By on June 9, 2021

us-capitol, public domain

Apologies for all the semiconductor news. But it’s the topic of the day, with the United States Senate recently approving $52 billion in emergency spending to help bolster domestic chip production and another $190 billion for R&D programs.

Passing the vote (68-32) under the premise that boosting localized chip production would help prevent domestic automakers from having to cut corners, the Senate is also suggesting the funding could give the U.S. a competitive advantage against China. The Communist Party of China (CCP) has opposed the U.S. Innovation and Competition Act (formerly the Endless Frontier Act), with statements released from the National People’s Congress (NPC) demanding the legislation be halted immediately. 

“[This bill] smears China’s development path and domestic and foreign policies,” read statement reported by the Xinhua News Agency,” [it] interferes in China’s internal affairs under the banner of innovation and competition.”

Other media entities similarly operated under the supervision of the Chinese government have issued similar stories, often framing the United States as an economic aggressor. That is debatable, though supporters of the bill have clearly implied that the bill is partially designed to combat China’s growing industrial dominance and global influence.

From the Global Times:

In a statement, the NPC expressed its strong dissatisfaction and firm opposition to the so-called US Innovation and Competition Act of 2021, which fabricates so-called “China treat” to preserve the US global hegemony and seeks to deprive China of its legitimate development rights through technological and economic “decoupling”.

The harshly worded statement also come as the NPC’s standing committee is also moving ahead with an anti-foreign sanctions draft law this week, which is aiming to counter unilateral and discriminatory sanctions imposed by foreign governments on Chinese entities and individuals.

“At a time when the world enters a period of turbulence and change, the practice of treating China as an ‘imaginary enemy’ at every turn is against the general trend of the world, unpopular and doomed to fail,” reads the statement.

With the CCP repeatedly signaling that its intends on invading Taiwan, there’s a distinct possibility that the region could end up with a stranglehold on the chip industry. Western countries have basically all started to think about how to avoid such a catastrophe, largely ignoring the political fallout accompanying the invasion of a sovereign island nation. The European Union has also launched initiatives to bolster localized chip production this year, which was similarly opposed by China.

While the brunt of the proposed funding would actually go toward supporting research at universities and trade schools, $52 billion is to go directly toward supporting the industry. Bloomberg reported that has gone over incredibly well with those in the chip business.

“Semiconductors form the nerve center of America’s economy, national security, and critical infrastructure,” said John Neuffer, the president and CEO of the Semiconductor Industry Association. “We look forward to working with leaders in the administration and Congress to swiftly enact needed federal investments in chip technology to help ensure more of the chips our country needs are researched, designed and manufactured on U.S. shores.”

The latter aspect of the bill was championed by Republicans (ditto for the China-focused amendments) after they criticized Democrats for wanting to devote the brunt of the funding to educational concerns and being soft on the CCP. Several billion has also been earmarked for defense spending, specifically for any chip related research conducted by DARPA over the next five years. But some on the right conversely believe this is at odds with the free-market approach and hinged on an unsavory collaboration between private corporations and the government.

“Maintaining our technological superiority over China requires punishing bad Chinese behavior and relying on the natural innovative entrepreneurship of America’s market economy, not by imitating Chinese central planning,” Pennsylvania GOP Senator Pat Toomey said in a statement before voting against the bill.

This is a slippery fish because everyone is aware that chip shortages are absolutely crippling our ability to manufacture goods, specifically in respect to automobiles. But not everyone feels comfortable with the solutions being presented.

Currently, the bill enjoys the support of Senate Democrats, the Biden administration, and gaggle of Republicans that appear broadly okay with government spending. But the House Science Committee has some ideas of its own about how to fund R&D programs that would benefit the domestic semiconductor industry. Marrying those to the Senate proposals could delay progress and House Republicans have not been signaling the same enthusiasm in respect to using government money. Though they have indicated a desire to further protect intellectual property relating to Chinese businesses and an understanding that domestic manufacturers are really struggling due to the chip shortage.

We’ll have to see how it goes but were predicting a secondary slew of amendments before anything passes into law.

