Looking at the competition of science and technology from the perspective of global chip policy

Semiconductor chips have now become the core of the digital economy, with applications ranging from smartphones and automobiles to critical applications and infrastructure in healthcare, energy, communications and industrial automation, pervading all aspects of the national economy.

The performance of chips is getting higher and higher, and all walks of life are becoming more and more dependent on chips, resulting in a rapid increase in demand for chips. The existing chip production capacity can no longer meet the demand. Coupled with the impact of factors such as the epidemic, earthquakes, floods, fires, and hoarding by middlemen, a protracted chip shortage is about to occur uncontrollably.

The industry is both capital-intensive and knowledge-intensive, characterized by intensive R&D activities. The chip supply chain is global and very complex, but production relies on a small number of manufacturing sites.

In the entire chip production process, chip manufacturing is the most important and has the highest technical threshold. There are many chip design companies now, and the design level is getting higher and higher. However, as chip design becomes more and more complex and the process becomes more and more advanced, there are fewer and fewer chip manufacturing companies, and production capacity is becoming more and more concentrated. To a certain extent, whoever masters chip manufacturing can strangle others in the chip field.

For decades, global chip manufacturing capacity has continued to shift to Asia. According to data from the Semiconductor Industry Association, as of 2020, Asia accounted for 79% of global chip production capacity, with Taiwan ranking first in the world at 22%, followed by South Korea at 21%, while mainland China and Japan both accounted for 15%, the United States only 12%, and Europe 9%.

Currently, in the global semiconductor industry, the United States' semiconductor design ecosystem leads the world, but the manufacturing end has shrunk significantly compared to before, and the industry is highly dependent on chip manufacturing in South Korea and Taiwan, China. China has the world's largest semiconductor market, but its semiconductor manufacturing still has a lot of room for improvement.

The chip shortage has put forward higher manufacturing demands for the development of chip industries in various countries, which has led to a shift in the focus of chip competition: from the past design field to the manufacturing field. Everyone is committed to increasing capital investment, concentrating resources, and promoting the localization of the semiconductor industry supply chain. Against this background, countries and regions including China, the United States, Japan, South Korea, and Europe have introduced new chip development strategies.

South Korean government releases "K-Semiconductor Strategy"

On May 13, 2021, the South Korean government released the "K-Semiconductor Strategy" - the government and enterprises will plan semiconductor industry clusters in Gyeonggi Province and Chungcheong Province, integrating semiconductor design, raw materials, production, components, cutting-edge equipment, etc., aiming to dominate the global semiconductor supply chain. In terms of investment amount, by 2030, South Korea will invest 510 trillion won (450 billion US dollars) in the semiconductor field, most of which will come from private enterprises, with a total of 153 companies joining.

To achieve this ambitious goal, the South Korean government will provide a 40% to 50% tax credit for investments in new chip technology R&D projects and a 10% to 20% tax credit for new factory spending. In order to achieve the set goals, more than 150 South Korean chip manufacturers have pledged to invest more than 510 trillion won in project R&D in the target year.

Japan establishes "Semiconductor Digital Industry Strategy"

On June 4, 2021, Japan's Ministry of Economy, Trade and Industry announced that it had completed the research and summary of semiconductors, digital infrastructure and digital industry strategies, and established a "semiconductor digital industry strategy", which will strengthen cooperation with overseas countries to jointly develop cutting-edge semiconductor manufacturing technology and ensure production capacity. Accelerate digital investment, strengthen cutting-edge logic semiconductor design and development; promote green innovation; optimize the domestic semiconductor industry layout and strengthen industry resilience.

At the end of 2021, in the budget amendment approved by Japan, the "Emergency Strengthening Package for the Semiconductor Industry Base" received a total budget of 774 billion yen (42.7 billion yuan), covering semiconductor production, semiconductor equipment, 5G communications, etc.

