KWM Select: How can Chinese companies respond to the opportunities and challenges brought by the US Chip Act
The CHIPS and Science Act of 2022, which has just come into effect, has been described by industry insiders as a key step for the United States to implement a "new measure of precise decoupling" from China. As an important part of the "Chips Act 2022" (Chips Act 2022) is particularly concerned by the chip and semiconductor research and development and manufacturing field, but also caused unease in the supply chain and investment community. This article will start with the analysis of the so-called "China guardrail" clause, focus on explaining the latest trend and future trend of export control which is highly consistent with it at the strategic level, and put forward specific analysis points and ideas and other relevant practical suggestions for enterprises on how to carry out risk analysis and formulate coping strategies.
1. Changes in U.S. semiconductor policy
Since the 1970s, US semiconductor industrial policy has been gradually replaced by an asset-light "science policy" strategy, with large enterprises and asset-light innovative enterprises replacing a strong ecosystem of small and large production enterprises [1]. After the 1990s, semiconductor companies in the United States further focused on the development of asset-light, high value-added, high-tech chip research and development and design, chip production and manufacturing are mainly located in Southeast Asian countries foundries. The above division of labor mode enables the United States to minimize costs while maintaining technology leadership, but at the same time, the chip supply in the United States is subject to the global semiconductor industry chain, making the chip supply chain in the United States a certain vulnerability. Especially in recent years, under the influence of multiple reasons such as the global epidemic, the complex and changing international situation and geopolitical pressure, the global chip supply has been insufficient, resulting in the lack of core production in the United States automobile manufacturing and other industries.
The formal passage of the 2022 Chip and Science Act aims to reshape the global semiconductor industry chain and enhance the chip manufacturing capacity and cutting-edge semiconductor research and development capacity in the United States. On the one hand, it is to protect the security of the semiconductor supply chain in the United States, and on the other hand, it is to achieve the goal of maintaining the absolute dominant position of the United States in the semiconductor field and comprehensively limiting the development strategy of the semiconductor industry in China and other related countries. The Act is mainly to support enterprises that master advanced process chip production technology and capability to establish production lines and expand production capacity in the United States, and its direct impact is mainly to affect the investment decisions of semiconductor manufacturing enterprises that master advanced process in the United States and overseas through the issuance of subsidies, forcing the above enterprises to "choose sides" in the semiconductor field of China and the United States. At the same time to improve the United States local chip production capacity and limit China's development and expansion of advanced process chip manufacturing capacity; In addition, through the implementation of the 2022 Chip and Science Act, the United States will deepen its strong alliance with semiconductor giants in Japan, South Korea and other countries and regions, maintain and expand the technological advantages of the United States in the semiconductor field, and strengthen the voice of the United States in the field of semiconductor standards.
2. Legislative process
In June 2020, as the share of U.S. chip manufacturing capacity in the world continues to decline, The looming strategic crisis in the industry prompted the U.S. Senate to introduce the Creating Helpful Incentives to Produce Semiconductors for America Act [2], The Act provides for investments and incentives to support U.S. semiconductor manufacturing, research and development, and supply chain security, and was included in the National Defense Authorization Act for Fiscal Year 2021 in January 2021. However, the chip bill failed to materialize after lawmakers failed to secure the necessary funding for the bill.
In April 2021, U.S. Democratic Senator Charles Schumer submitted a new version of the "Endless Frontier Act" (Endless Frontier Act), including the chip bill, requiring billions of dollars to be invested in the next five years to enhance American science and technology in general, focusing on ten key technology areas, including semiconductors. The bill was subsequently renamed the United States Innovation and Competition Act of 2021 [3] and passed the Senate in June of that year.
The Chips and Science Act of 2022 is an outgrowth of the America's Competition Act of 2022. Previously, the "American Innovation and Competition Act of 2021" passed by the United States Senate and the "American Competition Act of 2022" passed by the House of Representatives were quite different, and serious differences within the United States Congress led to a stalemate in the negotiations on the bill. In this context, the US House and Senate negotiated a "precise slimming" of the bill, reaching a compromise version acceptable to both sides, and eventually naming it the 2022 Chip and Science Act.
The reason why the Biden administration accelerated the legislative process of the bill, on the one hand, because the current chip shortage has greatly pushed up the cost of manufacturing in the United States, according to foreign media reports, experts estimate that the global chip shortage in 2021 has cost the United States economy 240 billion US dollars [4]. On the other hand, it is because the US Congress will recess in August, and after the resumption of the session, lawmakers' attention will turn to the midterm elections, which may slow down the passage of the chip bill.
3. Legislative purpose
The Chips and Science Act Of 2022 consists of three parts, including Part A, the Chips Act Of 2022, and Part B, the Research and Development, Innovation and Competition Act. The Competition, and Innovation Act and Part C of the Supreme Court Security Funding Act of 2022, It aims to revitalize domestic semiconductor manufacturing and invest in science to ensure U.S. leadership, reduce U.S. dependence on foreign semiconductor sources, and strengthen U.S. national security.
Us Secretary of Commerce Gina Raimondo issued a statement on July 28, 2022 local time, [5] saying that in the past 40 years, US companies have conducted business overseas in pursuit of lower costs, and the domestic semiconductor manufacturing economy has shrunk, causing domestic economic and national security vulnerabilities. With this historic investment in American chip manufacturing, the Chip and Science Act of 2022 helps achieve the Biden Administration's goal of revitalizing the domestic manufacturing economy while ensuring that the United States has access to a critical technology that will allow it to remain a leader in the 21st century.
