Biden Pushes Expansion of Domestic Semiconductor Manufacturing

U.S. President Joe Biden touted a $20 billion investment by American technology company Intel to build a semiconductor factory in Ohio to address a global shortage that has been exacerbated by the COVID-19 pandemic and the U.S.-China trade war.

In a speech from the White House on Friday, Biden said the Intel factory, part of the administration’s effort to work with the private sector, would create thousands of jobs. He urged Congress to pass legislation to further expand domestic chip manufacturing, framing it in the context of strategic competition with China.

“Today 75% of the production takes place in East Asia; 90% of the most advanced chips are made in Taiwan,” Biden said. “China is doing everything it can to take over the global market so they can try to outcompete the rest of us.”

Semiconductor chips function as the brains of cars, medical equipment, household appliances and electronic devices.

The $20 billion factory is an initial investment, said Patrick Gelsinger, chief executive officer of Intel, at the White House event.

“This site alone could grow to as much as $100 billion of total investment over the decade,” he said.

The White House pointed to other investments in semiconductor manufacturing in the United States earlier this year by Samsung, Texas Instruments and Micron.

“Congress can accelerate this progress by passing the U.S. Investment and Competition Act, also known as USICA, which the president has long championed and which he called for action on today,” said White House press secretary Jen Psaki, referring to legislation that aims to strengthen research, development and manufacturing for critical supply chains to address semiconductor shortages.

Driven by Washington’s desire to retain an edge over China’s technological ambitions, USICA was passed with rare bipartisan Senate support in June but still needs to be passed by the House of Representatives. It includes full funding for the CHIPS for America Act, which provides $52 billion to catalyze more private sector investments in the semiconductor industry.

“The Chinese have been really clear. They want an indigenous chip industry. They want to be globally dominant, and that means displacing the U.S. and others,” James Lewis, director of the technology and public policy program at the Center for Strategic and International Studies, told VOA.

The U.S. share of global semiconductor production has fallen from 37% to 12% over the past 30 years, according to government data.

Pandemic impact

The COVID-19 pandemic and extreme changes in consumer demand during lockdowns have exacerbated fragility in the global semiconductor supply chain.

“Consumer demand increased rapidly for items such as home computers, while supply could not keep up and many Chinese manufacturers were locked down,” Nada Sanders, professor of supply chain management at the D’Amore-McKim School of Business at Northeastern University, told VOA.

Meanwhile, the U.S.-China tariff war that began under the Trump administration and geopolitical conflicts between the two global rivals have made the environment even less conducive for cooperation, Sanders said.

The Intel factory will not be operational until 2025, but analysts say the initiative will still be effective to secure the supply of chips in the long run.

“You cannot underestimate demand for this stuff. It grows at about 10% a year,” Lewis said.

As the U.S. expands its domestic chip manufacturing capacity, analysts say a key component is working with international partners, including South Korea, Taiwan and Japan, to fill in the supply gap.

Earlier Friday, Biden discussed semiconductor supply chain resilience in his virtual summit with Japanese Prime Minister Fumio Kishida.

“The leaders did discuss the importance of cooperation on supply chain security, including semiconductors, and the president described what we are doing at home and underscored the importance of working together on it,” a National Security Council spokesperson told VOA.

The spokesperson added that the two countries have been working closely in this area bilaterally through the Quad, a security dialogue forum involving the U.S., Australia, India and Japan.

“The new ministerial-level Economic Policy Consultative Committee (the Economic ‘2+2’) established by the leaders today will also cover this important issue,” the spokesperson said.

Taiwan, home to the Taiwan Semiconductor Manufacturing Company (TSMC) and the leading producer of advanced chips in the world, is another key partner.

“If China was to take over Taiwan, and use TSMC as a leverage point, that would be hugely disruptive,” Lewis said. “Taiwan and its proximity to China and China’s hostility drives a lot of the concern.”

The global chip shortage has pushed up inflation rates and hamstrung the administration’s economic recovery efforts. It contributed to the sharp increases in the price of new and used automobiles, which account for one-third of the annual price increases in the consumer price index.

Biden’s approval in the polls has been lagging recently, partly driven by inflation. Consumer prices jumped 7% in December compared with a year earlier, the highest inflation rate in 40 years. It has dampened economic recovery in a year that the administration says has shown the biggest job growth in American history.
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