Commerce Secretary Gina Raimondo says that a combination of export controls and domestic incentives will be needed for the US and its allies to fight a glut of semiconductor chips she warns will come with China’s aggressive industry subsidies.
(Bloomberg) — Commerce Secretary Gina Raimondo says that a combination of export controls and domestic incentives will be needed for the US and its allies to fight a glut of semiconductor chips she warns will come with China’s aggressive industry subsidies.
“The amount of money that China is pouring into 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,” Raimondo said Wednesday at a panel hosted by the American Enterprise Institute.
The United States needs to invest in its capacity to produce high-end chips, she said, while preventing the most advanced technology from reaching China.
The Biden administration is working with industry leaders and coordinating with allies on a narrowly tailored set of new export controls, she said, while declining to provide an update on the time line.
Those restrictions, which will build on curbs implemented in October of last year, “will deny some revenue to American companies, but we think it’s worth it” to protect national security, she said.
At the same time, semiconductor companies are primed to benefit from $52.7 billion in direct subsidies to boost domestic chip manufacturing. Those programs in last year’s Chips and Science Act will help the US address a dual challenge in manufacturing low-end and high-end chips, said Indiana Senator Todd Young, who shepherded the legislation through Congress and also appeared at the event.
On one end of the spectrum, the senator said, snags in the supply chain for less advanced chips can create lags in car manufacturing plants in places like Indiana. On the other, Young added, the US needs to shore up its ability to produce advanced chips like those that can work in nuclear-armed submarines.
The money, which has yet to be disbursed, will flow out at the same time as the Biden administration offers massive incentives for the clean energy, electric vehicle and battery industries, aiming to reach global dominance in sectors the White House sees as critical for the economy and environment. The programs comprise the country’s largest foray into industrial policy since World War II, with massive implications for its depleted manufacturing sector.
But Raimondo said that the chip subsidies do not mark the beginning of a new era of industrial policy for the US, given that they’re narrowly tailored to a national security goal. “Will there be other pieces of legislation that are similar? I don’t know, maybe,” she said.
In the immediate term, Young said he’s focused on ensuring that some oft-overlooked aspects of the chips bill — particularly in research and development — are adequately funded through the upcoming appropriations process.
He’s also co-sponsoring a measure to expedite environmental permitting for new chip factories and aims to attach it to an annual defense bill working its way through the chamber this week.
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