Biden administration announces plan for $50 billion investment in chips to avoid dependency on China

Washington: The Biden administration has announced it will invest USD 50 billion in building up the domestic semiconductor industry to counter dependency on China, as the US produces zero and consumes 25 per cent of the world’s leading-edge chips vital for its national security.

President Joe Biden last month signed a USD 280 billion CHIPS bill to boost domestic high-tech manufacturing, part of his administration's push to boost US competitiveness over China.

US Commerce Secretary Gina Raimondo on Tuesday told reporters at the White House that the Department of Commerce plans to implement the USD 50 billion in CHIPS.

The department is aiming to begin soliciting applications for the funding from companies no later than February, and it could begin disbursing money by next spring, Raimondo said.

“This past year, we saw the impact of the chip shortage on American families when car prices drove a third of inflation because of lack of chips, factory workers were furloughed, household appliances were often unavailable, all because of a lack of semiconductors,” Raimondo said.

“And as our economy and military become more reliant on technology, it’s that much more essential that we develop a strategy with values, outcomes, and structures that enable us to plan for an economy and manufacturing infrastructure that positions us to compete today and into the future,” she added.

According to Tuesday's decision, the massive USD 50 billion funding aims at establishing and expanding domestic production of leading-edge semiconductors in the United States.

"Today, the United States consumes more than 25 per cent of the world’s leading-edge chips and produces zero of those chips," she said.

“We want to build a sufficient and stable supply of mature node semiconductors. We consume 30 per cent, and produce 13 per cent. We need to fix that,” she said, adding that the administration will invest in research and development to ensure the next generation of semiconductor technology is developed and produced right here in the United States.

She said the decision taken by the Biden administration would create jobs.

“In the process of doing all this, we will create tens of thousands of good-paying manufacturing jobs and more than a hundred thousand construction jobs. This effort will ensure the pipeline for these jobs expands to include people who have historically not had a chance to participate in this industry, including women, people of colour, veterans, and people who live in rural areas. And that is explicitly required in statute, and we will carry out Congress’s intent,” Raimondo said.

To achieve these goals, CHIPS for America will support three distinct initiatives. Two of those initiatives, which total USD 39 billion, will make investments in domestic chip manufacturing here in the United States, the Commerce Secretary announced.

The Biden Administration, she said, will make large-scale investments in leading-edge manufacturing.

CHIPS for America will target approximately USD 28 billion in manufacturing incentives to establish domestic production of leading-edge logic and memory chips that require the most sophisticated processes available today, she noted.

“We will invest about USD 10 billion in new manufacturing capacity for mature or current-generation semiconductors. This will help us increase domestic production across a range of chips, including the chips that are used in cars, medical devices, and communication technology,” she said.

The administration is going to make historic investments to strengthen America’s research and innovation leadership. Eleven billion dollars will go to research and development programs, including the creation of a National Semiconductor Technology Center, Raimondo told reporters.

Tensions between the United States and China are rising over Taiwan, the self-ruled island that is the source of more than two-thirds of the most advanced semiconductors.

Semiconductors are crucial components in mobile phones, pacemakers and coffee makers, and they are also the key to advanced technologies like quantum computing, artificial intelligence and unmanned drones.

Many leading companies, like Qualcomm, Nvidia and Apple, design chips in the United States, but they contract out their fabrication to foundries based in Asia, particularly in Taiwan. The system creates a risky source of dependence for the chips industry, a White House statement was quoted by The New York Times.