United States Should Rethink Its Chipmaking Strategy

Despite Current Manufacturing Crisis, United States Still Dominates World — Including China: High-End Microprocessors, Chipmaking Equipment.

The U.S. auto industry is slowing production and sending workers home because it can’t get the thousands of microchips that control everything from car emissions to engine performance. Chip shortages could also create long delays in upgrading smartphones or laptops this year or purchasing the latest game consoles for Christmas.

The shortages not only threaten our post-pandemic economic recovery — General Motors and Ford say they could be looking at a $4.5 billion hit to their earnings this year — they pose a danger to U.S. national security. The United States needs to rethink and bolster manufacturing of semiconductors that are increasingly critical to our daily lives. We were once the leader. In 1990, we produced nearly 40% of the world’s chips. Today, that portion has dropped to 12%. Taiwan (22%), Korea (21%), Japan (15%) and China (15%) all produce more and, if current trends continue, China will become the world’s largest chip producer by 2030.

President Biden gets it. His infrastructure plan would invest $50 billion in the semiconductor industry, with the primary focus on expanding U.S. chip manufacturing. Key companies are looking to do the same. Intel’s new CEO, Patrick Gelsinger, recently pledged to spend $20 billion on two new chip manufacturing plants in Arizona. And Taiwan Semiconductor Manufacturing Co., the leading chipmaker in the world, is building a $12 billion plant in Arizona.

But those plants won’t produce chips until 2024. Until they are up and running, the United States will be competing with other countries to win their share of the diminished global supply. The current shortage has multiple causes. The pandemic forced chipmakers to shut down or slow production. It also fueled higher demand for chip-dependent office equipment needed by employees working from home.

A serious drought in Taiwan hurt production because chip manufacturing uses vast amounts of water. And U.S. sanctions against China caused that country’s manufacturers to stockpile their chip supply. China is desperate for chips to help achieve its goal of dominating technological advancements, says Dan Sneider, an Asian studies lecturer at Stanford University. It’s imperative, he said, that the United States do everything possible to maintain a strong relationship with chipmakers in Taiwan, Korea and Japan to keep China from gobbling up whatever chips are available.

Despite The Current Manufacturing Crisis, The United States Still Dominates The World — Including China — In Three Important Areas: High-End Microprocessors, Specialty Chips And Chipmaking Equipment. But the United States cannot assume that dominance will continue without sufficient investment in the kind of research and development that fueled the technological breakthroughs of the past three decades.

As Biden said Wednesday, “We’re falling behind in that competition. … China and other countries are closing in fast.” Like it or not, the United States is in a tech war with China. The winner will be the country that creates the best chips and crafts a reliable supply chain to meet users’ needs.

This news was originally published at Mercury News.

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