U.S. $52 billion chip bill approved, how much does it affect?

After more than half a year of "tribulations", a bill called the "chip bill" by the speaker of the US House of Representatives Pelosi was finally officially passed.

The bill was forced through the House of Representatives on Friday, claiming that it would allow the United States to better compete with China in the global economy by strengthening the domestic semiconductor industry and supporting tight supply chains, Blackhillsfox reported.

The bill was passed by a vote of 222 to 210. That marks an important step forward in the Biden administration's top priorities, but it could be widely revised as negotiators reconcile differences with the bill passed by the Senate about eight months ago. US President Joe Biden urged members of Congress to reach a deal as soon as possible, saying, "The United States cannot wait any longer."

The nearly 3,000-page bill , which doesn't include a large number of amendments added this week — includes massive investments aimed at boosting U.S. semiconductor manufacturing, including about $52 billion in grants and subsidies to help the semiconductor industry, and $45 billion in strengthening supply chains for high-tech products.

The "coming out" of the Chip Act

On January 25, the U.S. House of Representatives announced an ambitious U.S. Competition Act of 2022, which includes $52 billion in chip investment.

But in fact, the U.S. Competition Act of 2022 is nothing new, and the model is the U.S. Innovation and Competition Act passed by the U.S. Senate last June. At that time, the Senate passed more than 1,400 pages of the U.S. Innovation and Competition Act of 2021 by 68 votes in favor and 32 against, including a $52 billion investment package in the chip sector. After the bill was approved, it stalled for various reasons.

It is reported that the "U.S. Innovation and Competition Act" is a hodgepodge, consisting of four bills, four bills called the "Endless Frontier Act", "Strategic Competition Act", "Ensure the Future of the United States Act" and "Respond to China Challenge Act", "The US Innovation and Competition Act" The total investment amount proposed is as high as 250 billion US dollars, of which the investment in the chip field is 52 billion US dollars. This becomes a big cake, and everyone wants to share it. The result was that it could not be divided, and after the Senate passed, it was stranded in the House of Representatives.

Last November, U.S. House Speaker Pelosi and Senate Majority Leader Schumer reached an agreement to rework a smaller cake by the House of Representatives, the newly released U.S. Competition Act of 2022.

The bill is characterized by retaining only $52 billion in solutions involving chips, and allocating another $45 billion to improve U.S. supply chains, promote the return of manufacturing, and maintain the U.S. alliance system. In fact, this bill can be regarded as a simplified version of the American Innovation and Competition Act, so it is called the "Chip Act" by Pelosi.

Commerce Secretary Gina Raimondo met with House Democrats this week to discuss the bill. She said the most "urgent need" in the bill is $52 billion for domestic chip production, because the impact of the global chip shortage on the automotive industry, including the automotive industry, and the impact of relying on overseas semiconductor manufacturing on national security cannot be ignored.

Big chipmakers such as Intel and Samsung recently announced plans to build new factories in the U.S., but Raymondo noted that they also said they could "do it bigger and faster" with the help of the federal government.

Multiple effects of the Chip Act

It can be seen that the focus of the "Chip Act" is to strengthen the supply chain of the United States and revitalize the American manufacturing industry, but can it really be achieved?

Obviously, this is somewhat wishful thinking.

The Beijing News commented that on the one hand, the problem exposed by the supply chain crisis in the United States is not only insufficient production capacity, but also a series of problems such as worker loss and extensive management, which cannot be solved by relying on 52 billion US dollars. On the other hand, even if the international chip manufacturers build factories in the United States to increase their chip supply, can they remain competitive by relying on this? According to estimates by the Semiconductor Industry Association of the United States, the total cost of new plants in the United States in ten years is about 25%-50% higher than in Asia. In the case of Europe and China are vigorously developing the chip industry, the new factory built in the United States does not have a long-term competitive advantage.

Zhang Zhongmou, the founder of TSMC, has publicly stated that the United States does not have a complete supply chain advantage and will face huge production costs, so it is difficult for the United States to promote semiconductor localization.

At a deeper level, the chip bill actually sends a very clear signal that the United States is trying to use chips as a major weapon to hit China's high-tech industry.

In terms of impact, it has not only had a huge impact on Sino-US relations but also on global supply chains. In the semiconductor industry, whether it is the industrial chain, supply chain or value chain, it should be said that in the entire chain, China and the United States are the most important "players". When the main "players" clash or even confrontation, I am afraid that the impact on the long-term healthy and stable development of the global semiconductor industry in the future is also fatal.

If the new "chip bill" launched by the United States is like an invitation to fight, then China has no choice but to face the battle head-on. Obviously, this is a protracted battle. The mainland semiconductor industry can only come up with determination, firm confidence, maintain concentration, and make up for the shortcomings of the industry in the protracted war, and do it step by step, because there is no shortcut to the breakthrough of China's core.

(Proofreading/Jouvet)