Biden’s chip push backfires

US President Joe Biden and Commerce Secretary Gina Raimondo (not pictured) hold a virtual meeting with business leaders and state governors to discuss supply chain issues, particularly semi-transparent chips. drivers, on the White House campus in Washington, United States, on March 9, 2022. [Photo/Agencies]

Bill calls for spending billions, but experts see waste, global problems

The US Congress is being urged to pass legislation that would pour billions of dollars into the semiconductor industry to counter China, but experts fear the approach could be too costly and undermine global collaboration.

Last week, US President Joe Biden demanded that Congress pass the Innovation Act quickly, saying it would “bring jobs home and fuel the return of American industry”. The law includes $52 billion in government subsidies to boost semiconductor production in the United States.

Lawmakers from the House of Representatives and the Senate are expected to hold their first formal meeting this week to work on ironing out the differences between their two legislative versions, according to Reuters.

Proponents of the bill said the subsidies would help address chip shortages, insulate the country from future supply chain disruptions in East Asia and counter China’s tech rise.

“It’s very difficult for government to intervene in technically very complex industries and very complex ecosystems and to do so effectively without drastically disrupting,” said Melissa Griffith, director of emerging technologies and national security at the Wilson Center, during a webinar on Friday.

Regarding the Innovation Act, Griffith said: “I think we would have more to worry about, but we really don’t know what this larger ecosystem will look like in terms of support going forward. “

There might be a “window of opportunity” to limit China’s growth in the short term, but that won’t stop China from becoming a “much stronger player” in semiconductors in the long run, a- she declared.

“East Asia has become the center of chipmaking and especially the center of chipmaking on edge nodes,” Griffith said. “It would be a waste of our money and our political efforts (to build domestic manufacturing capacity) given that we are competing on a wide variety of technologies,” she said.

The semiconductor industry is a global ecosystem. Each segment of the semiconductor value chain has, on average, 25 countries involved in the direct supply chain and 23 countries involved in market support functions, according to a 2020 report from the Global Semiconductor Alliance and Accenture.

Researchers found that the components of a chip could travel more than 40,000 kilometers before being completed and that a semiconductor product could cross international borders 70 times or more before finally reaching the end customer.

Global collaboration not only benefits individual companies, but also the semiconductor industry, as it results in better products, addresses critical business needs that cannot be met locally, and helps mitigate risk, according to the report.

Morris Chang, founder and former chairman of chip giant Taiwan Semiconductor Manufacturing Co, said current U.S. targets for domestic semiconductor manufacturing will be much more expensive than expected.

“Expensive Exercise”

U.S. leaders should be aware that the current rush to relocate may well overtake and produce “high unit cost” factories that will be “uncompetitive in global markets,” he said in a podcast produced by Brookings. Washington-based institution last month. “I think it will be a very costly exercise in futility.”

The idea of ​​chip sovereignty has instinctive appeal, but it is “logistically unfeasible and prohibitively expensive,” wrote Rakesh Kumar, a professor in the Department of Electrical and Computer Engineering at the University of Illinois, in a recent Fortune article.

Current global chip supply chains have been developed over decades, so it would take years, if not decades, to build replacement ecosystems, technologies and human resources in the United States, he said. -he declares.

Citing artificial intelligence chips, Griffith said not all chips need to be made in the United States, although some argue there’s a national security rationale behind it.

First, it means “a lot of redundancy built into this supply chain at great cost,” she said, and second, innovation will suffer “if we radically cripple this industry.”

“When you start breaking a very global, very complex supply chain into very siled pieces, you really limit innovation,” she said.

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