– House bill unveiled for $520 billion semiconductor investment (1.25.)
– Ministry of Commerce begins detailed plan and budget allocation for semiconductor manufacturing investment
– The share of international semiconductor production is expected to be 30-13% by 14 due to the US semiconductor promotion policy
– Concerns about side effects such as international trade disputes and oversupply due to competition for semiconductor investment in each country
The $520 billion domestic semiconductor industry nurturing investment, which the Biden government has been pushing for, has entered the visible sphere. Following passage by the Senate in June of last year, as the House of Representatives bill (America COMPETES Act) was unveiled on January 6, MOTIE of the United States began to establish detailed policies for semiconductor manufacturing and R&D investment. In order to secure an edge in cutting-edge future technologies and overcome the supply bottleneck, the US government is putting its life and death in competition for international semiconductor production. Some point out that such a country-centered semiconductor development policy can cause serious side effects such as international trade disputes and overproduction.
Green light for Biden government's domestic semiconductor investment policy
The U.S. Congress recognized the national security importance of the semiconductor industry, which is the key to future competitiveness, and codified a plan to foster the semiconductor manufacturing industry as part of the '2020 National Defense Authorization Act (NDAA)' passed in December 2021. . In this way, the 'CHIPS for America Act', which encompasses comprehensive policies such as fostering domestic manufacturing and investment in R&D, was born to restore US leadership in the global semiconductor industry.
The 'CHIPS for America Act' proposed a total investment of 520 billion dollars to foster the semiconductor industry, and the US Congress immediately entered into separate legislation to prepare the budget. And in June 2021, the Senate passed the 'US Innovation and Competition Act' (USICA: US Innovation and Competition Act) to check China's geopolitical-economic injury. USICA allocated US$ 6 billion to the construction and modernization of domestic semiconductor manufacturing, assembly, testing, and advanced packaging facilities, while approving a budget of US$ 390 billion for R&D support and overall environment creation. However, as the bill discussion was delayed in the House of Representatives, the Biden government's original goal of passing it by the end of last year was thwarted.
The White House and the industry have emphasized the urgency of semiconductor investment and urged Congress to pass the bill quickly. Finally, on January 1, the House of Representatives unveiled the 'America COMPETES Act' bill, including the same level of semiconductor budget as the Senate. The White House and the Commerce Department immediately issued statements of support for the bill and said they hoped for swift action by Congress. The bill, proposed by the House of Representatives, is expected to be finally passed during the first quarter of this year at the earliest after going through a conference with the USICA bill passed by the Senate.
Meanwhile, local media are predicting that the bill will not be handled smoothly. The semiconductor investment clause is widely supported by the ruling and opposition parties and the House of Representatives, but it is analyzed that other trade-related provisions included in the House of Representatives may become an impediment to negotiations with the Senate. An official from a law firm specializing in trade in the United States said, "In the House of Representatives, strengthening supervision of investment in China, revision of the De Minimis, stricter enforcement of anti-dumping/counterfeiting duties, and strengthening of working conditions in the trade preferential system are bound to conflict with the Senate. No,” he analyzed.
Ministry of Commerce begins budget allocation plan for semiconductor development
While the congressional budget approval process has yet to be finalized, the Department of Commerce has launched a preliminary investigation to allocate $520 billion in the semiconductor industry promotion budget. On January 1, the Ministry of Commerce announced that it was accepting opinions from the industry for efficient execution of the semiconductor policy included in the National Defense Authorization Act. According to the Official Gazette, all interested parties, including domestic and foreign semiconductor manufacturers, related associations, equipment suppliers, education/research institutes, companies in demand for semiconductors, and related investors, can access the 'www.regulation.gov' homepage and express their opinions by March 24. The Ministry of Commerce will hold a separate briefing session in relation to the collection of opinions, and the schedule for future briefings will be disclosed through the National Institute of Standards and Technology (NIST) website (www.nist.gov/semiconductors).
On the premise of the passage of the 'CHIPS for America Act' budget, the Ministry of Commerce is planning to establish a strategy and budget allocation plan for leading-edge technology, solving supply shortages, and promoting R&D/manufacturing based on the received opinions. To this end, the Ministry of Commerce solicited industry opinions for each of the following four policies: (1) semiconductor financial support program, (2) establishment of the National Semiconductor Technology Center, (3) advanced packaging manufacturing program, and (4) core talent development.
