For all of Donald Trump’s talk about “Chi-na,” President Joe Biden has proved a much wiser and more formidable opponent for Xi Jinping, effectively checking the Chinese semiconductor industry while enticing companies around the world to make enormous investments in American tech.
These investments are expected to bring over $200 billion to our economy in the short-term, and perhaps as much as $350 billion over the next twenty years, creating some 40,000 good-paying new jobs in advanced industries.
It is predominantly the result of the groundbreaking CHIPS and Science Act, passed by Congress in July with some degree of bipartisan support, with seventeen Republicans joining the Dems in the Senate to pass it 64-33 and 24 Republicans voting along with all Dems save one to pass it 243-187 in the House.
President Biden signed it in August.
The act looks to combat China’s growing international influence in the tech industry in two key ways: first by investing $53 billion in American tech innovation, and secondly by making it illegal for Americans or US companies to aid the Chinese chip-making industry.
The latter provision has had enormous consequences for the Chinese, who have largely relied over the years on training and expertise from abroad.
For Taiwan, where much of the semiconductor industry is located, the CHIPS and Science act is both a blessing and a concern.
As a blow against China, which has gotten more aggressive against the island nation it still refuses to recognize as independent, C&S is welcome news. Yet it also may mean that the US will get a strong foothold in a sphere Taiwan has dominated.
We’re already seeing the major effects.
Micron has invested $20 billion in a new factory in upstate New York and is expecting to put in a total of $100 billion there within the next couple of decades.
Intel has done the same in Ohio, putting up $20 billion to start, with another $80 billion expected in just ten years.
The reverberation effects on the economy, meanwhile, promise to be significant.
In an article for the Semiconductor Industry Association blog, Robert Casanova, the Director of Industry Statistics and Economic Policy, laid it out succinctly:
“The total impact of the new fabs, expansion of existing fabs, and equipment and materials supplier projects amount to nearly $200 billion in company investments and the creation of approximately 40,000 jobs throughout the U.S. semiconductor supply chain. Job creation in this sector supports jobs throughout the broader U.S. economy. In fact, a 2021 SIA-Oxford Economic study found that for each U.S. worker directly employed by the semiconductor industry, an additional 5.7 jobs are supported in the wider U.S. economy.”
In other words, a big win for the Biden administration and the US as a whole.
For his part, Xi Jinping has promised victory for China, telling the Chinese Communist Party in October, “We will focus national strategic needs, gather strength to carry out indigenous and leading scientific and technological research, and resolutely win the battle in key core technologies.”
But China’s options are somewhat limited. While they can continue to invest in chipmaking technologies, it will be difficult for them to make up ground, especially in the short term.
As for retaliating in kind, this presents problems for them: the US buys some $400 billion a year in products from China, and they need those dollars to keep flowing in.
Overall, the semiconductor industry is said to be worth around $500 billion. But its influence spreads well beyond that, impacting many industries across the board.
Apple, for instance, was about to make a deal with Yangtze Memory Technologies in China prior to the passage of CHIPS and Science. That deal has now been scrapped.
Surely, this will be a long and arduous battle and we cannot let our eye off the ball.
Both Democrats and Republicans know this: in the new House, Kevin McCarthy has created a Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, to be led by Mike Gallagher (R-WI).
The speaker has promised that the committee will be nonpartisan. for whatever that is worth.
Though China will remain a concern for a long time to come, we are undoubtedly in a considerably better position due to strong leadership from President Biden in this arena. His well-conceived strategies have given the US an edge that it never had under Trump, who delivered more rhetoric than sound, coherent policies.
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