WASHINGTON – In celebration a $ 20 billion investment from Intel at a new semiconductor factory in Ohio on Friday, President Biden sought to set in motion a halted element in his economic and national security agenda: a huge federal investment in manufacturing, research, and development in technologies that China also seeks to dominate.
With two other major legislative priorities dying in Congress – the Build Back Better Act and legislation to protect voting rights – Mr Biden moved to push for yet another bill, and a bill that has significant support from two parties.
But he has lost seven critical months since the Senate passed the measure, a comprehensive Chinese competition bill that would set aside nearly a quarter of a trillion dollars for domestic chip manufacturing, research in artificial intelligence, robotics, quantum computers and a variety of other technologies. The bill amounts to most expansive industrial policy legislation in American history.
In a White House speech, Mr. Biden that America was in a “tough economic and technological competition” with China. He chose the words deliberately, knowing that while it sounds obvious to American ears, Chinese officials have in recent months protested the use of the word “competition” and declared that it has echoes of a Cold War-like competition.
“We will insist that everyone, including China, play by the same rules,” he said. Biden. “We will invest whatever it takes in America, in American innovation, in American societies, in American workers.”
He argued that the initiative would be a long-term solution to supply chain disruptions and rising inflation and would free US arms systems from being dependent on foreign parts.
After months of rarely mentioning the Chinese Competition Bill so he did not lose focus on other elements of his agenda, Mr Biden said on Friday that it was necessary “for the sake of our economic competitiveness and our national security.”
Understand the supply chain crisis
“Today, we produce just under 10 percent of computer chips, despite being a leader in chip design and research,” he said. “We do not have the ability to make the most advanced chips right now, right now.”
The sweeping shortage of chips needed to power everything from cars and washing machines to medical equipment and electrical networks has forced some factories to close their production lines, knocking an entire percentage point away from U.S. growth last year, according to some estimates.
While the Biden administration has billed Intel’s new investment near Columbus, Ohio, as a partial remedy for supply chain disruptions that have led to global chip shortages and spurred inflation, the project would not do much to address any short-term economic problems. The plant in Ohio, the first phase of what Intel said could be an investment of up to $ 100 billion, is not expected to start operating until 2025, and many analysts have predicted that chip shortages will begin to subside later this year.
But in addition to giving positive headlines to a besieged White House, Intel’s plans could help create momentum for a key element on Mr. The bid’s agenda, which was set aside as lawmakers struggled with ambitious bills on infrastructure, social spending and voting rights. Speaker Nancy Pelosi indicated on Thursday that House committees would soon go to negotiations with the Senate to move Chinese competition law toward a vote.
When the bill passed the Senate by a wide margin in June, it was sold partly as a job plan and partly as a step to avoid leaving the United States dangerously dependent on its biggest geopolitical opponent.
China is not yet a major producer of the world’s most advanced chips, and it does not have the ability to make semiconductors with the smallest circuits – in part because the United States and its allies have blocked it from buying lithography equipment needed to make these chips.
But Beijing is pumping huge amounts of state aid to develop the sector, and it is also expanding its military reach over Taiwan, one of the largest manufacturers of advanced chips. China accounted for 9 percent of global chip sales in 2020, and was barely that far behind Japan and the EU’s global market share. according to the Semiconductor Industry Association. That was an increase from just 3.8 percent of global chip sales five years ago.
At this week’s World Economic Forum, Ursula von der Leyen, President of the European Commission, announced plans for Europe to propose its own legislation early next month to promote the development of the semiconductor industry and anticipate shortages.
John Neuffer, CEO of the Semiconductor Industry Association, said that Japan, South Korea, India and other countries also introduced their own incentives in an effort to attract a strategically important industry.
“The clock is ticking,” said Mr. Neuffer. “None of us work in a vacuum. This is a global industry.”
Mr. Biden’s push to pass China’s competition law comes amid growing frustration in business circles over his economic policies towards the country. Directors have complained to the administration still not clarified whether it will repeal any of the tariffs that President Donald J. Trump imposed on China, or how it will pressure Beijing for further trade concessions.
How the supply chain crisis unfolded
The pandemic triggered the problem. The very intricate and interconnected global supply chain is in disarray. Much of the crisis may be traced to the outbreak of Covid-19, which triggered an economic downturn, mass layoffs and a halt to production. Here is what happened next:
The bill passed by the Senate, known as the US Innovation and Competition Act, contains a number of provisions aimed at encouraging the US economy to take up the fight against China, but its focal point is $ 52 billion in federal investment to promote chip research , design and manufacture in the United States.
The chip financing itself has broad bipartisan support and could be enacted into law as soon as the next few months, supporters say; the question is whether other measures hidden in the package will lower the outlook. The Senate bill contains a number of trade-related provisions that some House Democrats may oppose, including a study of foreign digital trade practices.
The global shortage of chips and the damaging inflation that has followed it have spurred more interest in luring semiconductor manufacturing to the United States. But whether Congress approves billions of dollars in new funding – and how the Biden administration decides to distribute it – seems to determine whether an investment like Intel’s is a one-time event or a trend.
Companies including Taiwan Semiconductor Manufacturing Company, Texas Instruments, Micron Technology and SK Group have all announced recent expansions in the United States. Samsung has promised a $ 17 billion facility in Texas, while GlobalFoundries has committed another factory in New York.
But the focus of global industry is still in East Asia. While the United States is responsible for a lot of groundbreaking research and design in the chip industry, it has gone from being the world’s largest manufacturer of semiconductors several decades ago to mostly outsourcing production to Asian factories.
This has proven to be a vulnerability as pandemic-related shutdowns left companies around the world short of workers and raw materials, leading to shortages and rising prices for a number of goods, particularly semiconductors. Car manufacturers in particular have been affected, with almost all major car manufacturers forced to limit production last year.
Chip shortages have also become one of the biggest single factors driving inflation, which is now a major attack among US voters as midterm elections approach. Inflation hit a peak of 40 years in Decembersupported by a 37 percent increase in the price of used cars.
In an effort to alleviate the chip shortage, the Biden administration has convened meetings with semiconductors, established a global alert system to identify shortcomings, and requested huge amounts of information from chip companies about potential bottlenecks. The Ministry of Commerce is expected to publish some of this information before the end of the month.
Gina Raimondo, the trade secretary, said in a statement on Friday that Intel’s investment was a victory for the company, for US production and for “American consumers who can look forward to lower prices when we bring home the production of the semiconductors that hold our economy. running. “
But analysts say the administration has little control over any short-term trends in the industry, given the long delivery times needed to build semiconductor facilities.
Mr. Neuffer said his industry welcomed the White House’s attention to the sector, including encouraging companies to share more information. “But the reality is that there is only so much the government can do,” he said. “These are very complicated, deep global supply chains, and the market just has to work through this.”
Catie Edmondson contributed with reporting.