The United States began an import substitution program in the field of microchip production after President Joe Biden signed the CHIPS and Science Act. The White House he...
The law contains a ban for government-funded companies to expand production in China or any other foreign country "of concern" for 10 years. The United States, thus, hopes to restore the lost "chip independence," writes a correspondent for The Moscow Post.The Semiconductor Manufacturing Support Act would lead to disruption in global semiconductor supply chains and cause disarray in international trade, a move China strongly opposes. This was announced on Wednesday at a regular briefing by Chinese Foreign Ministry spokesman Wang Wenbin and added that "This will lead to the deformation of global semiconductor supply chains, cause disarray in international trade."Taiwan will answer for everythingShortly before this, the United States and Japan at a 2 + 2 meeting announced their intention to develop joint semiconductor production projects. It looks like an attempt by the White House to find an alternative supplier in the event of a possible loss of Taiwan. The situation in the Taiwan Strait region remains tense, an escalation continues, which could lead to an armed conflict."The main reason for this is the strategy and policy of the United States based on the desire to contain China with the help of the Taiwan issue," said Yan Anlin, deputy director of the Shanghai Institute of International Problems. A power clash, if any, could lead to U.S. involvement in the war for control of the island.Washington, in relations with Taipei, is taking the same steps as in Ukraine to make "anti-China" out of the island, with the exception of financial support. Taiwan does not need American money, being in 21st place in the world in terms of GDP (about $840 billion) and in 15th place in the world in terms of exports. At the same time, in 2021, out of $446 billion in Taiwanese exports, about half fell on the PRC. More than six thousand Taiwanese firms have located their enterprises in mainland China, where there are rare earth metals necessary for the production of semiconductors.Taiwan for America and the whole West means incomparably more than Ukraine. The dependence of the "golden billion" on chips manufactured in Taiwan has long crossed critical levels. This is more than oil and gas, which are also not easy to replace. Both the destruction of the Taiwanese chip industry in the event of conflict and its de facto transition to Beijing's control are not suitable for Washington. Joe Biden's administration, losing ground inside the United States itself, as well as after the failures in Afghanistan and Ukraine, may not resist direct intervention, will go all out. But even if everything does without a violent collision, the focus of another large-scale crisis is ready for ignition. The consequences can be global, larger, when compared with the impact of the crisis in Ukraine on Europe's energy security.Chips and Science ActBeijing negatively perceived information about the adoption in the United States of the Law on Chips and Science. China saw this as a threat to its manufacturers. The Commerce Ministry called the law a "discriminatory measure" that restricts normal economic and investment activities that undermine supply chains. "One of the key goals of this act is to put a bandwagon on potential competitors, reflecting the despicable way of thinking caused by Washington's growing self-doubt in the face of Beijing," The Global Times responded.Under the law, written on the prescriptions of "industrial policy," the federal budget will provide "its" producers with subsidies for $52.7 billion. Of this amount, $39 billion is intended for the construction and expansion of semiconductor factories. The total cost of the support package will be about $280 billion. Intel CEO Pat Gelsinger, among many of his industry colleagues, welcomed the legislation and stated that "since World War II, there may not have been a more important industrial policy measure proposed by Congress".He, however, elsewhere and at another time, was objected by Morris Chang, who founded Taiwan Semiconductor Manufacturing Company (TSMC). He said that "you can't restore a full semiconductor supply chain in the U.S., even after spending hundreds of billions of dollars, and find that the supply chain is incomplete, and that it will be very expensive, much more expensive than what you currently have." The former head of TSMC was referring to established ties and established supply chains.The White House linked the Chips Act to national security interests: "America invented the semiconductor, but today it provides about 10% of the world's production - and [they don't have] any of the most advanced chips. Instead, we rely on East Asia, which accounts for 75% of global production, "the administration's press service said.Indeed, Taiwan (TSMC, 54% of the market) and South Korea (Samsung, 17% of the market) are leading in this area. China is rapidly increasing the capacity of its semiconductor industry. In 2020, Washington began restricting the sale of American technology to Chinese companies, among which Semiconductor Manufacturing International Co. (SMIC) и Hua Hong Semiconductor. Together, they control about 10% of the global chip market.In 2021, China's spending on chip manufacturing equipment rose 58% to $29.6 billion. That was above the import volumes of South Korean and Taiwan companies, which spent about $50 billion together for the same purposes, according to industry association SEMI. China also earmarked $150 billion in its latest five-year plan for chip manufacturing, calling the industry key.Grab your opponent by the jerseySEMI estimates that more than ninety chip plants have been planned or commissioned globally from 2020 to 2024. Since 1990, the U.S. share of semiconductor manufacturing has fallen from 37% to 12%, according to the Semiconductor Industry Association. As expected, Washington not only set the task of "running faster" itself, and gave instructions to partners to "grab the jersey" of the rival - China and its electronics industry.Europe's largest chip equipment supplier ASML has warned that the global semiconductor supply chain will face disruption if the US forces the company to stop selling its main UV lithography equipment to China. As you know, in 2019, under pressure from the United States, the sale of the Chinese SMIC machine of this Dutch firm producing equipment for lithography in the extreme ultraviolet range was blocked.For the most