US Lawmakers Seek to Secure Semiconductor Supply Chains Away From China

May 11, 2020 Updated: May 11, 2020

The newly formed China Task Force, a House committee made up of 15 Republican lawmakers, is hoping to maintain the United States’ edge in designing advanced semiconductor chips—used to power nearly all electronic devices, from smartphones and computers to satellites and missile systems.

Rep. Michael McCaul (R-Texas), the leader of the task force and chairman of the House Foreign Affairs Committee, called on Congress to secure semiconductor supply chains from “the threat posed by malign actors like the Chinese Communist Party.”

He also asked Congress to come up with incentives for manufacturers to make advanced semiconductor chips in the United States.

“Cutting edge semiconductors are key to the nation’s future security and economic competitiveness,” he said in a press release issued on May 10.

Electronic device companies like Apple design their own chips before sending the blueprints to chip contractors to manufacture them. Currently, there are three companies in the world capable of manufacturing the fastest and most advanced chips: U.S. firm Intel, South Korean tech giant Samsung, and Taiwan-based TSMC, the world’s biggest contract chipmaker.

Although China lags behind in semiconductor manufacturing capabilities—with China’s chipmakers at least two generations behind TSMC—some parts of the supply chain are based in China. For example, TSMC and Samsung both have chipmaking factories in China.

New Factories?

The administration is also hoping that chipmakers can build manufacturing factories in the United States, and are in talks with Intel and TSMC about such plans, according to a May 10 Wall Street Journal report, citing correspondences viewed by the paper and unnamed people familiar with the discussions.

TSMC, in a statement to WSJ, said it was open to building a factory outside of Taiwan and China, but there has been “no concrete plan yet.”

On April 16, TSMC chairman Mark Liu said that the company “is actively evaluating a U.S. fab [factory] plan,” according to Taiwanese media.

Liu Pei-chen, a researcher at Taiwanese economic think tank Taiwan Institute of Economic Research, told the Epoch Times sister media NTD that this news could be a sign that the global semiconductor industry was moving away from China, with potential future changes in investment strategy and supply chain restructuring.

According to a Nikkei Asian Review report in January, U.S. officials were wary of potential Chinese interference and wanted TSMC to produce chips in the United States. “The U.S. government wants chips that go into military projects to be built on American soil,” an unnamed senior Taiwanese government official told the Japanese publication.

According to Nikkei, TSMC has manufactured chips used in American fighter jets F-35, as well as Pentagon-approved “military-grade” chips for classified military purposes.

North America accounted for 60 percent of TSMC’s net revenue of $35.77 billion in 2019, according to a U.S. SEC (Securities Exchange Commission) filing. China accounted for 20 percent, Japan 5 percent, while the rest of Asia Pacific accounted for 9 percent.

TSMC had a market share of 52.7 percent as of the fourth quarter of 2019, followed by Samsung with 17.8 percent, according to market researcher TrendForce.

US Actions

McCaul called on the U.S. government to “work with industry, academia, state and local governments, and international partners to incentivize advanced semiconductor manufacturing and R&D right here in the United States.”

He added that the current pandemic has illustrated the need for the United States’ self-sufficiency “and industrial capability to manufacture various vital products for our own security.”

The global pandemic has created a medical supply shortage in the United States, including protective masks and ventilators—as many of these items are mainly produced in China.

The CCP virus, commonly known as the novel coronavirus, originated from central China’s Wuhan city and has caused over 79,500 deaths in the United States alone.

The United States has made moves to bolster its domestic semiconductor industry. The Fiscal Year 2020 Appropriation Act, which sets the federal budget until Sept. 30 this year, includes language that emphasizes the importance of American leadership in semiconductors, according to the U.S. trade association Semiconductor Industry Association (SIA).

The act also allocates funding for federal agencies such as the National Science Foundation and the National Institute of Standards and Technology, that support semiconductor research, according to SIA.

Also, in February, the White House Office of Science and Technology Policy announced a new interagency working group to focus on semiconductor research and development.

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