The share of American chip manufacturing has plummeted by 2/3!Congress conspires to invest hundreds of billions in response to China’s rise

Schiphol News on February 24th, the US Senate Majority Leader Chuck Schumer said on Tuesday that he has instructed members of Congress to take a series of measures to deal with the rise of China and take advantage of the two parties’ hardline attitude towards Beijing. , To strengthen the US technology industry, including semiconductors, and combat unfair practices.

According to Reuters, a bipartisan group of congressmen in the United States plans to meet with U.S. President Biden on Wednesday to discuss supply chain issues including semiconductor chips.

A source said that legislators in the Senate and House of Representatives are expected to learn more about the executive order on supply chain issues that the Biden administration has been discussing.

According to two people familiar with the matter, Biden plans to take an administrative measure to require a review of key U.S. supply chains, with a focus on government contractors and private companies, with a view to obtaining U.S. industrial products from competitors including China. supply.

It is reported that the order will undergo a 100-day review. The order will mainly focus on the materials needed to respond to the COVID-19 crisis, while also including the analysis of key technologies and raw materials.

The White House declined to comment.

 01.

Schumer: Instructed to enact a bill to compete with China

At the weekly press conference, Schumer said that he has instructed committees to draft a bipartisan bill based on the legislation introduced last year, seeking US$100 billion in funding to stimulate key technology areas such as artificial intelligence, quantum computing, and semiconductors. Research.

Schumer said that this year’s package will target investments in the US manufacturing, science and technology, supply chain, and semiconductor sectors, adding that he intends to introduce a bill in the Senate before “this spring.”

“Today, at our core meeting, I instructed the chairmen and members of our relevant committees to start drafting a draft legislation to compete with China and create new American jobs.” Schumer said, “I hope the bill will be able to Addressing the short-term and long-term plans of the U.S. to protect the domestic semiconductor supply chain and keep us first in the fields of artificial intelligence, 5G, quantum computing, biomedical research, and storage, all of which are part of the bill.”

As part of the plan, senators are also considering providing emergency funding to implement a bipartisan semiconductor plan including the National Defense Authorization Act (NDAA) for fiscal year 2021, which sets the overall US military spending and the Pentagon’s Policy Support.

The US Congress authorizes the federal government to provide subsidies to companies that invest in domestic semiconductor manufacturing and provide the federal government with more chip research funding, but Congress has not yet allocated funds for the program.

At the time of the legislative promotion, the Republican Party increased its pressure on China’s “hawks” to pressure Democratic President Biden, asking him to stick to the tough policy of his Republican predecessor Trump on China.

The Biden administration has stated that it is reviewing Chinese projects and has pledged to adopt a tough but more sided approach to China.

At the same time, some US automakers have cut production due to a shortage of semiconductor chips, partly because of the booming consumer demand for more mobile phones and computers during the pandemic.

 02.

The U.S. chip manufacturing accounted for a serious decline in recent decades

The American Semiconductor Industry Association (SIA) welcomed Schumer’s statement and urged Biden and Congress to “boldly” invest in domestic semiconductor manufacturing and research in a letter to Biden this month.

SIA CEO John Neuffer said in a statement: “This will enable the United States to maintain a leading position in this basic technology, and it will also strengthen the U.S. economy, create jobs, and create national security. And critical infrastructure.”

The share of American chip manufacturing has plummeted by 2/3!Congress conspires to invest hundreds of billions in response to China’s rise

SIA and a number of institutions jointly wrote to the president in a letter: “Although the governments of our global competitors have invested heavily in attracting new semiconductor manufacturing and research facilities, the lack of incentives in the United States has made our country lose its competition. In order to enhance the competitiveness and resilience of key supply chains, we believe that the United States needs to encourage the construction of new modern semiconductor manufacturing facilities and invest in research capabilities.”

According to a report by the Boston Consulting Group, the share of the United States in the global semiconductor manufacturing industry has plummeted in recent decades. It was 37% in 1990, and it has now fallen to 12%.

SIA data also shows that US semiconductor companies account for 47% of global chip sales, but only 12% of manufacturing, because they outsource most of the manufacturing to overseas factories.

  

According to the previous legislation on which the bill is based, $100 billion of funds will be allocated within five years through the establishment of a new technology council at the National Science Foundation. According to the proposal, an additional $10 billion will be allocated for technology centers.

