During Wednesday night’s Select Committee on the CCP hearing on “Ensuring U.S. Leadership in the Critical and Emerging Technologies of the 21st Century” Lindsay Gorman from The German Marshall Fund raised an important point. She said we must look at the CHIPS Act as a start of America’s recovery of strength in the semiconductor space, not an isolated initiative. Acknowledging that technology isn’t static, she said “we need a continuous iterative process where we evaluate to the best of our ability, what are the critical technologies of the future of the next 5, 10, 15 years? Where is China leading? Where are we leading?” Right now, America risks ceding the future of legacy semiconductors.
When it comes to semiconductors, the U.S. government has been laser focused on advanced chips. These chips are important, but an exclusive focus on them is a strategic misstep. At an AEI event this week, Commerce Secretary Gina Raimondo acknowledged China’s commitment to legacy chips. She said, “The amount of money that China is pouring in to subsidizing what will be an excess capacity of mature chips and legacy chips, that’s a problem that we need to be thinking about and working with our allies to get ahead of.” Chris Miller, a fellow at AEI and author of Chip War: The Fight for the World’s Most Critical Technology, added, “We’ve spoken about China’s increasing capacity to produce lower end chips, and we’ve only begun to scratch the surface of the security implications of that.”
What will it take for Commerce and others to really see the strategic and (to put a finer point on it) national security importance of legacy – or mature – chips? Perhaps they should listen to warnings about China dominating in the legacy chip space, which is critical to – among other things – military systems. “Relying on an adversary to supply critical components in equipment that our nation deems mission-essential is, to put it mildly, foolish,” said defense experts Brian Cavanaugh and Bonnie Glick earlier this summer. “But that is exactly what the United States has been doing when it comes to China and semiconductors.” And it will only get worse if China dominates this segment. More recently, the Hoover Institution concluded, “Given that the focus of China’s semiconductor subsidies likely will be on mature nodes, the US should consider elevating export restrictions of US and partner semiconductor equipment to the 28nm range, in order to restrain China’s ability to gain market power and coercive leverage in that important part of the global supply chain.”
In an environment where policy is determined by node size and smaller (i.e. 14nm) is better, this would be an improvement. However, chips larger than 28nm should also be a focus of policymakers. Per Asia Times, third-generation chips, as an example, “usually range between 90 and 350 nm, sizes that are not covered by the US sanctions. Among them, GaN microwave radio-frequency chips can be used in missiles, radars and electronic countermeasures designed to trick radars. SiC chips can be used in jet, tank and naval ship engines, as well as wind tunnels.”
Secretary Raimondo sees a connection between chips and national security, but is it only for advanced chips? At AEI, she pointed to a new Memorandum of Agreement between the Departments of Commerce and Defense. According to CHIPS Program Office Director Michael Schmidt, who signed the MOA on behalf of Commerce, “This agreement will enable our teams to coordinate the national security review of applications, produce semiconductor chips in America that our military relies on, and bolster our domestic supply chain resiliency.” Hopefully this MOU will shine an important light on the connection between national security and legacy chips.
But, will Commerce turn the corner on legacy chips fast enough? Or will we continue to give China plenty of running room? It’s certainly time to move beyond a concentration on leading edge, understand the security implications of a Chinese-dominated legacy space, and take action.