[Image: Architect of the Capitol]

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26 Comments on “Senate Approves Bill Injecting Cash Into Semiconductor Industry...”


  • avatar
    Lou_BC

    I’d rather see this approach to dealing with China as opposed to tariffs that yield a pyrrhic victory or putting soldiers on planes and boats.

  • avatar
    stuki

    What a surprise!

    A bunch of halfwits robbing even more of what remains of productive American enterprise, to hand money to those too incompetent to do anything at all cost effectively. Aside from lobbying a state which is by now more totalitarian than even the Chinese one, of course.

    • 0 avatar
      Astigmatism

      Seems to me leaving it up to the whims of productive American enterprise is how we ended up with a semiconductor shortage that basically shut down the auto industry.

      • 0 avatar
        thornmark

        that’s really obtuse

        the US automakers are to blame, they are notoriously cheap so the chip makers put them low on the list of customers

        does Toyota have this problem?

        • 0 avatar
          Astigmatism

          Toyota is famous for close communications with its suppliers, but they’re they exception. Not just Ford and GM, but Stellantis (Netherlands), Honda, Nissan and Suzuki (Japan), VW and Mercedes (Germany), and JLR (UK) have all had rolling stoppages because of the chip shortage. This has nothing to do with US automakers being “notoriously cheap”; this is a global problem affected vast swaths of global industries that merits a government response.

          • 0 avatar
            thornmark

            wrong

            the US manufacturers did this to themselves

            “When factories were shuttered and new-car sales cratered in the United States in the early days of the coronavirus pandemic last spring, many carmakers made what has turned out to be a critical error: they canceled orders for the microchips that have become essential to the manufacture and operation of new cars. But as demand for new cars has returned, carmakers have struggled to source the chips they need to complete their cars… The report from AutoForecast was published Monday by Automotive News, and it quantifies the estimated impact of the microchip shortage on North American production so far. The data show that the three Michigan-based automakers are bearing the brunt of the shortage. AutoForecast estimates Ford has taken 324,616 vehicles out of production as a result of the shortage, while General Motors has removed 277,966 cars from its production plans and Stellantis has reduced production by 252,193 units as a result of the chip shortage. Honda, Nissan, Subaru, Toyota, and Volkswagen have lost between 20,000 and 46,000 units to the shortage. “

      • 0 avatar
        stuki

        “We” ended up uncompetitive, specifically on account of printing money and enacting legislation to take from productive American workers and enterprise, in order to hand the loot to utterly useless dimwits. So that those could “make money from their home”, and “their portfolio”, and “on lawsuits”, and “insurance against lawsuits”, and “regulatory compliance” and absolutely everything else under the idiots’ sun, aside from doing the actual hard work of producing something competitively. Because that requires a brain and some effort. Which noone in any position of wealth, hence authority, has any of, after 5 decades of completely unconstrained wealth transfers brought about by crass money printing.

        A house sitting in the weather decaying does not create value. Every penny anyone has “made” from theirs, and every penny anyone has made from brokering them, as well as lending against them, has to have been produced by someone productive. Whose costs have hence increased, since he also has to pay for Mr-sit-on-couch-and-be-a-useless-leech. Ditto “inveeeeestors”. And ambulance chasers. And the rest of FIRE rackets. And mindless mandates and their beneficiaries and lobbyists. As well as building bombcraters halfway around the world. Etc, etc.

        Someone had to pay for it all. And since only productive people produce value to pay for anything with, that entire bill has to be paid by them. Rendering them so overburdened they can’t even compete with someone as clueless and inefficient as a bunch of communists anymore.

    • 0 avatar
      thornmark

      the Dems will let scores of Solyndras bloom

      and get campaign $ kickbacks as the money goes down the drain

      • 0 avatar
        FreedMike

        Alternative is what…”let nature take its’ course” and watch jobs go down the drain?

        I suppose as long as it’s not *your* job, that makes perfect sense.

