Intel, Qualcomm, AMD and other U.S. industry leaders are banding together to ask for concessions for their industry in any new economic recovery plans from President Joe Biden. Specifically, these companies want the American government to reverse long-standing policy and offer financial incentives for domestic semiconductor manufacturing.
The context is a massive chip shortage that has U.S. companies practicing triage between auto factory lines, where cars sit idle for want of chips, and video game console production, which has also seen a bottleneck in microprocessor delivery. Stephen Nellis, in covering the current request for industry assistance for Reuters, reports U.S. share of semiconductor manufacturing is down 25% since 1990.
To be sure, modern semiconductor chip manufacturing is no easy task. From creating the nanoscale wafer substrate to etching the tiny integrated circuits, the entire life cycle requires a high degree of precision and careful resource allocation, along with skilled labor that can be expensive to corporate employers.
But U.S. companies are concerned that without additional ballast, the current U.S. tendency to rely on Korean and Chinese chips could be disastrous.
“The costs of inaction are high,” spokespersons write in their entreaty to the White House.
We’re also seeing some of the fallout from the policies of the past administration, where the Trump White House sought to wall American business off from Chinese companies due to vague and insubstantiated threats to national security.
“The broadening of US restrictions against China’s high-tech sector—with the addition of the country’s largest chip maker Semiconductor Manufacturing International Corp. … to the US government’s Entity List—threatens to disrupt the complex technology supply chains that bind US, Chinese, and other Asian manufacturers,” writes Jeremy Mark for Atlantic Council. “The action against SMIC … is likely to prove shortsighted. It will incur costs for US companies while failing to ensure them supply chain independence. US policy instead must coalesce around a more nuanced effort to protect US technology and national security while leaving room for an essential industry to continue flourishing without sudden disruptions. As the United States widens restrictions from mobile phone giant Huawei to one of the world’s top five chip makers, an industry that relies on the cross-border movement of chips at all stages of production is facing the possibility that China hawks in the Trump administration will succeed in advancing their goal of a technological decoupling from China.”
In short, capricious and imprecise protectionism is a recipe for disaster. Stay focused on the microprocessor sector, because this can cause big markets moves in technology as a whole.