Of this, 617 billion yen (34.7 billion yuan) is planned to be allocated to strengthen the semiconductor production system. According to Japanese media reports, about 400 billion yen will be used to fund TSMC to build a new factory in Kumamoto Prefecture, Japan, and the remaining 200 billion yen will be used for projects of other semiconductor companies.

47 billion yen (2.65 billion yuan) will be invested in semiconductor production equipment, which will be used for the addition and update of semiconductor production equipment such as microcontrollers, power semiconductors, and simulators. The goal is to prepare for the upcoming era of autonomous driving and the Internet of Things, strengthen the semiconductor supply chain, and achieve stable supply.

Another 110 billion yen (6.2 billion yuan) will be used for the research and development of 5G communication systems, the semiconductor technology used in the system, and the research and development of advanced logic chip manufacturing technology.

Earlier, Japanese Prime Minister Fumio Kishida said that the Japanese government and private sectors will invest more than 1.4 trillion yen (78 billion yuan) in semiconductor production.

Recently, the United States and Europe have also passed bills to provide financial support to the chip industry and expand chip production in order to support local companies and gain greater say in research and development and manufacturing in the chip field.

The United States passed the America COMPETES Act of 2022

On February 4, 2022, the U.S. House of Representatives passed the America COMPETES Act of 2022. The bill is 2,912 pages long and integrates a number of related bills previously introduced by the House of Representatives. It emphasizes support and subsidies for the semiconductor chip industry, including allocating $52 billion to the semiconductor chip industry to encourage companies to invest in semiconductor production, with specific uses including semiconductor manufacturing, research on key components of automobiles and computers.

Of this, $39 billion is used to support chip manufacturing, and $10.9 billion is used to support chip research and development and design. In addition, the bill also proposes to invest $45 billion in the next six years to alleviate the problem of worsening supply chain shortages. The bill is full of slander and interference against China, and is full of Cold War thinking and zero-sum concepts.

After the text of the bill was made public, U.S. President Biden issued a statement saying that the bill "represents the kind of transformational investment in our industrial base and R&D that will help the United States lead the global economy in the 21st century."

As the birthplace of the world's semiconductor chip integrated circuits, it is normal for the United States to have leading strength in the chip field; however, after years of development, the United States' achievements in the chip field are mainly concentrated in the field of chip research and development, while the global share of local manufacturing in the chip production field has declined significantly.

US companies account for 48% of the world's chip sales, but the production capacity of chip factories in the US only accounts for 12% of the world's semiconductor manufacturing industry, far lower than 37% in 1990. Due to the high labor costs in the United States and the poor quality of high-end chip manufacturing, companies such as Qualcomm, Apple, and Intel have handed over their high-end chips to Samsung in South Korea and TSMC in Taiwan, China.

Now, in order to improve its own industrial chain, the United States is trying every means to develop in the field of chip production. Not only has it allowed GlobalFoundries to return to its home country for development, but it has also spent a lot of money to invite TSMC and Samsung to build chip factories in the United States.

The bill passed this time is trying to reverse this trend, and the investment will be used for projects related to chip production, military and other key industries.

With the support of relevant policies, chip companies such as Intel, Samsung, and TSMC have successively announced plans to build chip factories in the United States.

U.S. Commerce Secretary Gina Raimondo said in a discussion of the bill that the "most pressing need" in the bill is $52 billion for domestic chip production, because the impact of the global chip shortage on the economy, including the automotive industry, and the impact of manufacturing so many semiconductors overseas on national security have reached a point that must be addressed.

In recent years, the United States has continuously revised the rules of the chip industry, restricting the free shipment of chip companies such as Qualcomm and TSMC, requiring TSMC, Intel and others to place more chip production lines in the United States, and even requiring the world's leading semiconductor companies to hand over core business data, causing many semiconductor companies and related companies around the world to suffer varying degrees of adverse effects.

The high-sounding reasons behind the United States' various actions are to help the world overcome the chip shortage and to ease the current global chip shortage situation. In fact, it is to increase U.S. economic benefits, consolidate its leading position in the chip field, and clear away obstacles that threaten U.S. chip development.