    • 0 avatar
      dal20402

      “more totalitarian than even the Chinese one”

      Big talk from a keyboard insurrectionist, but would you actually go live in the land of Uyghur genocide, hukou registration, and firewalled internet today? I didn’t think so.

  • avatar
    SCE to AUX

    To the government’s surprise, chips have become a matter of national security even if they don’t have a direct military use.

    A crippled American economy is a big problem, and the CCP’s protests indicate that this move was the right one.

    I agree with Astigmatism above – competitive cost-cutting in every industry got us to this point. Let’s face it – no consumer wants to pay more for the same quality product, so there is no nobility in producing chips domestically when your competitor will produce the same thing for much less money.

    So here we are, but what’s to prevent this cycle from repeating itself? Maybe some domestic-content legislation that protects the supply chain of key items?

    In the 1940s, Japan invaded the Far East to protect its supply chains. Today, maybe the US should invade Taiwan and protect its chip producers. /s People (incorrectly) think that’s what the US has done for decades with Middle Eastern oil fields.

    • 0 avatar
      Daniel J

      Yes, competitive cost cutting is one of many problems. Chip making isn’t exactly a clean process. It’s not just chips either, PCBs are harder to come buy as well, which was exacerbated by the pandemic. Chip making can be nasty stuff, and its just much easier to offshore it where the EPA doesn’t have to come screaming.

      On top of all of this, the big boys here in the US designing and making chips are slowing down with advancements, which means the only way to make money is cheap and volume. That means overseas.

  • avatar
    Jeff S

    The American version of Just In Time Manufacturing has created this chip shortage. Just In Time does not mean that manufacturers don’t keep any spare inventory. Even Toyota who is a pioneer in Just In Time adjusted to the Pandemic and bought more microchips in anticipation of shortages.

    I agree with Lou that tariffs don’t work it just causes consumers to pay more. This chip shortage affects not only manufacturers but national security as well.

    • 0 avatar
      Daniel J

      They don’t work? Then why do so many countries put tariffs on our stuff or other country’s stuff? For morality points? If tariffs didn’t work here, they wouldn’t work well everywhere, right? That doesn’t seem to be the case though.

      I honestly believe strategic tariffs over time would have worked overtime. Would American consumers feel some pain? Sure. Would there be benefits later? Yes. American’s don’t want to wait it out though.

      • 0 avatar
        Luke42

        Whether tariffs work or no depends entirely on your goal.

        Tariffs do not function the way Trump thinks. Import tariffs are paid by the customers in your own country, and so the brunt of the pain happens at home.

        Does that further the goal of the tariff? If you’re an American politician, and your goal is to punish China, it’s like hitting your citizens in the head with a 2×4 (economically speaking) until China says you win the fight. If, on the other hand, you’re trying to discourage consumption with negative externalities (ex: oil or alcohol), or raise money for the government from your own citizens (like an uneven sales tax), than tariffs can further those goals.

        Alas, Trump and his fans don’t seem to be willing to grasp this level of nuance.

        • 0 avatar
          Lou_BC

          The perfect example of dumb tariffs is on Canadian lumber. The USA is unable to meet its own needs so imports are necessary. Lumber prices are sky high right now but USA lumber producers want a doubling of tariffs. Why? So they can extort money out of home owners. The last president put tariffs on our lumber but due to demand it had a nominal effect on Canadian companies.

          One could simply pass legislation stating that if you sell here you also have to build here.

          • 0 avatar
            Daniel J

            I’ve read several studies stating we can produce enough lumber. Too much red tape and EPA regulations. Maybe higher import tariffs on Lumber would force the reduction of these regulations?

            It’s all the same crap. Too many regulations force companies out of states and out of the U.S. One thing tariffs do is do is force all those wanting regulations, whatever they may be (environmental, beurocratic, whatever…) to reduce those regulations.

            We have one side saying they want high minimum wages and at the same time have no problem allowing other countries take the environmental burden or cheap labor burden to make the exact products we could make here while keeping people employed. One way to pressure these types of politicians is to put tariffs on these products and resources coming into the U.S. It’s simply fighting back.

