Biden's plan to take back chip supremacy from China

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Biden's plan to take back chip supremacy from China

President Joe Biden's bill for the U.S. semiconductor industry marks an ambitious effort to set industrial policy for a critical sector of the economy, but it would need more money and global support to take back chip supremacy and prevent a rival effort from China.

On Tuesday, the White House outlined a sweeping plan to secure the conduits for critical products from medicines to chips, responding in part to the growing economic and political sway of its Asian rival. Semiconductors - the contemporary yet incredibly basic components in most almost any basic device -- took center stage in a 250 - page White House report, which highlighted Beijing's 'prime goal of cyber sovereignty and establishing first-mover advantage.

The U.S. Senate expressed bipartisan support by passing a bill that expected to raise the same day $52 billion in chip manufacturing from national citizens. These efforts are aimed at strengthening the industry leaders like Intel Corporation. Chinese Semiconductor Manufacturing Co. and Taiwan Semiconductor Manufacturing Co. as they think about increasing production capacity in the country. It's a major commitment, but the money will go fast in an era where a single advanced wafer manufacturing family operates over $10 billion.

China has made technology advances a major part of its 14th five-year plan, with President Xi Jinping pledged $1.4 trillion over six years to secure a lead in markets such as chips, artificial intelligence and autonomous driving. South Korean companies like Samsung and SK Hynix Inc. are spending $450 billion over a decade on chip research and expansion, while TSMC alone has $100 billion over the next three years.

The 50 billion dollar first is a large industry with multiple amounts of subsidies being proposed across multiple geographies, said Anne Hoecker, a partner at Bain Company. The investment gives more assurance for multi-year manufacturers to make large investments in the next two years.

Compete with China ;

Biden demonstrates a willingness to break with the other traditions of the U.S. in calculating semiconductor industry, why different approach given the deep government involvement in other countries? He has powerful allies in his corner, in nations that command global sectors of a giant chipmaking apparatus.

Among the goals outlined in Tuesday's report is an attempt to lure more foreign investment and leverage U.S. diplomatic muscle abroad. TSMC and Samsung are currently in talks to secure vital incentives to build advanced chip plants in the U.S., which would instantly elevate both the U.S. semiconductor industry know-how and capacity.

The White House also called for effective multilateral export controls that would protect U.S. national security interests by limiting advanced semiconductor capabilities in countries of concern.

The Netherlands is home to ASML Holding NV, which enjoys a virtual monopoly over the market for advanced extreme ultraviolet lithography equipment - essential in making the most advanced 5- nanometer chips and beyond. It has been unable to ship any EUV systems to China as the Chinese government has not renewed its Export Licenses for Dutch customers. Meanwhile, Chinese companies such as Tokyo Electron Ltd. and Nikon Corp. (Btw. ) supply first-class gear to Japanese chipmakers such as Intel and also sophisticated companies.

Biden's plan is in part a reflection of a growing global concern. The world's heavy dependence on a handful of major Asian chip suppliers like TSMC was exposed this year after a global supply crisis idled factories at several U.S. automakers, threatening to cut $110 billion in sales.

China's long-term threat is the other one. The country remains at least several generations behind Taiwan and the United States in chip design sophistication. But China's track record as the world's factory floor and vast reams of data could give it a leg up in certain vital segments, such as the labor-intensive but crucial work of assembling and packaging semiconductors or the younger field of AI-enabled chips.

In a sign of the urgency of this effort, Nanjing's top semiconductor executives and senior policy makers converged on this week for the three-day World Semiconductor Conference to brainstorm future approaches and cement alliances.

Advanced chip packaging offers China a chance to push performance by combining a number of chips in one package, but it's ultimately not a replacement for fundamental semiconductor development, said Bain Hoecker.

Until now, China has been chasing the rest of the world over the past decade. But today, as the performance of chips and chips increases significantly slower than in previous years it's for sure that China will be able to close the gap with the leaders, said Wu Hanming, a member of the Chinese Academy of Engineering, a state-backed research institute that houses elite scientists.

In the short term, Biden's blueprint promises to put a shot in the arm. A $50 billion federal program to incentivize domestic semiconductor manufacturing would add $24.6 billion annually to the economy, according to the Semiconductor Industry Association and Oxford Economics. It would generate 280,000 permanent jobs of which 42,000 would be employed directly in the semiconductor industry.

'' The goal of the U.S. semiconductor industry is simpler than China's. It is possible only to re-shore chip manufacturing, and is already well on the path to doing so, said Dan Wang, technical analyst at Gavekal Dragonomics. China’ s challenge is not only to invent chips but also invent the equipment - which are some of the most complex instruments in the world - to produce them.

More stories like this are available on bloomberg.com.

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