On the day the bill was signed, the White House released a fact sheet titled "The Chip and Science Act Will Lower Costs, Create Jobs, Strengthen Supply Chains, and Stand Up to China," [6] saying the bill's historic investments will enable American workers, communities, and businesses to win the 21st century race. The bill will strengthen U.S. manufacturing, supply chains, and national security, and invest in research and development, science and technology, and the workforce of the future to maintain U.S. leadership in the industries of the future, including nanotechnology, clean energy, quantum computing, and artificial intelligence.
1. Changes in U.S. semiconductor policy
Since the 1970s, US semiconductor industrial policy has been gradually replaced by an asset-light "science policy" strategy, with large enterprises and asset-light innovative enterprises replacing a strong ecosystem of small and large production enterprises [1]. After the 1990s, semiconductor companies in the United States further focused on the development of asset-light, high value-added, high-tech chip research and development and design, chip production and manufacturing are mainly located in Southeast Asian countries foundries. The above division of labor mode enables the United States to minimize costs while maintaining technology leadership, but at the same time, the chip supply in the United States is subject to the global semiconductor industry chain, making the chip supply chain in the United States a certain vulnerability. Especially in recent years, under the influence of multiple reasons such as the global epidemic, the complex and changing international situation and geopolitical pressure, the global chip supply has been insufficient, resulting in the lack of core production in the United States automobile manufacturing and other industries.
The formal passage of the 2022 Chip and Science Act aims to reshape the global semiconductor industry chain and enhance the chip manufacturing capacity and cutting-edge semiconductor research and development capacity in the United States. On the one hand, it is to protect the security of the semiconductor supply chain in the United States, and on the other hand, it is to achieve the goal of maintaining the absolute dominant position of the United States in the semiconductor field and comprehensively limiting the development strategy of the semiconductor industry in China and other related countries. The Act is mainly to support enterprises that master advanced process chip production technology and capability to establish production lines and expand production capacity in the United States, and its direct impact is mainly to affect the investment decisions of semiconductor manufacturing enterprises that master advanced process in the United States and overseas through the issuance of subsidies, forcing the above enterprises to "choose sides" in the semiconductor field of China and the United States. At the same time to improve the United States local chip production capacity and limit China's development and expansion of advanced process chip manufacturing capacity; In addition, through the implementation of the 2022 Chip and Science Act, the United States will deepen its strong alliance with semiconductor giants in Japan, South Korea and other countries and regions, maintain and expand the technological advantages of the United States in the semiconductor field, and strengthen the voice of the United States in the field of semiconductor standards.
2. Legislative process
In June 2020, as the share of U.S. chip manufacturing capacity in the world continues to decline, The looming strategic crisis in the industry prompted the U.S. Senate to introduce the Creating Helpful Incentives to Produce Semiconductors for America Act [2], The Act provides for investments and incentives to support U.S. semiconductor manufacturing, research and development, and supply chain security, and was included in the National Defense Authorization Act for Fiscal Year 2021 in January 2021. However, the chip bill failed to materialize after lawmakers failed to secure the necessary funding for the bill.
In April 2021, U.S. Democratic Senator Charles Schumer submitted a new version of the "Endless Frontier Act" (Endless Frontier Act), including the chip bill, requiring billions of dollars to be invested in the next five years to enhance American science and technology in general, focusing on ten key technology areas, including semiconductors. The bill was subsequently renamed the United States Innovation and Competition Act of 2021 [3] and passed the Senate in June of that year.
The Chips and Science Act of 2022 is an outgrowth of the America's Competition Act of 2022. Previously, the "American Innovation and Competition Act of 2021" passed by the United States Senate and the "American Competition Act of 2022" passed by the House of Representatives were quite different, and serious differences within the United States Congress led to a stalemate in the negotiations on the bill. In this context, the US House and Senate negotiated a "precise slimming" of the bill, reaching a compromise version acceptable to both sides, and eventually naming it the 2022 Chip and Science Act.
The reason why the Biden administration accelerated the legislative process of the bill, on the one hand, because the current chip shortage has greatly pushed up the cost of manufacturing in the United States, according to foreign media reports, experts estimate that the global chip shortage in 2021 has cost the United States economy 240 billion US dollars [4]. On the other hand, it is because the US Congress will recess in August, and after the resumption of the session, lawmakers' attention will turn to the midterm elections, which may slow down the passage of the chip bill.
3. Legislative purpose
The Chips and Science Act Of 2022 consists of three parts, including Part A, the Chips Act Of 2022, and Part B, the Research and Development, Innovation and Competition Act. The Competition, and Innovation Act and Part C of the Supreme Court Security Funding Act of 2022, It aims to revitalize domestic semiconductor manufacturing and invest in science to ensure U.S. leadership, reduce U.S. dependence on foreign semiconductor sources, and strengthen U.S. national security.
Us Secretary of Commerce Gina Raimondo issued a statement on July 28, 2022 local time, [5] saying that in the past 40 years, US companies have conducted business overseas in pursuit of lower costs, and the domestic semiconductor manufacturing economy has shrunk, causing domestic economic and national security vulnerabilities. With this historic investment in American chip manufacturing, the Chip and Science Act of 2022 helps achieve the Biden Administration's goal of revitalizing the domestic manufacturing economy while ensuring that the United States has access to a critical technology that will allow it to remain a leader in the 21st century.
On the day the bill was signed, the White House released a fact sheet titled "The Chip and Science Act Will Lower Costs, Create Jobs, Strengthen Supply Chains, and Stand Up to China," [6] saying the bill's historic investments will enable American workers, communities, and businesses to win the 21st century race. The bill will strengthen U.S. manufacturing, supply chains, and national security, and invest in research and development, science and technology, and the workforce of the future to maintain U.S. leadership in the industries of the future, including nanotechnology, clean energy, quantum computing, and artificial intelligence.
