Bringing Back Chip Manufacturing To The United States Of America

House Speaker Nancy Pelosi, D-Calif., signs the Chips and Science Act bill, which would subsidize domestic semiconductor manufacturing and invest billions in science and technology innovation, on the West Front of the U.S. Capitol in Washington on Friday. Photo by Bonnie Cash/UPI | License Photo

The world has been pushing ahead of the United States in many sectors but this is especially evident with chip manufacturing in the U.S, with China leading the way. Lacking in so many areas the United States fell behind if you compare it to the acceleration of China’s chip manufacturing industry. Through my analysis of this pivotal moment in the development of technology and potential economic growth you can see statistical evidence that China has become number one. The Semi Constructor Industry Association (SIA) SIA members account for nearly 95% of all US semiconductor sales. This concentration of membership could be the cause of lack of expansion, and preventing innovation from happening. The polarity of chips produced abroad in China has created an opportunity for the U.S. to reposition itself as the leader in new semiconductor manufacturing. The demand globally for semiconductors is forecasted to grow at a cumulative rate at 5% annually over the next decade, this is driven by the adoption of technologies including AI, Internet of Things , edge computing, 5G, and electric and increasing autonomous vehicles.

With the recent passage of the CHIPS act that will expand domestic semiconductor manufacturing, including research & development with a perk of developing the work force with the 'workforce development' part of the bill. The bill is decried by China as a form of protectionism where the U.S. will distort the market by injecting all this money into R&D while trying to stay competitive on the world stage. China is clearly afraid of the U.S. making a comeback and shoring up production of chips. This is currently playing out with the U.S. trying to do everything it can to prevent China’s continued rise in the semiconductor sector. The ban advances and protects U.S. companies through export controls, according to Reuters “ this ban would involve barring the shipment of U.S. chip making equipment to factories in China that manufacture advanced NAND chips.” (REUTERS, 2022).

The logic behind the ban is to prevent China from stealing any vital manufacturing schematics and preventing China from using the United State’s own technology against itself as they haven done for many years with other technology.  Some might say using exports as a way to hamper China’s growth is a strategy that is out of what could be considered fair practice, yet given China’s ability to copy our technology over the last ten years warrants these export controls that should have happened years ago. Does the U.S. have a strategy advantage in the long term by doing this? In many ways yes, by doing so we prevent our intellectual property from being stolen and re-created at a slimmer cost. We need to come up with ways to prevent China while enforcing rules in regards to manufacturing chips. The chips in question are NAND chips which are used all the way from Google to Facebook, giving the ban a significant leverage to American companies. Why this type of ban has taken so long to materialize is a matter of debate, and valid questioning to American national security abroad and domestically. 

This report from BCG was written in 2020 well before the CHIPS ACT was passed or even considered,  yet it's unknown what the building blocks of the bill are from the report gives spot on information regarding what the U.S. needs to do to seize market share. Any program that is created could double or triple participation in new additional semiconductor manufacturing capacity to meet global expected growth in the market. The figures are projected to grow from 6% to 14-24% giving the U.S. a huge increase in manufacturing capacity and prevent China from becoming the sole world's manufacturer of chips.  

If the U.S. can reposition itself as the leader in chip manufacturing China’s growth can be tamed in a way that gives our country leverage over China and repositions the dynamics of power for the next 50 years. Failure of the U.S. to leverage economic incentives for chip manufacturers will diminish the U.S. standing economically, and technologically throughout the world. Successful execution of the CHIPS act will give the U.S. a fighting chance and allow U.S. based companies to stay competitive with China and other chip makers around the world. Successful execution will ensure that the chip market is not in the favor of the Chinese government and give the U.S. more leverage and security over chip manufacturing.


Resources & BCG Report 
https://www.reuters.com/technology/us-considers-crackdown-memory-chip-makers-china-2022-08-01/ 
https://www.semiconductors.org/wp-content/uploads/2020/09/Government-Incentives-and-US-Competitiveness-in-Semiconductor-Manufacturing-Sep-2020.pdf