CHIPS Act Anniversary Arrives, Former National Security Advisor Weighs In

This Wednesday (August 9), marks the one year anniversary of President Joe Biden signing the CHIPS Act into law. While it’s too early to judge if it’s ultimately a success or not, challenges persist, namely:

  1. U.S. export controls still ignore legacy Chinese chip manufacturers.
  2. Chinese chipmakers, including legacy leader SMIC, are growing stronger.
  3. Supply chain disruptions are front of mind. How do we ensure we have enough legacy chips for automotive, defense, and more if there’s another pandemic or global crisis?
  4. The U.S. military is still dependent on Chinese chips for mission-critical equipment.

What do all these concerns share? Legacy chips. For these reasons and more, China Tech Threat recommended that when CHIPS Act funding allocations are made, that they don’t unduly favor advanced chips over legacy chips – like current U.S. policy – because every chip matters. 

What’s the big deal? As Ambassador Robert O’Brien, former U.S. National Security Advisor, remarked at a Hudson Institute event last week, everything from F-35s to washing machines depend on semiconductors. “The CCP has sought to dominate the market,” he said. “Now, we can’t eliminate our reliance on semiconductors… But what we can do is minimize the risk that Beijing poses…”

O’Brien cautioned that we’ve constantly underestimated China – and to our own detriment. Regarding semiconductors, he shared some startling statistics: In 2011, there were 1.3K semiconductor companies in China. By 2022, there were over 22K, and that number has only grown since. O’Brien said most of those companies are focused on legacy chips, which are critical to defense – including our own defense as the U.S. is buying chips from China and integrating them into our supply chains.

To put a finer point on that, O’Brien wrote in January that “The idea that ‘made in China’ chips are embedded in U.S. defense and intelligence systems, national critical infrastructure, and government networks is both absurd and, unfortunately, our reality. A single compromised chip in the right place can provide our adversaries with unfettered access to critical platforms.”

This is a dangerous posture and underscores the need for the U.S. to ensure it has a reliable supply of trusted chips, including legacy chips. To that end, O’Brien made his support for the CHIPS Act and the need to re-shore and friend-shore chip manufacturing clear.

To watch O’Brien’s remarks and subsequent conversation with Dr. Miles Yu at Hudson, click here for the replay. Additionally, in the coming days, watch China Tech Threat for additional commentary about the CHIPS Act from Retired Major General James “Spider” Marks and Steve Coonen, Former Pentagon Chinese Tech Advisor.

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