President Biden signed an executive order on Aug. 25 to implement the CHIPS and Science Act of 2022, which will “lower the costs of goods, create high paying manufacturing jobs around the country and ensure we make more critical technologies at home.”
The specifics get boring, but it sets out in basic terms that the U.S. wants to return to its position as a leader in the semiconductor industry to address “economic and national security risks by building domestic capacity that reduces U.S. reliance on vulnerable… foreign production.”
The COVID-19 pandemic sent producers worldwide into a frenzy attempting to maintain production and flowthrough.
If you’ve recently been shopping for a car, graphics processing technology or really anything even tangentially related to computers, you may have even felt in your wallet the effects of the struggling global economy. Everywhere you looked, production was being slowed down by the lack of microprocessors available for manufacturers, and prices were going up for consumers. Prices will continue to be unstable into 2023, according to some experts.
The Biden administration is putting policies and legislations such as CHIPS into place to make sure in the next supply chain-disrupting event, American production and consumption remains relatively solid. If everything works according to plan, it’s going to be great to be a consumer in the U.S. in the next couple decades.
The administration’s goal of less reliance on foreign manufacturing is manifesting as an economic battle to slow Chinese technological production. The White House published a broad set of export controls last Friday, with specific measures to cut China off from semiconductor chips made anywhere in the world with U.S. equipment.
This is an almost Cold War level of aggression, and if effective, it would hobble the Chinese chip manufacturing industry enough for American producers to perhaps rise to prominence to substitute in where Chinese manufacturers would falter.
However, in order to be fully effective, other countries around the world will have to join the U.S. in this new initiative. Major semiconductor and microchip producers like Korea or Japan find large volumes of their exports heading towards Chinese assembly lines. There are huge economic consequences if a semiconductor exporting country were to join the U.S.’s movement.
Without the help of other countries, it’s difficult to say that the China-combating moves will have more than minor success in the long run. Perhaps companies like SK Hynix, Samsung and TSMC will just capitalize on the situation and step up to the plate to fill the hole American semiconductor producers will leave in Chinese imports.
As of now, the situation can only be speculated upon with hypotheticals.
However, one thing is clear: the Biden administration really does mean it when they say that they’re looking to protect American consumers and to foster real economic growth in the United States. Even if the methods the White House has set out don’t find success, it certainly feels that they will continue down this path of actively combating Chinese technological and economic growth.
As we’ve seen with the Nord Stream gas pipelines in Europe and the current European energy crisis, placing too much trust in an unreliable actor like Russia or China can have disastrous consequences. The pandemic gave us a peek at what may happen if China were to deliberately try to sabotage global supply chains. The U.S. only has more to gain by building up its own independence, so I, for one, stand fully behind the new policies.