  • avatar

    Free market? You mean outsourcing manufacturing to Japan before WWII would help US to win the war in Pacific? You guys still don’t take China seriously. China outproducing US in all areas except of food and water. Soon it will dominate US in sea, air, military technology. It is just matter of time. US weapons are unnecessarily complicated and expensive. Will US be able to mass produce airplanes, ship, drones, robots? And mass produce means affordable not types of F35. Well where will you get chips and other components, steel, aluminum and etc?

    • 0 avatar
      Luke42

      Unless you make weapons, war is pretty bad for business.

      Make money, not war.

      War with China would put me out of a job, because we buy microelectronics from Chinese factories. They’re an essential part of our products, but not the only part. If we have nothing to sell, we’re out of business — and so are our Chinese suppliers. My colleagues on both sides of the Pacific would go from paying our taxes to collecting unemployment. War would kill the golden goose on both sides of the Pacific.

      Similar business ties with Japan might-maybe have prevented war with them, as well.

      Make money, not war.

      • 0 avatar

        Unfortunately China is preparing for the war because they are not stupid. There will be wars for water and other resources, world domination, for sphere of influence. There even may be civil wars in USA and China. Generations Y and Z will live in interesting times. Don’t forget that even Boomer generation fought and died in the war – draft. Tensions increase around the world – it is like an earthquake – sooner or later there will be big one.

  • avatar
    ToolGuy

    “We look forward to working with leaders in the administration and Congress to swiftly enact needed federal investments in chip technology to help ensure more of the chips our country needs are researched, designed and manufactured on U.S. shores.”

    I guess if chips are made from sand it makes sense to produce them at the coast, but too bad for those loser inland states. (On the other hand, why can’t the R&D happen in landlocked regions?) [Why does the Semiconductor Industry Association hate the heartland?]

    • 0 avatar
      Luke42

      The raw materials for ICs are cheap, but the tools required to turn sand into silicon wafers, and silicon wafers into ICs, are quite expensive and specialized — not to mention the engineering required to design the IC.

      You’re paying for everything *except* the raw materials. Remember that the tolerances for this kind of manufacturing is expressed in nanometers, and millions of electrical junctions have to function correctly after the chip is made to keep it out of the trashcan.

      This is one of those businesses where you can spend tens of millions of dollars on the equipment, and then make it back $0.50 at a time.

      I’d love to get into this business, but not a lot of investors say “how can I get a slice of that action?!?” once you lay out the parameters of the business on a spreadsheet. Not a lot of people are looking for high-capital, high-risk, low-return investments.

      • 0 avatar
        ToolGuy

        Right. Which is why I was surprised to see the SIA advocating for research, design and manufacturing to happen so close to the beach. I would probably build my cleanroom farther inland (but John Neuffer is the expert).

  • avatar
    schmitt trigger

    I agree with the posters above that Just In Time greatly exacerbated the problem.
    JIT is like a house of cards: it is sooooo light weight, however the smallest breeze and everything comes tumbling down.

    Yet most companies, intent on squeezing the last half penny out of a product, embraced it with open arms and open legs.

    • 0 avatar
      Daniel J

      I’ve seen both sides of this coin.

      The other option is for companies to sit on thousands or even 10’s of thousands of chips which cost them capital, and then just to turn around and have to dump them as soon as the next latest and greatest thing comes out.

      Before the market crash back in 07 or 08 our company had about a 30 day lead time on what we were making. We were sitting on millions of dollars of inventory. This was great for the consumer and for us when we had demand, but it really sucked for two reasons. The first was simply that in our particular business, the chips were changing every 6 months, and our customers were demanding the latest and greatest. That meant there were lots of write offs of inventory. It also sucked when demand halved in a year period after the crash.

      When we went to “JIT”, we were able to provide customers better technology without the overhead of millions of dollars in inventory. The only downside was lead time went from 60 days to 90 days because just as we reduced inventory, so did our suppliers.

  • avatar
    dukeisduke

    Not all semiconductor companies will bite on this, as it’s focused on the short term, not the long term.

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