US Reviews Semiconductor Supply Chain Amid Concerns Over Reliance on Chinese Chip Imports

Washington – The United States Commerce Department announced plans to initiate a comprehensive assessment of the nation’s semiconductor supply chain, focusing particularly on the defense industry, in a move to mitigate potential national security risks associated with reliance on Chinese-produced chips.

Set to commence in January, the survey is designed to identify vulnerabilities and dependencies on Chinese legacy semiconductors within critical sectors of the U.S. economy. The initiative is part of a broader strategy to counter what the Department considers to be unfair competitive practices by China, including substantial subsidies to its domestic semiconductor industry. According to a recent Commerce Department report, these subsidies, which are estimated to total around $150 billion over the past ten years, have skewed the international semiconductor market against U.S. and other foreign companies.

In response to U.S. actions, the Chinese embassy in Washington criticized the U.S. approach, accusing it of overreaching in its national security measures and engaging in biased and unjustified treatment of foreign businesses, while also politicizing economic and technological issues.

Secretary of Commerce Gina Raimondo highlighted the economic significance of the semiconductor industry last week, forecasting that her department would distribute approximately a dozen grants for chip manufacturing within the year. These grants could significantly influence the American semiconductor production landscape. The first such award from this initiative was granted on December 11.

The Commerce Department emphasizes that ensuring fair conditions for legacy chip manufacturing is essential. Secretary Raimondo stressed the importance of addressing foreign government actions that undermine the U.S. legacy chip supply chain, framing it as a national security imperative.

The Department’s report also pointed out that semiconductor manufacturing costs in the U.S. are considerably higher than elsewhere, by about 30-45%. To support the domestic industry, the report suggests the need for ongoing backing for the construction of semiconductor fabrication plants. It recommends the implementation of permanent measures to encourage continuous building and modernization of these facilities, referencing the investment tax credit due to expire in 2027 as a key example of such incentives.,

The United States government has initiated a comprehensive review of the semiconductor supply chain, focusing on the reliance on Chinese chip imports amidst rising concerns over national security and economic competitiveness. The review aims to identify vulnerabilities and ensure a resilient supply of these critical components, which are essential for a wide range of industries, from consumer electronics to military systems.

China’s growing expertise and capacity in semiconductor manufacturing have become a point of contention, as the U.S. seeks to safeguard its technological edge and mitigate the risk of supply chain disruptions. This scrutiny comes in the context of broader geopolitical tensions and trade disputes between the two countries.

As part of the review, the U.S. is considering measures to bolster domestic chip production and incentivize research and development. This includes potential investments in semiconductor fabrication plants and partnerships with allies to diversify sources of supply. The effort also aligns with broader strategic objectives to counterbalance China’s technological rise and protect sensitive industries from potential espionage or sabotage.

The outcome of the review may lead to policy recommendations, regulatory changes, or direct support for the semiconductor industry, all aimed at creating a more secure and self-sufficient supply chain for these crucial components.

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