China Taiwan and its chip manufacturing giant TSMC dominate today’s global semiconductor production, accounting for 22% of global output. Mainland China is also investing heavily in the chip field. The Boston Consulting Group predicts that with the help of about US$100 billion in government subsidies, by 2030, mainland China will gain a market share of 24%, ranking it among the world’s forefront.

The rapid rise of Chinese industry and the inability of the United States to produce enough medical equipment and other necessities during the coronavirus crisis have prompted both parties to increase federal investment to strengthen local production and research and development.

Since last year, Schumer has been running for the revival of the local chip manufacturing industry in the United States. Recently GlobalFoundries and the US Department of Defense strategic partnership will use its Fab8 fab in New York, which has invested more than 13 billion US dollars, to produce sensitive chips for the US Department of Defense. Delivery is expected to begin in 2023. This agreement is reached. One of the major efforts made by the US CHIPS Act.

 03.

The U.S. intends to reduce its reliance on mainland supply chains

According to foreign media reports, US President Biden will sign an executive order as early as this month to cooperate with Taiwan, Japan, South Korea and other places to accelerate the construction of chip and other products with low dependence on mainland China and strategic significance. .

The executive order will formulate a national supply chain strategy, and an assessment led by members of Biden’s economic and national security team will analyze “the resilience and capabilities of the US manufacturing supply chain and defense industry base to support national security and emergency preparedness.” , Focusing on reviewing major supply chains such as semiconductors, electric vehicle batteries, rare earth metals, and medical products.

The order mentioned that “cooperating with allies can build a strong and flexible supply chain”, which indicates that international relations may be the core of the plan. Washington may establish partnerships with Taiwan, Japan, and South Korea in chip production and Asia-Pacific economies including Australia on rare earths.

The United States plans to share information about important product supply networks with allies, and will seek to use complementary production.

The United States will consider a framework for quickly sharing these items in an emergency, and discuss how to ensure inventory and spare manufacturing capacity, and may also require partners to reduce trade with China.

With this year’s chip shortage hitting automakers particularly severely, this problem has become even more urgent. Although the US government requires Taiwan’s chip makers to increase production, Taiwan’s chip makers have already fully loaded their production capacity and there are few options for increasing supply in the short term.

The United States is worried that over-reliance on China for important products will bring security risks. The United States imports approximately 80% of rare earths from China and relies on China for approximately 90% of certain medical products.

“As far as I know, the United States will conduct an in-depth review of its supply chain to find out to what extent its semiconductor and rare earth products depend on which country.” A Japanese government source said, “After that, it will work with allies. Discuss countermeasures.”

 04.

Conclusion: Restructuring the supply chain is difficult and long

Restructuring the supply chain can take a considerable amount of time, especially in the semiconductor field. Due to the limited number of the world’s top chip manufacturers, these companies have the influence to decide whether to follow the United States.

Since last fall, the U.S. government has been actively striving for the understanding and cooperation of governments in many places, calling on China’s Taiwan, Japan, Australia and other economies with valuable technologies or resources to join the U.S. and separate the supply chain from China.

For example, in November last year, according to Taiwan media reports, the United States and Taiwan signed a so-called “Memorandum of Understanding on Cooperation” to promote technical cooperation, focusing on topics such as global health and safety, science and technology, 5G clean networks, supply chain cooperation, and investment review.

TSMC, the world’s largest chip foundry, agreed last spring to establish a manufacturing plant in Arizona, USA. It will invest 12 billion U.S. dollars in the plant to produce 5nm chips, which is scheduled to go online in 2024. The US government is providing subsidies for the project.

In addition to the United States, the Ministry of Economy, Trade and Industry of Japan has also been working hard to attract TSMC to build factories in Japan. The purpose is not only to establish a more solid three-party supply network, but also to provide a reliable source of cutting-edge chips for Japan in the future. The Japanese government plans to invest 200 billion yen (equivalent to 12.3 billion yuan) to pave the way for the construction of advanced wafer fabs. According to Japanese media reports this month, TSMC is planning to spend 20 billion yen to set up a research and development center in Ibaraki Prefecture, Tokyo.

In the field of rare earths, the United States is cooperating with Australian companies. With financial support from the US Department of Defense, Australian rare earth miner Lynas is building a rare earth processing plant in Texas, USA.

With the market share of Panasonic and South Korea’s LG Chem being squeezed out by Chinese competitors, electric vehicle batteries are another area where action is needed. But in other areas such as 5G, the new supply chain may become expensive for American and Japanese companies, and they cannot obtain cost-competitive Chinese suppliers like Huawei.

  

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