A sweeping bill to encourage companies to manufacture semiconductors in the U.S. passed the Senate on June 8 with bipartisan support. The tiny computer chips are used in practically all modern technology and the current global supply chain shortage of these semiconductors could spell disaster for American manufacturing.
Demand for semiconductors spiked 6.5% in 2020 as tech companies raced to produce products aimed at facilitating remote learning, work, and healthcare during the coronavirus pandemic. Industry experts have warned that further disruptions of the global supply chain could have dramatic consequences in the U.S. such as limiting American companies’ ability to produce everything from iPhones to high-tech weaponry and even medical equipment.
On Monday, NPR reported the global shortage forced an Alabama Hyundai plant to pause production. The United States Innovation and Competition Act of 2021 would allocate $92 billion to subsidize the domestic production of semiconductors and $195 billion in subsidies for technological research and development. And American businesses and research groups are lobbying hard to direct that money to their organizations.
Senate Majority Leader Chuck Schumer (D-N.Y.) is the original sponsor of the measure and seven Republican senators signed on as co-sponsors, making the bill a rare glimmer of bipartisanship in the highly-polarized Congress. The legislation combines two pre-existing bills: one aimed at bolstering scientific and technological research, and the other designed to encourage domestic semiconductor manufacturing. The bill was introduced in the House in February but hasn’t received a floor vote.
Top lobbying groups like the U.S. Chamber of Commerce, the Alliance for Automotive Innovation and the National Association of Manufacturers support the legislation. Earlier this year, these groups released statements urging Congress to provide economic incentives for increased domestic production of semiconductors. Only 12% of the world’s semiconductors are produced in the U.S. That’s a decrease of approximately 25% from the U.S.’s share of global production in 1990, according to a 2020 report by the Semiconductor Industry Association, the sector’s largest trade group.
During A Wednesday Webinar On Semiconductor Policy, SIA President John Neuffer Said Potential Supply Chain Issues Could Cause “Real Geopolitical Risks” for the U.S. if the government doesn’t create economic incentives for domestic manufacturers. “We have some blind spots that need to be addressed. The great thing is the U.S. government is focused like a laser on helping facilitate good outcomes,” Neuffer said. Neuffer added that the biggest barrier to U.S. manufacturing is a lack of federal investment.
“By far the biggest barriers to manufacturing in the U.S. are incentives offered overseas. What happened is that competing countries took the decision to incentivize manufacturing in their countries, massive incentives,” Neuffer said. “We absolutely need to have our government step in and offer similar incentives.”
There are 21 lobbyists registered for the SIA in 2021, and the trade association spent $300,000 on lobbying expenses in the first financial quarter. In 2020, the group spent a total of $1.2 million to lobby the federal government.
While disclosures for the second financial quarter aren’t available yet, lobbyists working on behalf of 64 separate clients reported lobbying activity related to the Endless Frontier Act, a 2020 bill to boost scientific research and development of technology like semiconductors. Defense contractors, software companies, hospitals, trade associations, and research universities were among the diverse group of clients who lobbied on the bill.
Lobbyists for Microsoft filed six individual lobbying reports that mentioned the Endless Frontier Act by name. Booz Allen Hamilton, an information consulting company that works closely with the U.S. military, reported $210,000 in lobbying expenses on the Endless Frontier Act in one lobbying report alone.
“Washington is increasingly focused on issues impacting the semiconductor sector, so our industry has bulked up its presence to ensure policymakers understand that U.S. leadership in semiconductors is essential to America’s global technology leadership, national security, economic strength, and job creation,” Neuffer told The Hill last summer.
According to CNBC, Taiwanese factories that produce semiconductors — called foundries — made up 63% of the global revenue from sales of semiconductors. In 2020, the Taiwan External Trade Development Council spent $1.8 million to lobby the U.S. government. Although the Senate-passed bill aims to boost domestic production, foreign-owned manufacturers could benefit from federal subsidies if they elect to build foundries in the U.S. The Wall Street Journal reported in 2020 that the leading Taiwanese production company planned to spend $12 billion over nearly a decade to build a new foundry in Arizona.
Some experts warn a Chinese initiative to dramatically increase the country’s semiconductor manufacturing capacity could threaten U.S. national security interests. In 2014, Chinese hackers breached computer hardware company Intel Corp.’s internal network by hacking into one microchip producer’s software, according to a Bloomberg investigation. One former FBI official told Bloomberg the hack demonstrated “an example of the worst-case scenario if you don’t have complete supervision over where your devices are manufactured.”
Chinese manufacturers controlled about 6% of the market share of semiconductor production in 2020. Virtually none of the manufacturing of the cutting-edge chips occurs domestically, National Instruments executive Ritu Favre told participants in Wednesday’s webinar. “There’s a big part of the performance of the actual chip that is tied to the manufacturing process,” Favre said. “The fact that these latest generations of technologies are 100% offshore, that does create a vulnerability.”
During his first two months in office, President Joe Biden issued an executive order directing the Department of Commerce to identify “risks in the semiconductor manufacturing and advanced packaging supply chains and policy recommendations to address these risks.” Biden reiterated his commitment to bolstering domestic manufacturing in a news conference at the G7 summit Sunday, emphasizing the importance of keeping pace with China’s technological output. “We’re in a contest, not with China per se,” Biden said, but “with autocrats, autocratic governments around the world, as to whether or not democracies can compete with them in a rapidly changing 21st century.”
This news was originally published at Truth Out.