US President Joe Biden’s big bet to secure more of the semiconductor supply chain is paying off.
The Chips and Science Act, backed by more than $100 billion in grants, loans and guarantees for semiconductor firms to build plants in America, unleashed an avalanche of investment that will help reverse a downward trend of domestic chip production, according to the Semiconductor Industry Association.
But America isn’t alone in building out its chip capacity: China is constructing about 30 new facilities for parts of the supply chain, more than in the US, the Washington-based lobby group said Wednesday.
It’s a reminder that for all the Biden administration’s efforts to curtail Beijing’s chipmaking ability — including further squeezing Huawei this week — China retains a hold on certain key sectors.
That includes so-called legacy chips. They’re not at the cutting edge and so avoid US export controls but remain ubiquitous in applications like consumer electronics, military systems and cars.
While China is the largest global supplier of such chips, the country is also an important revenue source for US, Japanese and especially European companies that supply the automotive industry there.
China is the world’s biggest market for electric vehicles, which need growing numbers of chips for sensors, power management and braking systems — and it relies on foreign chipmakers like Infineon of Germany and Texas Instruments to meet that demand.
They are more than happy to do so. Just this week Infineon announced a deal to supply chips for Xiaomi’s new EVs.
Beijing, though, has issued a call to increase domestic production of legacy chips, including automotive semiconductors. Biden, meanwhile, is preparing tariffs on industries including electric vehicles.
All the signs point to a new phase of competition that threatens to turn a lucrative market into a liability for Western companies — and another headache for Biden.— Alan Crawford