Chinese trade and industry associations cite the US government’s semiconductor bill as an impediment to global innovation and economic recovery. They also call on the business community to take action to protect their interests and mitigate the effects of the new bill.
The US Chip and Science Act, signed Tuesday, aims to boost the semiconductor industry in the United States, among other things. The text provides $52.7 billion in grants and funds to strengthen the country’s presence in emerging sectors, including nanotechnology, quantum computing and artificial intelligence (AI).
After US President Joe Biden signed the bill into law this week, various market participants announced their intention to invest. According to the Biden administration, these include a $40 billion per micron injection into memory chip manufacturing, which is expected to create up to 40,000 jobs and increase US market share in memory chip manufacturing from less than 2%. up to 10% over the next 10 years.
Leadership in cementing the country
Qualcomm and GlobalFoundries also announced a new partnership to invest $4.2 billion to expand GlobalFoundries’ chip manufacturing facility in New York. Qualcomm said it will increase domestic semiconductor production by 50% over the next five years.
Defending the new bill’s role, the US government says it will help solidify the nation’s leadership in technology that is “the foundation of everything,” from automobiles to defense systems to home appliances.
“America invented the semiconductor, but today it produces about 10% of the world’s supply and does not produce any of the most advanced chips. Instead, we depend on East Asia for 75% of world production,” the White House notes. “The Chips and Science Act will open up additional hundreds of billions to private sector investment in semiconductors across the country, including manufacturing critical to national defense and critical sectors. »
The new bill will also allow the United States to maintain and develop its scientific and technological leadership, the government adds. While noting that federal investment in R&D was 2% of the nation’s GDP in the mid-1960s, the Biden administration says that figure has dropped to less than 1% in 2020.
“Economic growth and prosperity over the past 40 years has been concentrated in a few coastal regions, leaving too many communities behind,” the government says, adding that the Chip and Science Act will “open up opportunities” in science and technology for those left behind.
Unfair US Global Competition Bill
Meanwhile, China believes the US bill will distort the global chip supply chain and disrupt international trade. China’s Commerce Ministry said last month that the law contains provisions restricting the “normal economic, trade and investment” activities of Chinese market participants.
The ministry said it would monitor the implementation of the law and take “strong measures” to protect its legitimate rights and interests.
In a joint statement released on Wednesday, the China Council for the Promotion of International Trade and the China International Chamber of Commerce again criticized the Chinese government, noting that the US bill would stifle global economic recovery and innovation.
China Appeals to the WTO
The new law serves to bolster the United States’ advantage in the chip market and encourage unfair competition against “any country of concern,” state-run China Daily reported.
Chinese trade associations said the bill gives the US government the power to force changes in the global semiconductor labor market, including through subsidies and tax breaks, investment in equipment manufacturing, to encourage companies to build factories in the United States. Chinese associations said it would negatively impact international business, including in China and the US.
They added that such provisions are not in line with the World Trade Organization’s “principles of non-discrimination” and that they single out specific countries as prime targets, forcing companies to adjust their global development strategies.
Reduce chip size and improve performance
Trade associations believe that the promotion of technologies to be produced in the United States will limit the equal participation of international market participants. They also called on businesses around the world to come together to mitigate the effects of the US bill and take action, if necessary, to protect their legitimate rights and interests.
In its memorandum on the US law, consulting firm PwC says the grants under the law provide a “necessary airbag” for semiconductor companies to fill talent gaps and diversify their workforce. They could potentially play a vital role in reducing chip size and power while improving performance.
However, the funding comes with new geographic restrictions on production, PwC notes, noting that the US bill would prevent companies from using grants to fund chip manufacturing expansion in China and other countries identified as a potential national security threat.
“Rethinking Global Strategy”
The consultant advises companies wishing to use grants to assess their global operations and take into account key issues, including ensuring that their global R&D and manufacturing activities comply with the geographic restrictions of the law. They may also need to find new partners in their supply chain, including for assembly, testing, and packaging of devices, and whether it would be more cost-effective to expand their manufacturing capacity in the United States rather than partnering with manufacturers.
For PwC, “The Chip Act may open opportunities for semiconductor companies, but realizing its potential will require rethinking the overall strategy, as well as the digital transformation plan, capital project management and financial planning. Geopolitical uncertainty, coupled with recent dramatic market changes, requires companies to carefully assess their place in the semiconductor value chain and how they can improve their position.”