◦ Semiconductor Financial Assistance Program: Subsidies/credits, etc. for private or public-private joint ventures promoting the establishment, expansion, and modernization of domestic semiconductor manufacturing facilities in accordance with the Defense Authorization Act of 2021 (Article 9902) Provide financial support
◦ National Semiconductor Technology Center: NSTC was established in accordance with the Defense Authorization Act of 2021 (Article 9906). NSTC is in charge of promoting advanced semiconductor manufacturing R&D, raising investment funds, supporting technology commercialization, protecting intellectual property rights, and hosting university-government research institute collaboration
◦ Advanced Packaging Manufacturing Program: Enhancing innovation throughout the domestic semiconductor industry, including manufacturing productivity, energy efficiency, and cost reduction through advanced packaging technology
◦ Workforce Development Needs of the Industry: Operate a core workforce development program in the private/public sector for the future of the semiconductor industry in the US
Ministry of Commerce predicts prolonged global semiconductor supply and demand instability
In September of last year, the US government held a semiconductor countermeasure meeting presided over by the White House to resolve the global semiconductor supply bottleneck and requested business information such as inventory, sales price, and customers from major semiconductor companies at home and abroad. And on January 9, the Ministry of Commerce released a report containing the current status of global semiconductor supply and demand, short-to-mid-term prospects, and government response plans based on the 1 responses received.
In the report, the Ministry of Commerce stated that △ Semiconductor demand increased by more than 2021% in 17 (compared to 2019) △ Reduced inventory holding days of demanding companies from 2019 days in 40 to 2021 days in 5 △ Aggravated bottlenecks in certain items △ Stabilization of international supply chains The necessity of transparency in industry information for this purpose and the importance of strengthening domestic semiconductor manufacturing capabilities were revealed.
In addition, it is predicted that the current imbalance in supply and demand for semiconductors will continue for at least six months and may recur at any time depending on domestic and foreign circumstances in the long term. If overseas semiconductor production is disrupted for two to three weeks due to a natural disaster, it is predicted that the US manufacturing industry with a low inventory retention rate (average inventory holding days 6-2 days) will suffer severe damage such as suspension of operations.
The Ministry of Commerce identified △ semiconductor logic chips (used for medical devices, automobiles, etc.) △ analog chips (used for power management, image sensors, radio wave devices, etc.) △ optoelectronic chips (used for sensors, switches, etc.) . The Ministry of Commerce announced that it will ease bottlenecks in the short term through the semiconductor supply chain Early Alert System and focus on increasing manufacturing fab capacity in the US in the long term.
U.S. plays a vital role in preoccupying global manufacturing capacity
According to a report (September 2020) jointly published by the National Semiconductor Association (SIA) and Boston Consulting, international semiconductor demand is expected to grow rapidly at an average annual rate of 9% over the next 10 years due to technological innovations such as artificial intelligence, Internet of Things, and autonomous driving. In line with this rapid increase in demand, global semiconductor manufacturing capacity by 5 must increase by more than 2030% (about 56 million wmp) from the current level. However, given the current state of investment (as of June 1000), only 2020% of the global capacity increase required by 6 is actually expected to be met. In other words, it said that there is a 'white space' of opportunity where global semiconductor investment cannot keep up with the rapidly growing demand for production capacity.
SIA ordered the US government to accelerate aggressive semiconductor manufacturing investment in order to occupy a 'vacancy' in international production. At current investment levels, the US is projected to capture only about 2030% of the current global production 'vacancy' by 6. However, when the approximately $500 billion semiconductor support program is activated, 10 US production facilities will be built over the next 19 years, and the US will be able to capture 24% of the new global production capacity. As a result, the share of the US in international semiconductor production will increase from the current 10% to 13-14%.
<Forecast of Effect of Investment to Foster U.S. Semiconductor Manufacturing>
Currently, efforts to seize national competitiveness in semiconductors are not limited to the United States. According to media reports, on February 2, the European Commission will unveil the European version of the semiconductor manufacturing promotion policy. Thierry Breton, EU Commissioner for Domestic Demand Policy of the European Union, said, “Currently, semiconductors are the most important geopolitical area of interest for all countries.”
Some are concerned that the competitive policy to foster semiconductors may escalate into international trade disputes or overproduction problems. Scott Lincicome, director of trade policy at the Cato Institute, pointed out that if the US uses a subsidy system for the domestic semiconductor industry, the EU, China, and South Korea will scramble to respond with similar policies. “Therefore, if countries competitively use trade remedies such as countervailing duties, the semiconductor industry could become the epicenter of protectionism as it was in the 80s and 90s,” he warned. In addition, he urged careful policy, saying, "If policy investments are concentrated in the semiconductor industry, which is a representative capital-intensive industry, the problem of price drop due to overproduction will inevitably be expressed."
Source: U.S. Department of Commerce, Federal Register, White House, National Semiconductor Association (SIA), Politico Pro, Financial Times, Bloomberg and KOTRA Washington Trade Center