Challenges Still Loom Large on the Eve of the CHIPS Act One Year Anniversary

On August 9th of last year, President Biden signed the CHIPS and Science Act to restore American semiconductor manufacturing. Commerce Secretary Gina Raimondo described the impetus in response to China’s ominous ambitions:

Over the past decade, China’s leaders have made clear that they do not plan to pursue political and economic reform and are instead pursuing an alternative vision of their country’s future… [T]hey are accelerating their efforts to fuse their economic and technology policies with their military ambitions. … Semiconductors are ground-zero…

As we approach the one-year anniversary, four challenges remain paramount: 

#1. U.S. Export Controls Still Ignore Legacy Chinese Manufacturers 

Legacy (or mature) chips are critical to defense systems, critical infrastructure, automobiles, medical devices, consumer electronics, and other products. We shouldn’t turn a blind eye to – let alone encourage – China to step up its game. But that’s what we’re doing. As Dan Wang, a visiting scholar at the Yale Law School’s Tsai China Center, recently wrote in The New York Times, “although Commerce Department officials have severely limited China’s access to the most sophisticated chips, they have taken pains to say that Chinese manufacturers can continue making less-sophisticated chips… And a world in which Chinese companies dominate the production of mature chips — driven directly by American policy — hardly looks like a victorious outcome for the United States.”

#2. Chinese Chipmakers Grow Stronger

This is just one example: Semiconductor Manufacturing International Corporation (SMIC) is a top Chinese chipmaker and was added to the Entity List in 2020, but restrictions were too narrow. Now SMIC is expanding, has a new leader with government ties, and is doubling down on legacy chip production. And it’s working with Huawei, a known threat with “inextricable ties” to the CCP.

#3. Supply Chain Disruptions Persist 

Although the most severe supply chain disruptions have abated since the pandemic, chips are top of mind. As the Ford Motor Co. CEO said last fall, a shortage of legacy chips is “one thing that keeps me up at night.”

Increasing U.S. manufacturing capacity – for both advanced and legacy semiconductors – is a necessary hedge against future interferences.

#4. The U.S. Military Remains Dependent on Chinese Chips

“Relying on an adversary to supply critical components in equipment that our nation deems mission-essential is, to put it mildly, foolish,” recently wrote national security scholars recently. “But that is exactly what the United States has been doing when it comes to China and semiconductors.”

The 2024 National Defense Authorization Act, which is getting debated this summer in Congress, provides an ideal opportunity to ensure that American military systems are constructed only with semiconductors manufactured from trusted supplies.

While the Biden Administration and Congress will all undoubtably congratulate themselves on the CHIPS Act one year anniversary in August, important challenges remain. Learn more at Every Chip Matters.

Learn more at Every Chip Matters and watch the video below