WASHINGTON –
Over the past years, the US share of manufacturing and producing semiconductors (also called electronic chips) has eroded from 37% of global production in 1990 to just 12% today.
The tension in America's relations with China following the emergence and spread of the Corona virus since the end of 2019, called the attention of American decision-makers to the dangers of heavy reliance on semiconductors manufactured outside their country.
The administration of former President Donald Trump, and then the administration of Joe Biden, took several serious steps in order to reduce dependence on electronic chips manufactured abroad, and Congress introduced several legislations to facilitate and support this sector within the United States, the most recent of which was the Senate's passage of the "Semiconductor Act" (CHIPS- plus) to support American semiconductor producers and developers, which won the support of a bipartisan majority of legislators, with 64 approved and 33 against.
Al Jazeera Net presents, in a question and answer, everything related to this issue that preoccupies politicians and the technology sector inside and outside the United States.
Why did Congress get involved in the semiconductor manufacturing issue?
The Senate passed the Semiconductor Act of 2022 to strengthen domestic semiconductors, manufacturing, design, and research, fortify the economy and national security, and strengthen U.S. chip supply chains.
The erosion of the modern manufacturing capacity of American semiconductors - due to the absence of government support - has led to a stalemate in research, at a time when other countries have greatly doubled research investments in these vital sectors, especially China.
What is the significance of the step taken by the Senate?
The legislation aims to help the United States compete with China by pumping tens of billions of dollars into domestic semiconductor production.
The bill will now head to the House of Representatives, where lawmakers hope to pass it and send it to the White House for President Joe Biden's signature before Congress leaves for summer recess in the first half of August.
The package includes more than $52 billion for US computer chip producers, as well as a tax credit for investment in chip manufacturing.
The project also provides the necessary funding to stimulate innovation and development in other assistive technologies.
The bill's passage would encourage the return of American chip manufacturing, boost domestic chip research and design, and help ensure US leadership in the critical chip-powering technologies that will define America's future in a fierce competition from China.
What are the highlights of the new legislation?
The bill allocates tens of billions of dollars to increase US computer chip manufacturing, and provides tax credits for investments in semiconductor manufacturing.
This measure includes more than $52 billion for the semiconductor industry, including $39 billion to improve local facilities and equipment for manufacturing.
It will also create a 25% tax credit and other incentives for investments in semiconductor manufacturing.
How did the US technology sector respond?
“Congressional approval of the Semiconductor Act investments is an important step toward strengthening America's leadership in the semiconductor sector, which is essential to our economy, national security, and global leadership in today's and future transformational technologies," said John Nuffer, President and CEO of the American Semiconductor Producers Association. Accelerate the promotion of chip production and innovation in the United States for many years to come.”
What is expected of Parliament?
The legislation is expected to pass the House, with Speaker Nancy Pelosi saying the chip bill is a "huge victory for American families and the economy."
What is the importance of manufacturing electronic chips locally in the United States?
This reduces dependence on exports, which the experience of the past few years revealed their fragility with the widespread closures caused by the outbreak and spread of the Corona virus, in addition to the disruption of global commercial supply chains, which left millions of American consumers without the devices and products that these chips used to manufacture. Significantly, such as automobiles, household electrical appliances, medical instruments, and other vital industrial products.
The United States also makes few of the most advanced types of semiconductors, which are produced largely in Taiwan, which is the epicenter of ongoing tension between China and the United States at a time when many Americans fear Beijing's invasion of Taiwan.
Semiconductors are involved in the operation of many tools and lethal weapons of modern warfare, for example, each Javelin missile launch system - of which Washington has provided hundreds to the Ukrainian army - contains hundreds of electronic chips, which prompts US defense officials to concern about their dependence on foreign producers for their country's supply of chips.
What is the Biden administration's position on the Senate move?
US National Security Adviser Jack Sullivan stated that "America's continued dependence on overseas-manufactured semiconductors is extremely dangerous, and disrupting our chip supplies would be catastrophic."
Biden also spoke out, blaming the lack of chips for his administration's high inflation and for causing his popularity ratings to plummet among Americans.
Biden said, "America invented semiconductors, and it's time to bring them home." Flexibility, so we never depend on foreign countries to get the critical technologies we need for American consumers and the national security sector.”
Has the legislation faced strong opposition in the Senate?
The legislation faced criticism from some Senate Republicans such as Senator Marco Rubio of Florida, who said it lacked "protective barriers" to prevent government funding from falling into the hands of China.
Others argued that the United States would have to spend several billion more to have a real chance of competing with the world's leading chipmakers.
Senator Bernie Sanders earlier opposed the bill, calling it "a $52 billion blank check for profitable microchip and semiconductor companies."
"Let's rebuild the microchip industry in the United States, but let's do it in a way that benefits our entire community, not just a handful of profitable, rich companies," Sanders said before the vote.
Why has the American concern increased over reliance on imported chips?
Semiconductors, or computer chips, are involved in nearly all industrial activities, including systems that support industrial competitiveness and national security for the United States.
They are useful in technologies that meet a wide range of critical needs, such as defensive weapon systems, medical equipment, automobiles, industrial machinery, consumer electronics, and environmental systems.
The process of designing and manufacturing semiconductors is a global process that takes place in several countries, and complements each other in a wide range of them, and these processes include: design, manufacture, assembly, testing, packaging, and packaging.
American companies play a large role in the design, and six US-based or foreign-owned semiconductor manufacturers currently operate 20 manufacturing facilities in America.
However, the US share of semiconductor manufacturing capacity reached 12% in 2020, at a time when nearly 4-fifths of global production capacity was located in the Asian continent - South Korea (28%), Taiwan (22%), Japan (16%) and China (12%)-.
What are the main concerns about US chip manufacturing capacity?
Some members of Congress have expressed concern about the economic and military implications of losing US leadership in parts of the semiconductor supply chain, and related to the adequacy of US-based semiconductor manufacturers' capacity to meet the country's commercial and defense needs.
Others are becoming increasingly concerned about the concentration of production in East Asia and the related vulnerability of semiconductor supply chains to disruption in the event of a trade or military conflict, as well as other risks such as product tampering and intellectual property theft.
These concerns have been exacerbated by the semiconductor supply chain challenges that emerged during the COVID-19 pandemic due to shifting industrial and consumer demand, reduced production and disruptions to transportation and logistics.
Does China pose a threat to the United States in this field?
Some members of Congress are concerned that China's state-led effort to develop an integrated semiconductor OEM industry, unprecedented in scale and scale backed by huge Chinese consumption and market size, may allow China to shift to a global semiconductor production lead.
A study by the Congressional Research Service, the research backer of members of Congress, indicates that the Chinese government's expenditures have so far exceeded $150 billion in this direction, in order to make it a central production point for global consumer electronics.
The US Department of Defense believes that Chinese semiconductor makers have strong ties to the Chinese military and the Communist Party, which must reduce or end dependence on Chinese imports in these areas.
The Pentagon has previously placed on the US Department of Commerce's blacklist many major Chinese technology companies such as Huawei and SMIC because of their extensive ties to the Chinese military.