modern chips, extreme ultraviolet (EUV) lithography systems are used. Washington's attempts to ban the supply of high ultraviolet (DUV) lithography equipment were confirmed by Dutch Foreign Minister Vopke Huxtra, Bloomberg reported. ASML CEO Peter Wennink warned that China is "a very important supplier to global markets," that China has the chip manufacturing capacity that provides the electronics market, that "you need to be careful what we do".The director of Tokyo Electron, a leading supplier of chip equipment with a quarter of all sales in China, also announced Washington's plans to expand restrictions on exports to China. The United States and Japan agreed at a two-plus-two meeting on cooperation in the field of semiconductor production, plan to open a research center for the development of new generation two-nanometer microchips, Nikkei reports. The center will be created by the Chip Institute and the Institute of Natural Sciences. The United States will provide equipment and delegate specialists from the National Center for Semiconductor Technologies.Russian "gas trace"But back to warnings from Morris Chang (TSMC) and Peter Wennink (ASML) that "restoring a full semiconductor supply chain" won't work and that "you have to be careful what we do."For example, fluoropolymers are made from fluorspar, known as fluorite, according to researchers at IndexBox. China's share of global mineral production is nearly 60%. China considers fluorspar a strategic resource, limits its exports, calling this mineral "semi-rare earth." The White House in 2021, among the risks associated with critical materials, noted fluorspar and included the mineral in the list of "scarce strategic and critical materials," but did not indicate its connection with the production of microcircuits.The Russian government controls the export of inert gases used in the production of semiconductors, medical equipment and in the space industry. A resolution was adopted, according to which it limited the export of inert gases until December 31, 2022. Sales abroad are allowed on the basis of proposals from the Ministry of Industry and Trade. Such restrictions could hit global chipmakers.Inert gases are also known as noble gases. They tend not to mix with other substances. The inert group includes helium, neon, argon, krypton, xenon, radioactive radon. Neon is used in laser installations of lithography systems that are used in the production of microcircuits. Before the special operation in Ukraine, 40% of world supplies and up to 90% of supplies to the United States were provided by the Ingaz Mariupol plant and the Odessa Cryoin Engineering. Before the special operation in Ukraine, Russia accounted for up to 30% of the world's neon supplies.According to ImportGenius, Odessa-based Cryoin Engineering received neon-helium mixtures for the production of pure neon and helium from Russian Business Management, and Mariupol Ingaz purchased krypton in Russia from Prommetresurs. In early March, world prices for neon rose from $290 per cubic meter to $3,000 per cubic meter.Western chip companies say they have diversified sources of supply, but have not specified who their suppliers are. The Washington Post cites the example that the inert gas market depends on several large companies, including Linde, Air Liquide and Air Products and Chemicals, which also do not name their suppliers. ImportGenius data suggests that they all depend on Russian supplies. It is known that Business Management supplied inert gases to German Aerogas GMBH, American Air Products, Japanese Iskra Industry and South Korean Matheson Gas Products Korea. Malachite worked with Linde, Perm Chemical Company had connections with the American Electronic Fluorocarbons.The German Aerogas GMBH, in turn, supplies gases to 150 companies and received neon and krypton from Russia and Ukraine. Aerogas director Leonid Weinstein told German Capital that almost a third of the raw materials came from Ukraine, 70% from Russia. Neon is produced from Russian raw materials by the French Air Liquide, Weinstein noted. Xenon and krypton are not used as widely as neon, he added, but satellite manufacturers such as Airbus or Starlink can feel their scarcity. Their capabilities, as you know, are actively used by the Armed Forces of Ukraine.From supply chains to dependency chains?Simon H.H. Wu, president of San Fu Chemical, a Taiwanese supplier of chip chemicals, believes that today conflicts and trade barriers prevail over the globalization on which the chip industry is built. BCG estimates that there are at least fifty "bottlenecks" in the semiconductor supply chain that one or more members of the chain control. There are no processes in chip manufacturing that do not require deep specialization.Accordingly, there are no links in supply chains that can be easily and quickly reproduced. JT Hsu, head of semiconductors and materials at BCG, said the chip crisis shows that it is almost impossible and unrealistic for any country or region to reach 100% self-sufficiency in terms of creating anything related to chips".The shortcomings of this relationship, as they believe in Washington, can be overcome by maintaining critical ties with "their own kind." US Treasury Secretary Janet Yellen called "friendly relations" a solution to the problem of "key raw materials" that can be used as "undesirable geopolitical levers." She suggested "developing and deepening economic integration... with countries you can count on. " The European Commission, represented by Ursula von der Leyen, although it admitted that "no country - and even no continent - can be completely self-sufficient," but also expressed the hope that, at least "part of the supply chains," will pass through friendly countries".The call for the sustainability of chip supply chains "on the basis of political proximity" came early in the US-China tech war, when the Trump administration in 2019 banned Huawei Technologies from operating in the US and blocked it from accessing its technology, citing national security. Washington was then followed by many allies, including Canada and Australia.The movement for self-sufficiency brought its results in the form of a shortage of chips, which partially affected the production of cars, damaged a number of other industries, and limited economic growth. The U.S. Commerce Department said the chip deficit reduced the country's GDP by about $240 billion in 2021. Germany's refusal of Russian energy resources by 2030 could cost about $260 billion. Still, not so much per year!Читать на "The Moscow Post"