The Biden administration is encouraging foreign companies to invest in semiconductor manufacturing in the United States and other countries to establish facilities for final assembly and packaging.
The administration envisions more electronic chips being produced in U.S. factories, such as those in Texas or Arizona, and then sent to partner countries like Costa Rica, Vietnam, or Kenya for final assembly. These chips would subsequently be distributed worldwide, powering devices from refrigerators to supercomputers.
This strategy, termed “chip diplomacy,” aims to transform the global chip supply chain. Key elements include attracting foreign investment in U.S. chip production and encouraging other nations to set up factories for completing the manufacturing process.
The administration believes that increasing domestic production of these essential components will enhance U.S. prosperity and security. President Biden highlighted these efforts in an interview, noting South Korea’s significant investment in U.S. chip manufacturing.
A crucial part of this initiative involves collaborating with international partners to ensure the sustainability of these investments. This effort aims to address security concerns related to China’s expanding chip production and potential threats to Taiwan, a major hub for chip technology. It also seeks to reduce supply chain disruptions highlighted by the COVID-19 pandemic and the conflict in Ukraine.
“Our focus is to expand capacity in diverse countries to make global supply chains more resilient,” said Ramin Toloui, a former assistant secretary at the State Department’s Bureau of Economic and Business Affairs.
The administration’s efforts extend beyond semiconductors to green energy technologies, including electric vehicle batteries, solar panels, and wind turbines. China currently dominates these industries, which the administration views as both a national security and human rights issue due to labor practices in regions like Xinjiang.
Over the past three years, the U.S. has secured $395 billion in semiconductor manufacturing investments and $405 billion for green technology. Notable investors include companies from Japan, South Korea, Taiwan, and Europe. For instance, South Korean chipmaker SK Hynix is building a $3.8 billion factory in Indiana, potentially creating over 1,000 jobs.
Secretary of State Antony J. Blinken emphasized the importance of these investments in a recent speech, highlighting legislative efforts to attract foreign investment in U.S. high-tech manufacturing.
The Commerce Department has also been instrumental in strengthening the chip supply chain, allocating $50 billion for research, development, and manufacturing. Commerce Secretary Gina Raimondo has conducted extensive studies on global chip supply chains and engaged with foreign governments to explore investment opportunities.
Raimondo’s efforts included a trip to Costa Rica, where she met with officials and Intel executives to discuss the semiconductor supply chain. Similar discussions took place during her visits to Panama and Thailand.
Reworking global supply chains to reduce reliance on East Asia presents challenges, as East Asian factories often possess more advanced technology and lower production costs. Taiwan currently produces over 60% of the world’s chips and nearly all advanced chips.
Despite potential labor shortages in the U.S. semiconductor industry, new investments are expected to increase the U.S. share of global chip manufacturing from 10% to 14% by 2032, according to a report by the Semiconductor Industry Association and Boston Consulting Group.
The administration is also working to prevent China from developing U.S. technology by persuading countries like Japan and the Netherlands to restrict the sale of advanced technology to China.
Simultaneously, efforts are being made to identify countries and companies interested in investing in U.S. semiconductor manufacturing and establishing endpoint factories for the supply chain. The CHIPS and Science Act, which allocates $500 million annually for secure supply chain development, supports these initiatives.
Current countries in the program include Costa Rica, Indonesia, Mexico, Panama, the Philippines, and Vietnam, with Kenya being added recently. Job training is a priority, with partnerships being developed with institutions like Arizona State University and Vietnam National University in Ho Chi Minh City.
Martijn Rasser, managing director of Datenna Inc., emphasized the strategic advantage of this network of alliances, highlighting the impracticality of the U.S. attempting to handle everything independently given the global diffusion of technology.
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