The United States is moving fast to ward off China’s challenge for high-technology supremacy. US Commerce Secretary Gina Raimondo announced Tuesday that the Biden administration was preparing to divvy up $50 billion in federal assistance to the chip industry as part of a new law known as the US Chips and Science Act.
She said that with the funding, the US will make sure it is never again in a position where its national security interests are compromised.
US tech companies that receive federal funding will be barred from building “advanced technology” facilities in China for 10 years. She warned that if they take money and break the rules, the administration will call back the money.
The Senate passed the Chips and Science Act on July 27, followed by House passage on July 28. President Biden signed the measure into law on Aug. 9. The bipartisan bill was processed quickly.
The Inflation Reduction Act also became law quickly, reflecting Washington’s sense of urgency at the bitter competition with Beijing. The bill passed the Senate on Aug. 7 and the House on Aug. 12. Biden signed it on Aug. 16.
China moved early. It has provided support for its semiconductor industry with a state-backed China National Integrated Circuit Industry Investment Fund, also known as the “Big Fund,” that it established in September 2014. The fund was instrumental in nurturing China’s homegrown chipmakers. According to a recent report by TechInsight, to the surprise of the global chip market players, the Shanghai-based SMIC has built 7-nano chips on its own.
The Diet of Japan reportedly approved the Act on the Promotion of National Security Through Integrated Economic Measures in May. Its key features include support for the country’s semiconductor industry.
The European Commission presented a proposed European Chips Act in February that mobilizes 43 billion euros (59 billion won) in policy-driven investment in the EU’s semiconductor sector by 2030.
Semiconductor chips emerged as a strategically important state asset. To survive fierce competition in the semiconductor market, it is important to be agile. Industrial policies need to be executed as quickly as possible. But South Korea has been sluggish in boosting its semiconductor industry, while its rivals are moving fast to supercharge theirs.
When Taiwan suffered from a severe drought last year, its government diverted water from farmers to chip makers. It is likely this kind of resolute attitude helped make TSMC the global No. 1 foundry player.
This contrasts with the situation facing South Korea’s SK hynix. The company plans to invest 120 trillion won ($86.8 billion) to build a cluster of semiconductor factories in Yongin, Gyeonggi Province. The cluster plan was unveiled in 2019 but no ground has been broken yet. Yeoju and its residents demand SK hynix give them “benefits” for letting the cluster use the Namhan (South Han) River as the source of its industrial water. Construction is not likely to start until conflicts with residents are settled.
The ruling People Power Party scouted an independent lawmaker, Yang Hyang-ja, as chairperson of its special committee to strengthen the competitiveness of the Korean semiconductor industry in June. The party drew much attention by embracing a former National Assembly member of the opposition Democratic Party of Korea. She did not rejoin the party that had expelled her. She is also a former Samsung Electronics executive.
The committee proposed the so-called “K-Chips Act” on Aug. 4. The bill increases tax deductions for high-tech industry investment and extends the tax credit period.
But the National Assembly has not deliberated the bill yet. The government sits on its hands, making little effort to persuade lawmakers.
A sure way to be a winner in high-tech competition is to secure a commanding lead that no one else can hardly catch up. When it comes to an issue with the future of the country at stake, rival parties must stop fighting and process non-partisan bills as quickly as possible. Timely execution of measures matters. Creating a special committee and proposing a bill are not the end.