A chip law? Does America need it?
Yes definitely. The fact that some Republicans also support these plans indicates a greater sense of urgency. Thirty years ago, 37 percent of all chips worldwide were made in the United States. It has now come down to 12 percent. Europe is faring even worse. Most chips worldwide are made in China. When it comes to advanced chips for smartphones and military applications, for example, the figures are even more extreme. A single company, Taiwan’s TSMC, is responsible for 90 percent of global production. For example, this company also makes the chips that are in iPhones. Rate for Americans: 0 percent.
Is it too bad for America that Taiwan makes almost all the chips?
Yes, it is disadvantageous for several reasons. First, the economy. President Biden tweeted over the weekend that the CHIP Act “creates high-paying jobs across the country.” The geopolitical landscape is very important, in which chip manufacturing also plays a role. The fact that the US itself produces very few chips makes it particularly vulnerable. The current shortage, triggered by the Covid pandemic, has left entire industries reeling. Especially when the car industry is struggling with delays or, at best, broken cars that don’t have chips. The computer and smartphone market has also been facing major problems for some time now.
Less known, but even more important is the military industry. Even high-tech weapons cannot function without modern chips. It is actually made in Taiwan. If China decides to annex Taiwan, a scenario the White House is considering, the consequences are incalculable. This would make the US completely dependent on China, so that a potential chip boycott would boomerang back. Incidentally, the effects of heightened tensions resulting from Nancy Pelosi’s visit to Taiwan may soon be felt. According to some rumors, the new iPhone 14 will be delayed due to new Chinese sanctions on Taiwan.
The CHIPS Act will supercharge our efforts to make semiconductors in America. It will make cars, appliances and computers cheaper and reduce the cost of everyday goods. And, it will create high-paying manufacturing jobs across the country.
— Joe Biden (@JoeBiden) August 6, 2022
What does Biden want to do about all this?
A giant bag of money should change the status quo and put America back on the map. Of the $280 billion, about $50 billion is intended to support the national chip industry. So those billions should go directly to manufacturers, preventing companies like Intel or Broadcom from setting up their factories elsewhere. Building a modern chip factory takes an enormous amount of time and a lot of money, about tens of billions of dollars. Other countries have been subsidizing a significant portion of those costs through subsidies for some time, according to Intel boss Pat Kelsinger. In China, according to him, it would be 70 percent. Without those subsidies, according to the CEO, Intel (once the market leader) would not be able to compete. A large portion of Biden’s aid package is for scientific research into new chip technologies.
What is Europe’s role?
Apart from advanced machines from Dutch ASML – used in chip factories – this stock is very limited. The European market share of total chip production has declined from 20 percent in the 1990s to 8 to 9 percent now, but should return to that level by 2030. The European Commission has launched a plan to provide 43 billion euros in public and private investment over the coming years to boost the development of advanced chips in the EU. It will be crowded because China and Taiwan are not yet seated.
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