US President Joe Biden’s Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act is intended to bring the US in line with China in manufacturing and creating supply chains which aren’t reliant on China, a potentially volatile market. After Russia’s invasion of Ukraine and the rationing of their oil to western nations supporting Ukraine causing significant inflation, there is worry that another nation with significant resources could do the same in the future.
In this situation, many point to China given that it is a power with natural resources and one of the largest economies. Over the past few years, America has attempted to challenge China on the international stage through various trade wars during the Trump administration, and now they are seeking to further challenge them through boosting the manufacturing of semiconductors on US soil.
Whilst the US invented the semi-conductor, a substance which has electrical properties and serves as the foundation of computers and many other electrical devices including household electronics, they now only produce about 10 percent of the world’s supply. Given the importance of semiconductors in technology and the US’ low manufacture rate, they are concerned that they could be taken advantage of on the international stage. Recently this has led to supply issues and skyrocketing costs in the automotive industry as virtually all modern vehicles contain integrated computer chips. This is a particular blow to America, a nation that generally attempts to be self-sufficient to ensure their international dominance.
Alongside boosting domestic production of semiconductors, there is also an emphasis within the CHIPS and Science Act on scientific research. Historically, US investment in science has led to significant achievements, most notably the moon landing in 1969. President Kennedy’s ‘moonshot’ and a subsequent investment of two percent of GDP in research and development has allowed the US to continue pushing boundaries that previously were not thought possible. This investment has now fallen to below one percent of GDP -- something the Biden administration is attempting to correct.
The $52.7 billion investment is certainly sizeable and it is being described as a research investment, but where the money will end up is unclear. Despite it being earmarked for research, most of the money will be used as a subsidy, or manufacturing incentive for companies to build manufacturing plants on US shores. It doesn’t appear that all $52.7 billion will go towards academic research, as many people would expect.
This does not mean that research won’t happen though. By investing this money in companies, it is likely that new products and technologies will emerge, likely in the fields of artificial intelligence. The focus of this piece of legislation is to ensure that anything new comes from the US though, rather than from other countries such as China as was expected given the previous trajectory of research.
Although semiconductor production will increase in the US as a result of this Act, the US will likely still rely on China for technological materials. Rare earths are necessary components of technologies such as mobile phones, computers and televisions as well as defence technologies such as radar, and China has monopolised the resource with an 84 percent majority share of rare earth production. They are often found together in geological deposits in countries such as the USA, Brazil, China, Australia, Russia and India.
The US has a small stockpile of the materials in case imports from China stop, however they will need to create a mining process of their own in order to become more self-reliant. The current mining process is extremely impactful on the environment because it causes the pollution of both water and air and local soil is incapable of being used for crops. Where it is possible to clean up the pollutants, it is thought to take 50 to 100 years before the surrounding environment is usable again.
The adoption of this process in the US is likely to be hugely unpopular domestically given how climate change is slowly moving up the agenda and how local residents often oppose environmentally unfriendly measures in their surroundings. Furthermore, it would be in opposition to the Biden administration’s emphasis on climate and their recent climate change investments.
It is possible that the investment in semiconductors will lead to research around rare earths and how the US can increase their extraction and production of them as well as creating a process which is more environmentally friendly. Overall the CHIPS and Science Act is likely to help the US in creating more technological security, but it is only one step in that direction.
