On the heels of the Chinese spy balloon incident, President Biden delivered his State of the Union (SOTU) address. Three welcome calls to action related to China came through:
- Energize American semiconductor production, research, and innovation.
- Check China’s dominance in semiconductor production and other technologies.
- Work with international partners aimed at protecting advanced technology.
The first of the key points in President Biden’s address was the bipartisan passage of the CHIPS Act, a law designed to help increase domestic production, research, and innovation in the semiconductor industry. He clearly stated, “We’re going to make sure the supply chain for America begins in America,” and later pointed out that investing to make America stronger means “Investing in American innovation, in industries that will define the future, that China intends to be dominating.”
President Biden’s embrace of the CHIPS Act and the bipartisan support to expand American chip manufacturing are both positive steps. The U.S. must ensure that its semiconductor industry is competitive and capable of meeting the demands of the modern economy by investing in it. But giving a boost to the supply side is only one side of the coin. Sufficient demand for U.S. produced chips needs to be present too. If not, well-intentioned efforts can still be undercut by state-subsidized Chinese chips from the likes of national champion firms like YMTC, CXMT, and SMIC. That scenario would portend disastrous results for other semiconductor firms and, by extension, American jobs.
Lastly, building on U.S. leadership from BIS’s October 7 export control actions, cementing our alliances to protect advanced technologies like semiconductors will be critical to national security. There is an opportunity for the U.S. to limit China’s access to essential technologies through multilateral export controls. In recent weeks, the Netherlands and Japan have reportedly joined the United States in restricting chipmaking tools to China, a move that will hopefully further limit China’s ability to advance its semiconductor production.
Beyond SOTU, it seems like the U.S. is primed for more action. While it’s unclear if any CCP-backed semiconductor companies will be impacted by a forthcoming announcement to “tighten technology exports to China after [the] balloon incident,” it’s not hard to imagine – and we’ll be eagerly watching.
However, the Biden Administration decides to move forward, the new bipartisan House Select Committee on the Strategic Competition between the U.S. and the CCP will provide wind at its back. Members from both parties have now been named and are on board to devise strategies to counter China. As Rep. Mikie Sherrill (D-NJ) explained:
“The CCP is a threat to our democracy and way of life. They are currently reshaping the international order through economic, diplomatic, military and cyber tactics, and we must respond with smart, thoughtful policies. America will need to modernize our military, strengthen our national supply chains, advocate for human rights across the globe, and support sovereign democracies.”
Now that clear-eyed evaluation must be translated into smart and thoughtful policies. As President Biden stated, “Winning the competition (against China) should unite all of us. We face serious challenges across the world.” It’s time for Congress and the Administration to capitalize on a bipartisan consensus and continue to strengthen export control laws that will help prevent China from dominating the semiconductor space.