Washington – To celebrate Intel’s $ 20 billion investment in a new semiconductor plant in Ohio, President Biden on Friday wanted to launch a stalled element of its economic and national security program: a massive federal investment in manufacturing, technology research and development. that China is also trying to rule.
Two other important legislative priorities in Congress – the Build Back Better Act and the Act to Protect Voting Rights – are dying, Mr Biden has called for another bill and a bill that enjoys significant bipartisan support.
But it has lost seven critical months since the Senate passed the measure, a huge Chinese competition law that would spend nearly a quarter of a trillion dollars on domestic chip manufacturing, artificial intelligence research, robotics, quantum computing and a host of other technologies. The bill is the most extensive industrial policy legislation in U.S. history.
Mr Biden spoke at the White House that America was in “tough economic and technological competition” with China. He deliberately chose the words, knowing that while it sounds obvious to American ears, Chinese officials have protested in recent months against using the word “race,” saying it has an echo of a race like the Cold War.
“We will insist that everyone, including China, play by the same rules,” Mr. Biden continued. “Whatever we invest in America, American innovation, American communities, American workers.”
He argued that the initiative would provide a long-term solution to supply chain disruptions and rising inflation and free U.S. weapons systems from dependence on foreign components.
After months of rarely mentioning China’s competition law so as not to lose sight of other elements of its agenda, Mr Biden said on Friday that its adoption was “for the sake of our economic competitiveness and national security”.
Understanding the supply chain crisis
“Today, we produce barely 10 percent of computer chips despite being a leader in chip design and research,” he said. “We don’t currently have the ability to produce the most advanced chips.”
Due to a lack of chips for everything from cars to washing machines to medical equipment and electrical networks, some factories have shut down production lines and some are estimated to have fallen by a full percentage point from last year’s growth in the United States.
While the Biden administration billed Intel’s new investment near Columbus, Ohio as a partial remedy for supply chain disruptions that led to global chip shortages and inflation, the project would not help much in the short term. The Ohio plant, which Intel says is the first phase of an investment of up to $ 100 billion, is not expected to start operating until 2025, and many analysts predict that the chip shortage will begin to decline during the year.
But in addition to giving positive addresses to the distressed White House, Intel’s plans could help boost a key element of Mr Biden’s program that was set aside as lawmakers struggled with ambitious bills on infrastructure, social spending and voting rights. Speaker Nancy Pelosi indicated Thursday that House committees will soon begin talks with the Senate to put China’s competition law to a vote.
When the bill was passed by a large majority in the Senate in June, partly as an employment plan and partly to avoid the United States being dangerously dependent on its biggest geopolitical opponent, it was sold.
China is not yet a major manufacturer of the world’s most advanced wafers and is unable to produce the smallest semiconductor semiconductors – in part because the United States and its allies have prevented it from purchasing the lithographic equipment needed to make the chips. .
But Beijing is pumping huge amounts of state aid into the sector’s development and extending its military reach to Taiwan, one of the largest manufacturers of advanced chips. According to the Semiconductor Industry Association, China accounted for 9 percent of global chip sales in 2020, barely behind the global market share of Japan and the European Union. That was only 3.8 percent of global chip sales five years ago.
At the World Economic Forum this week, European Commission President Ursula von der Leyen announced that Europe will be proposing its own legislation early next month to help the semiconductor industry develop and prevent deficits.
John Neuffer, CEO of the Semiconductor Industry Association, said Japan, South Korea, India and other countries are also introducing their own incentives to attract a strategically important industry.
“The clock is ticking,” said Mr. Neuffer. “None of us work in a vacuum. It’s a global industry. “
Mr Biden’s efforts to legislate on China’s competition law amid growing frustration among companies in his circles about his economic policy towards the country. Leaders have complained that the government has still not clarified whether it will lift tariffs imposed on China by President Donald J. Trump or how it will urge Beijing for further trade concessions.
How the supply chain crisis unfolded
The pandemic caused the problem. The extremely complex and interconnected global supply chain is in turmoil. Much of the crisis can be traced to the outbreak of Covid-19, which caused an economic slowdown, mass layoffs and shutdowns. Here’s what happened next:
The bill passed by the Senate, known as the U.S. Innovation and Competition Act, contains a number of provisions designed to encourage the U.S. economy to take action against China, but central to the $ 52 billion in federal investment to stimulate chip research, design and manufacturing .
Chip funding itself enjoys widespread bipartisan support and could be enacted in the next few months, supporters say; the question is whether the other measures in the package will reduce your prospects. The Senate bill contains a number of trade-related provisions that may be opposed by some House Democrats, including an examination of foreign digital trade practices.
The global shortage of chips and the associated dangerous inflation have sparked interest in attracting semiconductor manufacturing to the United States. But whether Congress approves billions of dollars in new funding — and how the Biden administration decides to allocate it — is likely to determine whether an investment like Intel is a one-time event or trend.
Companies such as Taiwan Semiconductor Manufacturing Company, Texas Instruments, Micron Technology and SK Group have all announced their recent expansion in the United States. Samsung has promised a $ 17 billion facility in Texas, while GlobalFoundries has committed to a second plant in New York.
However, the focus of global industry remains in East Asia. While the United States conducts state-of-the-art research and design in the chip industry, it has outsourced production to mostly Asian factories instead of the world’s largest semiconductor manufacturer decades ago.
This proved to be a vulnerability as pandemics-related shutdowns caused companies worldwide to run out of labor and raw materials, leading to a shortage of many commodities, especially semiconductors, and a price spiral. It has hit carmakers in particular, with almost every major carmaker being forced to cut production last year.
Chip shortages have also become one of the biggest drivers of inflation, which is a major problem for U.S. voters as the mid-term elections approach. Inflation peaked at a 40-year high in December, backed by a 37 per cent rise in the price of used cars.
To alleviate the chip shortage, the Biden administration convened meetings with semiconductor leaders, set up a global alert system to identify deficiencies, and requested a huge amount of information from chip makers about possible bottlenecks. The Department of Commerce is expected to release some of this information before the end of the month.
Gina Raimondo, the trade secretary, said in a statement on Friday that Intel’s investment will pay off for the company, U.S. manufacturing and “U.S. consumers, who can expect lower prices when we bring home the semiconductor manufacturing that sustains our economy. running.”
However, analysts say the administration has little influence on short-term trends in the industry due to the long lead times required to build semiconductor facilities.
Mr Neuffer said his industry welcomed the White House’s focus on the sector, including companies to share more information. “But the reality is that the government can only do that,” he said. “These are very complex, deep global supply chains, and the market just has to go beyond that.”
Catie Edmondson contributed to the report.