Home News U.S. builds high-tech global supply chain to reduce China-related risks

U.S. builds high-tech global supply chain to reduce China-related risks

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If the Biden administration has its way, factories in Texas or Arizona will produce more electronic chips.

They will then be shipped to partner countries such as Costa Rica, Vietnam or Kenya for final assembly and shipped around the world to run everything from refrigerators to supercomputers.

These places may not be the first places that come to mind when people think of semiconductors. But government officials are trying to change the global chip supply chain and are in intense negotiations to do so.

The plan’s core elements involve getting foreign companies to invest in chip manufacturing in the United States and finding other countries to set up factories to do the work. Officials and researchers in Washington call it part of a new “chip diplomacy.”

The Biden administration believes that producing more of the micro-brains of electronic devices in the United States will help make the United States more prosperous and secure. President Biden boasted that he His interview In an interview with ABC News on Friday, he said he had gotten South Korea to invest billions of dollars in U.S. chip manufacturing.

But a key part of the strategy takes place outside the United States, and the administration is trying to work with partners to ensure that investments made in the United States are more permanent.

If the initial effort pans out, it could help the administration achieve some broad strategic goals. The administration wants to allay security concerns about China, which has threatened Taiwan, a global hub for chip technology, as it develops its chip manufacturing industry. The administration also wants to reduce the risk of disruptions to the chip supply chain — risks that became apparent during the coronavirus pandemic and the war in Ukraine, both of which threw global shipping and manufacturing into disarray.

“Our focus is to do our best to expand production capacity in different countries and make global supply chains more resilient,” said Ramin Toloui, a Stanford University professor who most recently served as assistant secretary for economic and business affairs at the State Department. The forefront of diplomatic efforts Establish new supply chains.

The government’s targets extend beyond chips to include green energy technologies such as electric vehicle batteries, solar panels and wind turbines, industries in which China is the largest player.

Biden and his aides have said Chinese corporate dominance is both a national security issue and a human rights issue because some manufacturing Occurred in XinjiangIn China’s Xinjiang province, officials have forced members of some Muslim ethnic groups to work in factories.

In the three years since the Biden administration took office, the United States Attracted Toloi said foreign investment in semiconductor manufacturing was $395 billion and investment in green technology and clean energy production was $405 billion.

Many of the companies investing in this type of manufacturing in the U.S. are located in Asian countries known for their tech industries (such as Japan, South Korea, and Taiwan) and Europe. One of them is South Korean chipmaker SK Hynix, which is building a $3.8 billion plant in Indiana. The U.S. State Department said the project is the largest investment ever in the state and has the potential to bring more than 1,000 jobs to the region.

Secretary of State Antony Blinken A speech Last month, at a conference in Maryland aimed at encouraging foreign investment in the United States, he stressed that he hoped legislation enacted by Mr. Biden would attract foreign investment into American high-tech manufacturing by “modernizing our roads, rails, broadband and electric grid.”

He added that these policy efforts are aimed at “strengthening and diversifying supply chains, boosting domestic manufacturing, and promoting the development of key industries of the future, from semiconductors to clean energy.”

The U.S. Department of Commerce has also played a major role in efforts to consolidate the chip supply chain, allocating $50 billion to U.S. companies and organizations to research, develop and manufacture chips.

Commerce Secretary Gina Raimondo led the Further research The company is also working with foreign governments to discuss opportunities for additional investment overseas.

This theme was a key focus for Ms. Raimondo Travel to Costa Rica this spring She met with local officials and executives from Intel Corp., which has a factory in the area. Semiconductor Manufacturing Conference She also discussed diversifying the semiconductor supply chain during visits to Panama and Thailand.

But reshaping the global supply chain and reducing dependence on East Asia It will be a challengeEast Asian chip factories are expected to offer more advanced technology, a larger pool of talented engineers and lower costs than their U.S. counterparts.

Taiwan produces more than 60% of the world’s chips, and nearly all of the most advanced chips, which are used in computers, smartphones and other devices.

In contrast, the U.S. semiconductor industry may face Up to 90,000 workers According to several estimates, in the next few years.

Governments in China, Taiwan, South Korea and other places are also heavily subsidizing their own chip industries.

Still, billions of dollars in new U.S. investments are expected to transform global supply chains to some extent. The U.S. share of global chip manufacturing is expected to rise to 14% by 2032 from 10% currently, according to a May report. Report From the Semiconductor Industry Association and Boston Consulting Group.

Some administration officials have adopted a more coercive chip diplomacy to prevent China from developing versions of American technology. That approach has focused on persuading a handful of countries — notably Japan and the Netherlands — to block companies from selling some chipmaking tools to China.

Alan Estevez, director of the U.S. Commerce Department’s export administration, visited Japan and the Netherlands last month in an effort to persuade the two countries to block their companies from selling certain advanced technologies to China.

In contrast, Toloi and his aides fly around the world looking for countries and companies that might want to invest in American industry and build factories that would form the end point of the supply chain. Toloi said his bureau’s work is part of Biden’s recent legislation aimed at creating more manufacturing jobs in the United States, including the infrastructure bill and the chips and science bill.

The Chips and Information Systems Act provides the government with $500 million a year to create a secure supply chain and protect semiconductor technology. The State Department uses this money to look for countries that are suitable for developing supply chains. Officials are organizing a study of a range of countries to understand how to bring the infrastructure and workforce up to certain standards to ensure that chip assembly, packaging and transportation can proceed smoothly.

Countries currently participating in the program include Costa Rica, Indonesia, Mexico, Panama, the Philippines and Vietnam. The US government is introducing Kenya.

Mr. Toloi said vocational training is a key focus of this supply chain, and he has discussed with Arizona State University about developing training programs with overseas institutions. One such institution is Vietnam National University in Ho Chi Minh City, which he visited in May.

Martijn Rasser, managing director of Datenna Inc., a China-focused research firm, said this network of alliances is a strategic advantage for the U.S. over China.

He said that if the United States tries to do everything alone, the cost will be too high. If the United States acts alone, they will ignore the reality that today’s technology is more widely spread around the world than it was decades ago, and all countries play an important role in the chip supply chain.

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