President Joe Biden has accused China of meddling with congressional negotiations over the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act.
The bill would help boost domestic U.S. semiconductor manufacturing by providing incentives and tax breaks for building new fabs in America. The bill would also provide more than $52 billion to fuel these incentives and construction.
The Senate passed the bill in June of 2021 and the U.S. House of Representatives passed its version of the bill in February. While both houses of Congress have passed the bill, both branches will have to revise the bill and negotiations will likely be needed to hammer out the details.
Biden said China is working to interfere in these negotiations to thwart the bill’s approval and renewed calls to finalize the bill so he can sign it.
“Fundamentally, this is a national security issue,” Biden said at a tour of a Lockheed Martin Corp. plant this week. “This is one of the reasons why the Chinese Communist Party is lobbying folks to oppose this bill. And it’s an issue that unites Democrats and Republicans. So, let’s get it done.”
As the Senate and House could soon begin deliberations into the final version of the CHIPS for America Act, China has been seeking meetings with congressional offices, think tanks, companies and the Biden administration to gather more information about the bill, according to a report from Bloomberg.
Why grow domestic chip manufacturing?
The U.S. has fallen behind in its support for semiconductor manufacturing. Despite 54% of global chips being designed by American companies in 2021, the U.S. only manufacturers 12% of all semiconductors globally.
If nothing is done to correct the situation, this will decline to 10% in the coming decade, according to the Semiconductor Industry Association (SIA). As America and other regions failed to keep up with demand for chips, semiconductor manufacturing aggregated in Taiwan, South Korea and China as these governments offered substantial incentives, placing the U.S. and other countries at a competitive disadvantage.
The attitude of the U.S. government and other regions — including Japan and Europe — changed when COVID-19 hit and impacted the supply chain, causing a massive chip shortage that is still ongoing. The flaws in the aggregation of semiconductor manufacturing reopened the need to bolster the supply of domestic semiconductors as a matter of national security.
This is especially important given semiconductor use is projected to grow 5% over the next decade as these chips are being used substantially in the automotive, consumer electronics, professional and appliance markets.
Increasing manufacturing market share
The result is many new fabs being built on multiple continents to support the uptick in domestic semiconductor manufacturing.
Intel Corp., a U.S.-based vendor of chips and modules for PCs, graphics, IT, 5G and automotive, wants the U.S. to manufacture one-third of all chips in the future and has taken it upon itself to develop a foundry business.
Meanwhile, Europe has made it clear it wants to manufacture 20% of all global semiconductors by 2030 and is wooing companies to build new fabs in the region through its own semiconductor bill called the European Chips Act.