WASHINGTON — Celebrating a $20 billion investment by Intel in a new semiconductor plant in Ohio on Friday, President Biden attempted to restart a stalled element of his economic and national security agenda: a huge federal investment in manufacturing, research and development of technologies that China is also striving for dominance.
With two other key legislative priorities dying in Congress — the Build Back Better Act and voting rights protection legislation — Mr Biden pushed for another bill that has significant bipartisan support.
But he has lost seven crucial months since the Senate passed the measure, a sweeping Chinese competition law that would allocate nearly a quarter trillion dollars to domestic chipmaking, artificial intelligence research, robotics, quantum computing and a host of other technologies. The bill amounts to the most comprehensive industrial policy legislation in US history.
Speaking at the White House, Mr. Biden said America faces “tough economic and technological competition” with China. He chose the words deliberately, knowing that while it sounds obvious to American ears, Chinese officials have protested the use of the word “competition” in recent months, saying it has connotations of a Cold War-like competition .
“We will insist that everyone, including China, play by the same rules,” Mr. Biden continued. “We will invest whatever is necessary in America, in American innovation, in American communities, in American workers.”
He argued that the initiative would be a long-term solution to supply chain disruptions and rising inflation, and free American weapons systems from reliance on foreign parts.
After months of barely mentioning China’s competition law so as not to lose sight of other elements of his agenda, Mr Biden said on Friday its passage was necessary “in the interests of our economic competitiveness and our national security.”
Understand the supply chain crisis
“Today we produce barely 10 percent of computer chips, although we are leaders in chip design and research,” he said. “We don’t currently have the ability to make the most advanced chips.”
According to some estimates, the ubiquitous shortage of chips needed to run everything from cars and washing machines to medical equipment and power grids has forced some factories to shut down production lines and slashed US growth by a full percentage point last year .
While the Biden administration has billed Intel’s new investment near Columbus, Ohio, as a partial remedy for supply chain disruptions that have led to global chip shortages and fueled inflation, the project would do little to solve economic problems in the short term . The Ohio plant, the first phase of what Intel says will require an investment of up to $100 billion
But aside from providing positive headlines for a beleaguered White House, Intel’s plans could help create momentum for a key element of Mr. Biden’s agenda that was put aside when lawmakers came up with ambitious bills on infrastructure, social spending and fought for voting rights. Speaker Nancy Pelosi hinted Thursday that House committees would soon turn to negotiations with the Senate to put China’s competition law to a vote.
Passed by a large majority in the Senate in June, the bill was sold partly as a hiring plan and partly as a measure to keep the United States from becoming dangerously dependent on its main geopolitical adversary.
China is not yet a major producer of the world’s most advanced chips and lacks the capability to make semiconductors with the tiniest circuits — partly because the United States and its allies have blocked it from buying lithography equipment needed to make those chips.
But Beijing is pumping huge amounts of government money into developing the sector, and is also straining its military hold on Taiwan, one of the largest makers of advanced chips. According to the Semiconductor Industry Association, China accounted for 9 percent of global chip sales in 2020, just behind the global market share of Japan and the European Union. That was an increase from just 3.8 percent of global chip sales five years ago.
Ursula von der Leyen, the President of the European Commission, announced this week at the World Economic Forum plans for Europe to propose its own legislation early next month to encourage the development of the semiconductor industry and prevent bottlenecks.
John Neuffer, executive chairman of the Semiconductor Industry Association, said Japan, South Korea, India and other countries are also introducing their own incentives to attract a strategically important industry.
“The clock is ticking,” said Mr. Neuffer. “None of us work in a vacuum. This is a global industry.”
Mr. Biden’s push to enact China’s competition law comes amid growing frustration in business circles over his economic policies towards the country. Executives have complained that the administration still hasn’t made clear whether it will lift any of the tariffs President Donald J. Trump has imposed on China or how it will press Beijing for more trade concessions.
How the supply chain crisis unfolded
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The pandemic triggered the problem. The highly complex and interconnected global supply chain is in a state of upheaval. Much of the crisis stems from the outbreak of Covid-19, which triggered an economic slowdown, mass layoffs and a shutdown in production. Here’s what happened next:
A reduction in shipping costs. With fewer goods being made and fewer people holding paychecks early in the pandemic, manufacturers and shipping companies assumed demand would fall sharply. This proved to be a mistake, however, as demand for some items would increase sharply.
The demand for protective equipment rose sharply. In early 2020, the entire planet suddenly needed surgical masks and gowns. Most of these goods were made in China. As Chinese factories ramped up production, cargo ships began shipping equipment around the world.
Then a shortage of shipping containers. Shipping containers piled up in many parts of the world after being emptied. The result was a shortage of containers in the one country that needed them most: China, where factories began pumping out goods in record quantities
Demand for durable goods increased. The pandemic shifted Americans’ spending from dining out and attending events to office furniture, electronics and kitchen appliances — mostly purchased online. Spending was also encouraged by government stimulus programs.
Strained supply chains. Factory goods quickly flooded US ports. The surging orders outstripped shipping container availability, and the cost of shipping a container from Shanghai to Los Angeles increased tenfold.
Passed by the Senate and known as the US Innovation and Competition Act, the law includes a number of provisions aimed at spurring the US economy to take on China, but at its core is $52 billion in federal investment to promote chip research, design and manufacture in China The United States.
The chip funding itself has broad bipartisan support and could be passed into law as early as the next few months, proponents say; The question is whether other measures put into the package will diminish its prospects. The Senate bill includes a number of trade-related provisions some House Democrats may oppose, including an investigation into digital foreign trade practices.
The global shortage of chips and the associated harmful inflation have sparked interest in attracting semiconductor manufacturing to the United States. But whether Congress will approve billions of dollars in new funding — and how the Biden administration decides to allocate it — seems likely to determine whether an investment like Intel’s is a one-off event or a trend.
Companies such as Taiwan Semiconductor Manufacturing Company, Texas Instruments, Micron Technology and SK Group have recently announced expansions in the United States. Samsung has promised a $17 billion facility in Texas, while GlobalFoundries has committed to a second factory in New York.
But the gravitational center of global industry is still in East Asia. While the United States is responsible for much of the cutting-edge research and design in the chip industry, a few decades ago it went from being the world’s largest maker of semiconductors to largely outsourcing manufacturing to Asian factories.
This has proved a vulnerability as pandemic-related shutdowns have left businesses around the world with labor and raw material shortages, leading to shortages and rising prices for a variety of commodities, particularly semiconductors. Car manufacturers in particular are affected, with almost all major car manufacturers having to cut production last year.
The lack of chips has also become one of the biggest single factors fueling inflation, and is now a major criticism among American voters as the midterm elections near. Inflation hit a 40-year high in December, buoyed by a 37 percent rise in used car prices.
In an effort to alleviate chip shortages, the Biden administration has called meetings with semiconductor industry executives, established a global alert system to identify shortages, and has requested huge amounts of information from chip companies about potential shortages. The Commerce Department is expected to make some of this information public before the end of the month.
Gina Raimondo, Secretary of Commerce, said in a statement Friday that Intel’s investment is a win for the company, American manufacturing and “American consumers, who can look forward to lower prices as we bring semiconductor manufacturing home who support our economy are running.”
But analysts say the government has little control over short-term trends in the industry given the long lead times required to build semiconductor facilities.
Mr. Neuffer said his industry welcomes the attention the White House is giving to the sector, including encouraging companies to share more information. “But the reality is that there is only so much government can do,” he said. “These are very complicated, deep global supply chains, and the market is just going to have to work through it.”
Catie Edmondson contributed to the coverage.