America’s desire to dominate the “sophisticated” semiconductor industry

On August 9th, President Joe Biden signed the CHIPS and SCIENCE Act into law to promote technology autonomy and semiconductor manufacturing in this country. This is part of an effort to address the long-term shortage of chips and reduce production dependency on other countries like China.

The new policy commits to spending $280 billion to boost high-tech manufacturing, specifically a $52.7 billion semiconductor manufacturing and research package. This money is intended to benefit the US National Science Foundation (NSF), the US Department of Commerce and the US National Institute of Standards and Technology (NIST) for research and development, replacement of production units and exports.

Companies subsidized by the new law will receive preferential treatment to expand US production and a 25% tax break. But they must commit to not expanding production in China for 10 years, except for “legacy semiconductors,” defined as chips made with 28-nanometer or larger technology. In the memory chips market segment, the US government decides which devices are classified as legacy.

The Chips and Science Act will encourage more companies to bring factories to the US, experts say. “Building a factory is such a costly and time-consuming process that companies only move when motivated by money and good politics,” said Zachary Collier, an assistant professor at Radford University. CNN.

Fancy at the wrong time?

follow up FTThe CHIPS and SCIENCE Act is long overdue legislation. But while Mr. Biden’s signature was still in ink, more bad news emerged.

On Aug. 10, memory chipmaker Micron Technology warned investors that fourth-quarter 2022 sales will be “very low.” In the second quarter of 2022, the company’s revenue was just 7.2 billion. $9.1 billion, less than analysts had predicted. On the same day, the Philadelphia Semiconductor Index, which tracks the semiconductor market, fell 4.6%, its biggest drop since 2020.

Micron’s warning reflects a slowdown in chip demand in the semiconductor industry. In most outbreaks, factories couldn’t supply enough, leading to a chip crisis. Now things are getting out of hand.

Many companies even thought about the overproduction crisis due to overproduction. As a result, for the remainder of 2022 and into 2023, revenue and profits will fall. According to Gartner, semiconductor sales are just 7.4% this year compared to 26% last year.

Other US-made chip companies are also struggling. Earlier this week, Nvidia announced that it may lower its revenue guidance for the second quarter of 2022. 17% for the quarter (published August 28). Meanwhile, Intel lost $454 million last quarter. He warned that US dollar and PC sales would fall 10% this year.

“I’ve never seen as many chips as I do now,” said Dan Hutcheson, CEO of VLSI Research. chance. “Other companies are also beginning to slow production or limit new imports to take advantage of excess inventory.”

Also, according to VLSI Research, products in the chip supply chain are increasing rapidly earlier this year. Stocks only lasted about 1.2 months in February compared to the global average of 1.4 months in June and 1.7 months in July.

follow up chanceWith demand falling and inventories rising, the United States may have made the mistake of injecting too much money into a sector that “doesn’t need the support it needs.”

“It is strange. It’s not clear how quickly policymakers will understand how to solve shortages or surpluses by switching industries,” said Stacey Rasgon, an analyst at Bernstein Research. Bloomberg.

According to experts, the CHIPS and SCIENCE Act is a long-term goal and serves a vital industry. However, the fact that it takes years to implement is another problem.

In particular, it is planned to allocate 52.7 billion. It will now be paid until 2025. Finally, this pace is considered too slow and may lag far behind other countries, especially China.

At around $53 billion, the US semiconductor sector is not overly large compared to other countries. For example, South Korea plans to spend $450 billion on semiconductors over the next decade, or Taiwan said in January it would invest more money to maintain its leadership in semiconductor manufacturing, but it didn’t. Please give specific numbers.

China concerned about ‘supply chain mix’

On Aug. 17, the China Semiconductor Industry Association (CSIA) declared that chips and the Science Law “violated fair trade.”

CSIA was founded in 1999. In June, he represents 744 member companies of the Chinese semiconductor industry. The organization says the new law signed by Biden violates the industry’s general principles of fairness, transparency and nondiscrimination. It could deprive China of the advanced technologies it needs in the chip sector and jeopardize its role in the supply chain.

The CCIA warned that passage of the bill would “certainly create chaos in the global semiconductor industry” and urged the US to “right its mistakes” to show respect for the order of the industry.

“CSIA’s statement reflects China’s urgency in the semiconductor sector. The US move could lead to a so-called chip alliance with top partners like South Korea, Taiwan and Japan.” SCMP Opinion.

However, the new law is expected to put pressure on companies that have factories in China, such as Samsung, SK Hynix, TSMC… “When companies like Samsung and SK Hynix get help from Washington, their business is expected to grow at everyone case be affected. Especially in China, everyone is interested in American technology. This is based on Gary Ng, chief economist at the investment bank Natixis. SCMP.

Samsung and SK Hynix are investing heavily in establishing and operating chip foundries in China. According to some experts, the two may not be leaving any time soon due to business reasons.

Bao Lam Artificially