Article Summary –
The Biden administration is working to transform the global semiconductor supply chain, aiming to produce more chips in the US and partner with other countries for final assembly. The administration argues this will make the country more secure and prosperous, and help to manage security concerns related to China and potential disruptions to the chip supply chain. However, reworking global supply chains to be less dependent on East Asia will be challenging due to advanced technology, a larger pool of talented engineers, and lower costs than American factories are expected to provide.
The Biden Administration’s Plan for Chip Manufacturing Industry Revamp
The Biden administration aims to boost American production of electronic chips, with factories ideally situated in Texas or Arizona. The vision includes shipping these chips to partner nations like Costa Rica, Vietnam or Kenya for final assembly. The goal is to redefine the world’s chip supply chain, with intense negotiations currently underway.
“Chip Diplomacy”: A New Approach to Global Supply Chains
Key aspects of this strategy involve enticing foreign firms to invest in chip manufacturing within the United States and encouraging other nations to establish factories to finalize the process. This is referred to as “chip diplomacy” by officials and researchers in Washington.
Strengthening Economic Prosperity and Security through Chip Manufacturing
The administration contends that increasing domestic production of electronic device components will enhance the country’s prosperity and security. President Biden has even managed to secure significant investment from South Korea in American chip manufacturing. A crucial element of this approach involves collaborating with partners beyond the US borders to ensure the durability of these investments.
Addressing Strategic Goals and Security Concerns
This initiative might also help the administration attain broader strategic objectives, such as mitigating security threats posed by China and minimizing disruption risks to the chip supply chain, as brought to light by the Covid-19 pandemic and the Ukraine conflict.
Investing in Green Energy Technology and Human Rights
Additionally, the administration seeks to diversify not only chip production, but also green energy technology manufacturing, such as electric vehicle batteries, solar panels, and wind turbines. The dominance of Chinese companies in these sectors is viewed as both a security and human rights issue, given the forced labor practices in Xinjiang.
Overcoming Challenges in Reworking Global Supply Chains
However, restructuring global supply chains to reduce East Asian reliance will pose a challenge. East Asian chip factories offer more advanced technology, an expansive pool of skilled engineers, and lower costs compared to anticipated American factories. Moreover, the US semiconductor industry could potentially face a shortage of up to 90,000 workers in the coming years, while countries like China, Taiwan, and South Korea are actively subsidizing their chip industries.
Anticipated Shifts in Global Supply Chains
Despite these challenges, new investments are expected to somewhat shift global supply chains. The US share of global chip manufacturing is projected to rise to 14% by 2032, from 10% today, according to a report from the Semiconductor Industry Association and the Boston Consulting Group.
Implementing New Legislation for Job Creation and Supply Chain Development
Biden’s recent enactment of legislation aimed at creating more manufacturing jobs in the US, including the infrastructure act and the CHIPS and Science Act, has been instrumental in this initiative. The CHIPS act includes $500 million annual funding to create secure supply chains and protect semiconductor technology.
Focusing on Job Training and International Partnerships
Job training has been a priority in supply chain creation. Arizona State University has been approached as a potential partner with overseas institutions to develop training programs. Countries currently involved in the program include Costa Rica, Indonesia, Mexico, Panama, the Philippines, and Vietnam, with plans to include Kenya.
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