023, 06:24:52 AM »
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.
« Last Edit: March 02, 2023, 07:33:43 AM by Crafty_Dog »

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Re: Microchips, semiconductors
« Reply #67 on: March 02, 2023, 07:34:01 AM »
Thank you Doug.

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GPF: Netherlands plans additional restrictions on chips to China
« Reply #68 on: March 09, 2023, 01:48:44 PM »
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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D1
« Reply #73 on: April 12, 2023, 11:44:28 AM »


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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WSJ: Can Intel deliver American made chips?
« Reply #75 on: June 08, 2023, 09:59:42 PM »
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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RANE
« Reply #76 on: June 13, 2023, 06:47:06 AM »
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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Re: Microchips, semiconductors-- and related industrial policy
« Reply #78 on: July 21, 2023, 08:29:04 AM »
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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RANE: EU chip dreams
« Reply #79 on: August 05, 2023, 08:29:16 AM »
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.

Crafty_Dog

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WSJ: Why WH went to Wall Street
« Reply #80 on: August 15, 2023, 09:06:09 AM »
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.




Crafty_Dog

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Chinese response
« Reply #84 on: September 05, 2023, 08:55:28 AM »


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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Re: Microchips, semiconductors-- and related industrial policy
« Reply #88 on: April 04, 2024, 08:17:50 AM »
I thought the issue here was national security, not economic efficiency.  I wish the WSJ had addressed that.

==========================

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
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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.