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I just saw a story from Reuters (here) that a “sweeping semiconductor industry bill” has advanced in the Senate, and could be passed by both the Senate and House within the week. The story reports that the bill “provides about $52 billion in government subsidies for U.S. semiconductor production as well as an investment tax credit for chip plants estimated to be worth $24 billion.”
The stated justification, in the Reuters story, is “to make the domestic industry more competitive with China.”
Are any of you sufficiently knowledgeable about the semiconductor industry to be able to provide a helpful explanation about this bill, or about the industry in general?
My initial hypothesis is that this bill may be a wise measure, though costly, aimed at returning semiconductor production to the US. It appears that the main competition, however, is not China. At least, not the People’s Republic of China, but rather its breakaway province, Taiwan.
My general impression, probably from a podcast by Peter Zeihan, was that Taiwan is the leading semiconductor manufacturer. I found a March 2021 story from CNBC (here) setting forth market share for “semiconductor contract manufacturers” as follows:
- 63% – Taiwan
- 18% – South Korea
- 6% – China
- 13% – All others combined
I’m not sure whether this includes all semiconductor manufacturing worldwide, or only a portion performed by “contract manufacturers.” My suspicion is that other companies might manufacture semiconductors for their own use, and that those might not be included in these figures. I’m not sure about this, so I’d appreciate any additional information.
My thought about the semiconductor bill advancing in Congress is that its primary purpose is to reduce our dependence on semiconductor imports from Taiwan, not China. Again, this strikes me as a good idea.
If I am correct about this, though, I wonder if there is an ulterior motive. If I were a top US government official, and I was concerned that Taiwan might fall to China — or just be attacked and wrecked by China — I would want to take action to reduce our economic exposure to such an event. On the other hand, I probably wouldn’t want to say that this was the purpose of the bill.
For my part, I wouldn’t object to this possibility. While I wish the Taiwanese well, I’m becoming increasingly skeptical of the wisdom of defending the island from the mainland Chinese.
What do you all think?Published in