In an effort to restore American technological leadership and reduce reliance on manufacturing in Asia, the US government has allocated up to $52 billion in subsidies for domestic semiconductor manufacturing. The funding, authorized by the CHIPS and Science Act signed into law by President Joe Biden in August 2022, aims to strengthen the US semiconductor industry. However, the US Commerce Department is taking steps to ensure that beneficiaries of the funding do not divert it to “countries of concern,” particularly China and Russia. This article explores the importance of protecting US semiconductor manufacturing and the potential risks of unrestricted engagement with these countries.

The Risks of Unauthorized Diversion

With a global reach, a company receiving funding could potentially conduct research and development of sensitive semiconductors in countries the US wants to avoid sharing with. This raises serious concerns about the possibility of sensitive technologies, such as quantum computing, AI technology, radiation-hardened chips, and communications equipment, falling into the wrong hands. These technologies can be exploited by adversaries for various purposes, including military applications like missiles and drones. It is vital to restrict the expansion of semiconductor manufacturing capacity in certain countries to safeguard America’s technological advancements.

Preventing Unfair Advantage

Commerce Secretary Gina Raimondo emphasized the need to prevent China from gaining an advantage through these subsidies. The US government believes that semiconductor manufacturing is an arms race, and protecting closely held secrets is crucial. By ensuring that not a penny of the funding helps China get ahead, the US aims to maintain its superiority in technology. The CHIPS Act is not only about commercial reasons but also strategic ones, including safeguarding critical supply chains and reducing dependence on Asian manufacturing.

The COVID-19 pandemic highlighted the vulnerability of global supply chains, especially in the semiconductor industry. The shortages experienced during this period had severe consequences. The gaming industry, for example, faced a shortage of consoles, GPUs, and power management chips, resulting in unavailability and skyrocketing prices. These bottlenecks illustrated the importance of diversified global chip making capacity to prevent future shortages and maintain a steady supply. By investing in domestic semiconductor manufacturing, the US can mitigate the impact of global disruptions and ensure a reliable source of critical technologies.

Beyond economic considerations, protecting US semiconductor manufacturing is crucial for national security. Semiconductors are integral to advanced technologies used in defense, intelligence, and infrastructure systems. Any compromise in the production and supply chain of semiconductors could undermine national security and leave the nation vulnerable to cyber threats or manipulation by foreign adversaries. The proposed rules by the US Commerce Department are necessary steps to secure the technological capabilities vital for ensuring national security.

The US government’s commitment to revitalizing the semiconductor industry through subsidies highlights the importance of domestically manufacturing critical technologies. By putting restrictions on funding recipients, particularly to prevent it from reaching countries of concern like China and Russia, the US aims to protect its technological edge and national security. The lessons learned from semiconductor shortages further underscore the need for diversified chip making capacity to avoid future disruptions. By safeguarding its semiconductor manufacturing, the US can maintain its technological leadership and reduce dependence on foreign sources, ultimately benefiting its economy and national security.

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