With Covid-19 on the run, at least in the U.S., a sudden burst of business and government activity has sprung forth to a higher degree than normal in a kind of Covid Spring.
This past week on LinkedIn, a group of engineers, analysts, chip marketers and tech journalists chatted over the grand and timely topic, “WTF, what in the world is going on?” They all agreed they are getting many more emails in their inboxes this June than they have seen in prior years.
The higher activity level has also infected Congress, the White House and lobbyists in Washington, even prompting a reaction from officials in China and elsewhere. Late spring and early summer are normally a busy time in Washington up until the normal break for the dog days of August, but the spring of 2021 has been right up there in fever pitch.
For anyone who has overlooked the latest clamor, here’s a breakdown of recent news that promises to set the agenda for electronics industry for CEOs and average engineers alike for years to come.
1. The U.S. Senate voted 68-32 on Tuesday June 8 to approve $250 billion of funding in the U.S. Innovation and Competition Act (USICA). It includes $39 billion in grants for domestic chip manufacturing of up to 10 fabs and $13 billion for chip-related research, which passed with bipartisan support despite a long period of partisan politics on just about everything else. The bill now goes to the U.S. House where passage is expected. President Biden supports the measure as well.
2. While the billions in funding in USICA is for domestic technology, its political and trade purpose is clearly to put China on notice that the U.S. has a strategy for building up chip manufacturing and emerging technologies like AI and quantum, areas where China is already far outspending the U.S. U.S. Senators Warner and Cornyn, from separate parties, described how China’s build-up finally came into focus during Covid in 2020 when supply lines for medical equipment, chips and more vital products have helped shock the U.S. into the recognition of the need for self-sufficiency.
3. China’s parliament quickly slammed USICA, saying the U.S. has a “paranoid delusion of wanting to be the only winner” in the international economy. But China quickly its words into action on Thursday June 10 by passing an “anti-sanctions law” which empowers Chinese authorities to claim damages or seize assets from companies that comply with foreign sanctions by the U.S. and others against China. The new Chinese law offers a basis for damages claims against multinationals and even Chinese companies that comply with foreign sanctions to discriminate against China, according to attorneys that study the matter.
4. Earlier in the week, the White House issued a 250-page report calling for resilient supply chains and revitalized domestic manufacturing that could lead to enhanced economic stability. A task force will be created to plan next steps. There are many recommendations, including specific ones such as consumer rebates and tax incentives to spur consumer adoption of electric vehicles.
5. The Biden administration also signed an executive order on June 9 to address threats to the U.S. information and communications technology supply chain. While it gained attention for revoking Trump-era prohibitions on transactions over TikTok and WeChat, its lasting impact may be to direct the Department of Commerce to evaluate software apps connected to foreign adversaries (read: China mainly).
6. The second week of June has been especially busy for people involved in enacting changes to technology policy, but there has also been time to look back and evaluate how the domestic-produced chip shortage developed over decades. Senator John Cornyn, R-Texas, told reporters in response to the question of “How did we get into this chip shortage in the first place?” about his concerns that U.S. companies have for years been buying chips and components from plants in Asia where prices have been cheaper with lower labor costs.
Aside from the car industry’s sudden interest in more chips last fall when many chipmakers had moved to making chips for other products, he spoke about capitalism and the natural corporate urge to lower chip production costs.
“Wherever in the world made a product the cheapest, we would import it, but what we didn’t figure out until Covid made it very plain is if the supply lines are shut down or cut, we’re in a world of hurt,” Cornyn said.
“Covid flipped the light switch on. Semiconductors have become essential to our economy and national security,” Cornyn added. “With 90% of semiconductors manufactured in Asia, what if there’s a natural disaster or heaven forbid a military conflict? We’ve become overly reliant on imports. Covid has exposed a huge, yawning vulnerability in terms of this critical product.”