Problem: US Military Relies On Advanced Semiconductors. None Are Made In the US

Electronics and semiconductors are key elements in the US and NATO's military preparedness and a reason why weapons provided to Ukraine are superior to those of the Russian invaders. 

Virtually all of those semiconductors are made in Taiwan or other parts of Asia, which is why the Senate today passed a bill allocating $50 billion in subsidies for semiconductor manufacturing in the US. JL 

David Leonhardt reports in the New York Times, Thomas Franck reports in CNBC:

The most advanced category of semiconductors used in smartphones, military technology and much more is known as 5 nm. A single company in Taiwan, TSMC, makes 90% of them. U.S. factories make none. If China were to invade Taiwan and cut off exports of semiconductors, the American military would be at risk. The Senate (today) voted to advance a slimmed-down version of its bill which would provide $50 billion in subsidies to bolster U.S. computer chip manufacturing. The aim is to incentivize semiconductor production within the U.S. to decrease dependence on Asia-based manufacturers.

New York Times - The most advanced category of mass-produced semiconductors — used in smartphones, military technology and much more — is known as 5 nm. A single company in Taiwan, known as TSMC, makes about 90 percent of them. U.S. factories make none.

The U.S.’s struggles to keep pace in semiconductor manufacturing have already had economic downsides: Many jobs in the industry pay more than $100,000 a year, and the U.S. has lost out on them. Longer term, the situation also has the potential to cause a national security crisis: If China were to invade Taiwan and cut off exports of semiconductors, the American military would be at risk of being overmatched by its main rival for global supremacy.

For these reasons, a bipartisan group of senators and the Biden administration negotiated a bill last summer that included $52 billion to jump-start the domestic semiconductor industry, as well as other measures to help the U.S. compete economically with China. The bill would offer the kind of semiconductors subsidies that other countries — including China, South Korea, Japan, India and Germany — provide. Without such subsidies, companies like Intel and Broadcom would probably choose to build new factories outside the U.S.

 

But the Senate’s semiconductor bill still has not become law. The House spent months negotiating its own bill, passing one in February. Since then, the House and Senate have failed to resolve the differences between the two bills, and Mitch McConnell, the Republican Senate leader, recently threatened to scuttle the talks.

CNBC - The Senate voted to advance a slimmed-down version of its bill designed to boost U.S. semiconductor competition with China.

The bill cleared a key procedural hurdle Tuesday evening in a 64-34 vote even as lawmakers worked to finish various sections of the legislation.

The bill, which would provide about $50 billion in subsidies to bolster U.S. computer chip manufacturing, is a multifaceted bipartisan effort that combines the interests of several committees, ranging from national security to economics.

The Senate’s procedural step forward on Tuesday paves the way for the chamber to hold a vote on final passage later this week or early next week. The bill would then travel to the House for passage before it would head to President Joe Biden’s desk for signature into law.

The broadest aim of the legislation is to incentivize semiconductor production within the U.S. to decrease dependence on Asia-based manufacturers.

Biden administration officials say a larger domestic chip industry would help ease the supply chain disruptions that have hampered the economic recovery from Covid-19 and insulate the U.S. from supply routes dominated by political rival China.

The centerpiece of the legislation is $52 billion to rebuild domestic chip production and tax breaks to encourage the construction of plants based in the U.S. Chip stocks rallied on Tuesday ahead of the expected vote, with Intel up 3.9%, Nvidia 5.5% higher and Texas Instruments rising 3.1%, all ahead of the broader S&P 500′s 2.8% gain.

The procedural step forward comes more than one year after the Senate in a bipartisan vote first approved a $250 billion bill to reinforce U.S. chipmaking and invigorate American research and development.

But the House never considered that legislation after the Senate cleared it in June 2021.

House Democrats drafted their own version of a Chinese competition act, with a gentler national security tone and a greater emphasis on climate change funding. Republicans opposed the bill.

Democrats in both chambers have for months attempted to reconcile differences between the two versions. With annual inflation running above 9% and the party set for tough midterm elections, the Biden administration has suggested it would approve a simpler bill aimed at just magnifying chip production.