The "new industrial revolution", "historic investment", and the leading global economy, all these forces that shake the market and capital, all point to two words: chips.
Around this, economies on both sides of the Atlantic are scrambling to announce that they will invest a lot of money.
On February 8, local time, the European Commission announced the long-planned "Chip Act", hoping to increase investment, strengthen research and development, expand the proportion of EU chip production capacity in the global market, and prevent excessive dependence on the international market. Under the bill, the EU intends to use more than 43 billion euros (about 312.5 billion yuan) of public and private funds to enable the EU to produce 20% of the world's chips by 2030. European Commission President von der Leyen said in a speech on the same day that the importance attached to the chip industry will ensure that the EU will not miss this new industrial revolution.
In the United States, the House of Representatives recently passed the 3,000-page Chip Act, which shows its ambition. The U.S. Competition Act of 2022, passed by the U.S. House of Representatives on Friday (Feb. 4), included the U.S. Chip Act, previously proposed by House Republican Mike McCaul. Under the bill, the United States will create a chip fund that allocates $52 billion (about 331 billion yuan) to encourage private companies in the United States to invest in semiconductor production. The bill also authorizes $45 billion in funding to improve U.S. supply chains and strengthen manufacturing.
U.S. President Joe Biden said in a statement after the text of the bill became public, saying the bill "represents the kind of transformative investment in our industrial base and research and development that has helped the United States lead the global economy in the 21st century."
In response to the "whether tens of billions of dollars should be spent to save the US chip industry" that the US government and Congress are hotly discussing, industry experts said that tens of billions of dollars are not enough, and the funds needed to repair the fault lines in the US chip industry chain may exceed hundreds of billions of dollars.
Tens of billions of dollars invested in the chip industry is only enough for "down payment"
The U.S. Competition Act of 2022, while already passed in the House of Representatives, still needs to be negotiated with the Senate and sent to the White House for signature after a compromise version is passed by both Houses.
The U.S. House of Representatives has called the bill's investment in chips a "historic investment." "This legislation from the House of Representatives will strengthen our investment in chips, advance manufacturing at home, strengthen our supply chains, improve our research capabilities, and enhance our global competitiveness and leadership." House Speaker Pelosi said in a statement.
Discussions about the chip shortage crisis have begun to heat up after rising inflation in the United States, and while there are widespread voices that the chip industry in the United States needs to reduce its over-reliance on overseas markets, congressional Republicans remain skeptical about whether the government should invest heavily in a single industry.
Some Republicans believe that the 3,000-page chip bill is a matter of scrutiny in itself.
Chip industry experts pointed out that the most critical issue is actually how to continue to promote follow-up work and additional investment after the $52 billion investment, but the bill has not discussed.
Chip experts at the Potomac Institute for Policy pointed out that in the next 20 years, the required government and private enterprise investment to achieve "self-sufficiency" in U.S. chips may exceed $500 billion, and the $52 billion included in the chip bill may only be enough as a "down payment."
Analysts pointed out that after the "down payment" is paid, how to ensure that the government's investment is really used for the operation of chip production is very important, and can not just "invest in the construction of a chip factory", otherwise, tens of billions of dollars are likely to be lost.
"A lot of times it's the government that throws money at it, but it doesn't solve the problem because the money isn't being used where it's needed." Bryan Clark, a senior scholar at the Hudson Institute's microelectronics expert, said, "This [chip act] is going to be one such example." ”
For example, Clark said that in the chip bill, a very popular part of the chip bill is the investment in building chip factories, because it will create jobs; and the other part is long-term funding for chip technology research and development, which is not very popular with politicians because the political effects of building factories are not "visible".
Clark pointed out that the investment plan should be "reversed", that is, private companies should invest in building new factories, and the government should mainly assist in the development of new technologies.
"In the chip industry, unless the United States starts developing the next generation of technology, the United States will never regain its advantage." Clark said.
Shortages persist, and the EU is worried about the chip crisis
The US Department of Commerce released an analysis of the relevant data of major companies in the global semiconductor supply chain on January 25, showing that the global semiconductor supply chain is still fragile, and the chip supply shortage will continue for at least 6 months.
