US chips away at globalized industry
White House Press Secretary Karine Jean-Pierre has made no bones about the purpose of the Creating Helpful Incentives to Produce Semiconductors for America Act that is expected to be approved by Congress this week.
In a news briefing last week, she said that the CHIPS Act is to “make sure Chips incentives generate more semiconductor investment here in the US, not in China, and guardrails help slow the growth of investment in China”.
The United States’ share of global chip production has dropped from nearly 40 percent in 1990 to 12 percent today. But that is also a period when the advancement of relevant technology and the spread of the know-how led to extended supply chains for their manufacture. The production of some advanced chips involves more than 1,000 processes and requires more than 70 kinds of crossborder collaborations.
The CHIPS Act is an attempt to wind back the clock. It aims to shatter the global supply chains for the production of chips, and concentrate what is a global industry in the US.
Washington’s efforts date back to January 2017 when the former Barack Obama administration released the report Ensuring US Leadership and Innovation in Semiconductors shortly before its tenure drew to an end. This is believed to have spurred its successor to target Huawei and other hi-tech Chinese companies.
However, despite Washington’s efforts, China’s chip industry has maintained fast development. The total sales of chip-related companies in China rose 18 percent last year to a record 1 trillion yuan ($148 billion). Over the past four quarters, 19 of the world’s 20 fastest-growing chip companies are from China.
China’s status will not be changed in the short term due to the vigorous development of its domestic home appliances, electronics, communications, intelligent vehicles and large-scale promotion of the internet of things and cloud technology.
That means although it is at the lower end of the chip industry, chip companies around the world cannot afford to lose the foundation of China in the pyramid of the industry.
So the victims of the Act will by no means be restricted to Chinese companies.
Over the past month, Washington has pressed the government of the Netherlands to ban Dutch exports of deep ultraviolet lithography systems to China, and the Republic of Korea to join its chip alliance.
The chip industry is a model of globalized industry, and the formation and development of the global chip industry chains and supply chains are the results of the joint action of market law and enterprise choice. But Washington wants to have control of the industry so it can grab the whole world by the throat given the importance of semiconductors to almost all advanced industries today. That is doomed to failure.