President Joe Biden signed an executive order Feb. 24 to address supply chain shortages of semiconductor chips, personal protective equipment, medicine and other critical goods. The order calls for a 100-day review of U.S. supply chains to pinpoint “vulnerabilities” impacting a range of goods, including certain pharmaceutical products, critical minerals such as rare earths, semiconductors and large-capacity batteries. The order also calls for a one-year review that will examine issues in a broader set of U.S. supply chains, including those impacting the defense industrial base, the public health base, the information and communications technology sector base, the energy sector industrial base, the transportation industrial base and the agricultural sector.
Senate Majority Leader Chuck Schumer, D-N.Y., said he directed lawmakers this week to begin crafting legislation to strengthen the U.S. semiconductor industry to out-compete China. The legislation will include a bipartisan bill introduced by Schumer and other lawmakers last year that would increase U.S. investment in technology, research and high-tech manufacturing (see 2006010011), Schumer said, adding that the legislation will also include other semiconductor industry initiatives. Schumer said he plans to call for a vote on the legislation this spring. “[W]e need to get a bill like this to the president's desk quickly to protect America's long-term economic and national security,” Schumer said Feb. 23. The Semiconductor Industry Association applauded Schumer’s comments and said investing in U.S. innovation is “key” to out-competing China (see 2102180062). “We urge the Biden administration and Congress to invest boldly in domestic semiconductor manufacturing and research,” SIA President John Neuffer said.
A broad coalition of trade associations including representatives from the semiconductor manufacturing industry wrote a letter Feb. 18 to President Joe Biden urging him to back the funding for the crucial technology authorized in the CHIPS for America Act in the fiscal year 2021 National Defense Authorization Act. The letter made the groups' case for greater funding for semiconductors and called for an investment tax credit in the upcoming infrastructure and economic recovery proposal. Notable signatories to the letter include the National Association of Manufacturers, SEMI and the Semiconductor Industry Association, as well as the Information Technology Industry Council and the Alliance for Automotive Innovation.
Sen. Tom Cotton, one of the most prominent China hawks in Congress, thinks that the Bureau of Industry and Security is buried within an organization “hostile to the aggressive use of export controls,” and so it should be moved from the Commerce Department to the State Department, because, he says, that department puts national security first. Cotton, who has published a lengthy report on what he calls the economic long war with China, discussed his views during an online program at the Reagan Presidential Foundation on Feb. 18.
The semiconductor, chemicals, medical devices and aviation industries could be especially hurt by decoupling, according to a new U.S. Chamber of Commerce report attempting to quantify the costs of stopping or slowing sales to China, and in the case of chemicals, high tariffs on Chinese inputs used by U.S. chemical plants. Some of the actions modeled in the report have already happened, such as 25% tariffs on chemicals from China, and China's retaliatory tariffs on chemical exports. But while semiconductor exports to ZTE, Huawei and Fujian Jinhua have been restricted, there has not been a complete ban on the export of chips to China, which is what the report modeled.
The U.S. needs to swiftly implement industrial policies to counter China’s technology rise and compete against Chinese state-owned companies or risk lagging behind in innovation, experts said. Without targeted policies, the U.S. could quickly cede technology leadership to China in a variety of sectors, the experts said during a Feb. 16 Center for Strategic and International Studies event.
Semiconductor firms are hoping to convince the Biden administration to reverse some export restrictions against Huawei as the new administration undergoes a review of China-related policies, Reuters reported Feb. 11. The companies believe significant changes are unlikely but hope to appeal to U.S. interagency panels that at least some restrictions should be lifted, the report said. The Commerce Department, which oversees the restrictions, didn’t comment. In its final weeks in office, the Trump administration issued a flurry of license denials for exports to Huawei after months of inaction on the applications, partly caused by COVID-19 pandemic-related delays (see 2101150062). Export control lawyers say they have not yet seen a shift in the Huawei licensing policy under President Joe Biden (see 2102080046).
The Semiconductor Industry Association wants the new administration to include substantial funding for semiconductor manufacturing and research via grants and tax credits in its economic recovery plan. In a Feb. 11 letter to President Joe Biden, SIA said its competitors worldwide have an unfair advantage due to incentives and subsidies provided by their governments. SIA said the U.S. took a step in the right direction when it passed the Creating Helpful Incentives to Produce Semiconductors for America Act, or CHIPS for America Act, in the 2021 defense bill, but it said more is needed. “Semiconductors are critical to the U.S. economy, American technology leadership, and our national security,” the letter said. “They enable the technologies needed to realize your Build Back Better goals, including smarter and safer transportation, greater broadband access, cleaner energy, and a more efficient energy grid, while also providing high-paying jobs for Americans and strengthening our advanced manufacturing base.”
A panel of scholars and a former general consul in Hong Kong agreed that the Biden administration is likely to place more emphasis on export controls and industrial policy to support domestic semiconductor production, and less on the trade deficit and tariffs, even as the new president has to decide what to do about Section 301 tariffs at some point. They were speaking on a virtual panel about U.S.-China relations hosted by the Washington International Trade Association on Feb. 8.
Industry should expect the Biden administration’s review of Trump-era China policies -- including export controls and licensing decisions -- to take two to three months, trade lawyer Peter Lichtenbaum said. He also said the Bureau of Industry and Security will continue to adhere to the Trump administration's strict Huawei licensing policy until it’s changed by incoming political appointees, which has not yet happened.