Information requested by the U.S. Department of Commerce from more than 150 semiconductor manufacturers, users and intermediaries around the world shows that the median demand for user chips in 2021 increased by about 17% compared with 2019, but the supply did not increase accordingly. At the same time, the capacity utilization rate of most semiconductor production facilities has reached more than 90%, which means that new production facilities must be built to increase chip supply. The data confirms that there is a serious and ongoing mismatch between supply and demand of chips, and the surveyed companies expect that this problem will be difficult to solve in the next 6 months. The information also shows that the median inventory of key chips has dropped from 40 days in 2019 to less than 5 days in 2021.
Affected by the epidemic and chip supply shortages, many US automakers were forced to stop production or reduce production last year.
U.S. Commerce Secretary Raimondo issued a statement on the same day saying that the semiconductor supply chain is still fragile, and the U.S. Congress must approve President Biden's proposed investment of $52 billion to increase domestic chip research and development and manufacturing as soon as possible. She claimed that given the surge in demand for semiconductor products and the full utilization of existing production facilities, the only way to solve the semiconductor supply crisis in the long run is to rebuild domestic manufacturing capacity in the United States.
The EU Chip Act includes a package of measures designed to help the EU implement green and digital transformation while ensuring a leading position in chip manufacturing.
Von der Leyen said the EU aims to produce 20 percent of the world's chips by 2030. By then, global demand for chips will double, which means that the EU's chip capacity should quadruple from the existing level. At the same time, von der Leyen also called on the global chip market to remain open, promote diversification among partners, establish a more balanced interdependence, and build a supply chain that can be trusted.
Thierry Breton, the internal market commissioner in charge of the EU's chip funding program, said at a news conference on Friday: "The EU will equip itself with the means to secure supply, as the UNITED Has done, to deal with possible export restrictions abroad in the event of a chip crisis." "Breton stressed that the EU still relies on Asia for more than half of its chip needs." There are significant economic risks to this. "Once Asia restricts exports, almost all of the world's chip factories will be able to sustain for up to three weeks." ”
In the 1990s, the EU accounted for more than 40% of the global chip market, but this proportion has now fallen to about 10%. The global chip shortage that began last year has severely affected various industries in the EU, and the automotive industry has been particularly affected, highlighting the EU's excessive dependence on foreign chip suppliers.
Some large companies are also increasing their chip production layout in the EU. On June 7, 2021, the German Bosch Group officially completed a 1 billion euro wafer factory in Dresden, which will mainly provide chips for autonomous driving and electric vehicles. Intel announced in September last year that it would invest 80 billion euros in Europe over the next decade to develop automotive chip manufacturing business.
Will the U.S. prescribe the wrong medicine again?
According to the U.S. Chip Research Institute, 30 years ago, the United States produced about 50% of the world's chips, but this number is currently only about 12%.
Clark pointed out that the problem with the U.S. chip industry is not the "lack of money", in fact, the companies in the related industry have "never lacked money", but what makes these companies eventually abandon production is expensive operating costs, high labor, taxes and government regulatory policies.
As a result, Clark pointed out, the cost of building factories could have been covered by loans and bonds, but the cost of operating these factories could not be borrowed. Clark said that the U.S. government should consider how to implement more preferential policies to assist the operation of these chip companies.
Experts with similar views point out that running these chip factories is actually more important than building them.
"The reason U.S. companies chose to process overseas was because we lost our price advantage." John Nichols, a fellow at the Hudson Institute for Policy Studies, said, "Without government sustainability investment and subsidies that give these factories an internationally competitive price advantage, 10 years from now, we will find that we still have the same problem as we do today, that is, it is too expensive to produce chips in the United States." Nikos said.
While Congress is still negotiating to increase investment in chips, semiconductor giant Intel Corporation announced this month that it will invest $20 billion to build a new chip processing plant in Columbus, Ohio.
The Semiconductor Industry Association of the United States expects that this "U.S. government investment, private follow-up" model will continue. The association predicts that $50 billion in federal investment could build 10 new chip processing plants, which is expected to attract $279 billion in private investment, create 185,000 domestic jobs a year, and generate more than $24 billion a year for the U.S. economy.
Experts pointed out that whether the United States can really save the chip industry also depends on an important factor, that is, whether these chip companies can attract a large number of technical talents, because the operation of related machines requires specialized technology and training.
"If we don't have qualified staff to operate these machine systems, it doesn't matter how much equipment we invest in." Jennifer Buss, CEO of the Potomac Institute for Policy Research, said, "Those devices [are being operated] can't turn around." ”