The United States, Europe, Japan and other semiconductors set off a "subsidy frenzy" and "competed with China for chip supremacy"

Observer.com

2024-05-14 14:06Posted on the official account of Shanghai Observer.com

According to a report by Bloomberg on May 13, the United States took the lead in setting off a "subsidy frenzy" when the United States escalated chip export restrictions and tried to coerce allies to suppress China's semiconductors, and large economies led by the United States and the European Union have invested nearly $81 billion in R&D and mass production of next-generation semiconductors, and this is only the first batch of funds in place.

Leading semiconductor companies such as Intel and TSMC have received nearly $380 billion in government subsidies around the world to boost production of more advanced chips.

According to the report, with the influx of large amounts of capital, the global chip competition has intensified, and the United States and its allies have escalated the decisive battle of "competing with China for chip supremacy", intensifying the competition between countries led by the United States and China in the field of cutting-edge technology, which will determine the future of the global economy.

Bloomberg quoted analysts as saying that the surge in subsidies could pose a danger of "overcapacity", although the risk could be reduced as it takes time for new capacity to come online.

On April 16, 2024 local time, Samsung's Austin semiconductor factory in Taylor County, Texas, USA. The U.S. government provided Samsung Electronics with $6.4 billion in subsidies to support the company's chip manufacturing plant in Taylor County, Texas. (Source: Visual China)

The U.S. has made frequent moves in the semiconductor sector in recent years, originally due to concerns about the rapid development of China's key electronic products, but this panic escalated during the epidemic due to the chip shortage, and the United States began to hype the importance of chip supply to the country's "economic security". As a result, the United States plans to accelerate the return of the semiconductor industry chain through subsidies.

Jimmy Goodrich, senior adviser on China issues and strategic technology at the RAND Corporation, said that the United States has "crossed the Rubicon" (meaning no way back) when it comes to technology competition with China, especially in the field of semiconductors, and "both countries have basically made this one of their primary strategic goals."

Not long ago, TSMC, Samsung, Micron and other companies received subsidies from the U.S. government one after another, totaling nearly $33 billion. On April 25, local time, the U.S. government announced that it had reached a non-binding preliminary memorandum of terms with Micron Technology, the largest computer memory chip manufacturer in the United States, to provide the latter with a $6.1 billion subsidy under the U.S. "Chips and Science Act" to support Micron's production of chips in New York and Idaho.

U.S. President Joe Biden's signing of the CHIPS and Science Act in 2022 opened the funding lever for this subsidy, which requires the use of $39 billion in direct subsidies and $75 billion in loans and mortgages, as well as a tax credit of up to 25%, to "revive" the U.S. chip industry (especially advanced chips) and provide jobs, which is also an important measure for Biden to win over voters.

According to Bloomberg, while the huge spending by the United States and its allies will take years to bear fruit, the move marks a more "solid" position on the "trade war" front between the United States and China. This also provides a way out for the American chip giant Intel, which has lost its advantage in competition with Nvidia and TSMC in recent years.

The report also pointed out that the huge subsidies of the United States in the field of chips are not only to "confront Chinese mainland", but also to narrow the gap with places such as Taiwan and South Korea in advanced semiconductor technology.

This "subsidy frenzy" has also intensified competition between the United States and its European and Asian allies, all of which want to boost the semiconductor industry and, by extension, artificial intelligence and quantum computing.

U.S. Commerce Secretary Raimondo played up the "threat" at a conference in Washington last month, saying that technology is rapidly evolving and that "our enemies and competitors move fast, so we must move fast." ”

The European Union, Japan, India and others join the "subsidy war"

While the United States is throwing money at it, the European Union has also formulated its own $46.3 billion plan to expand the production capacity of semiconductor manufacturing in Europe. The European Commission expects public and private sector investment in the semiconductor industry to exceed $108 billion, mainly for the construction of large manufacturing sites.

Germany plans to provide $20 billion in subsidies to increase chip production, of which about 75% of the funds will go to Intel and TSMC, and the funds may be in place by 2027.

Two of Europe's largest semiconductor fab projects have landed in Germany: one is Intel's planned wafer fab in Magdeburg worth about $36 billion, which has received nearly $11 billion in subsidies; Another TSMC joint venture invests in a wafer fab in Dresden, worth about $10 billion, and $5 billion will come from government subsidies. At present, the European Commission has not yet finalized the subsidy plans for these two projects.

Despite Europe's aggressive chip subsidies, experts warn that the bloc's investment may not be enough to meet its target of producing 20% of the world's semiconductors by 2030.

Some European countries have struggled to provide subsidies and attract businesses, such as Spain, which announced in 2022 that it would invest nearly $13 billion in semiconductors, but only a small amount of money was allocated to a few companies due to the country's lack of a semiconductor value chain.

In addition, emerging economies are also looking to compete in the chip market. In February, India approved a $15.2 billion investment plan for semiconductor manufacturing plants, including plans by the Tata Group to build the country's first large-scale chip manufacturing plant.

Saudi Arabia's Public Investment Fund is considering a large-scale investment this year to kickstart the country's plan to enter the semiconductor sector.

At the same time, Japan is also taking active action. Last month, Japan approved subsidies of up to $3.9 billion to Japanese semiconductor company Rapidus Corp. The company aims to mass-produce 2-nanometer chips in 2027.

Since June 2021, Japan's Ministry of Economy, Trade and Industry has raised about $25.3 billion for the chip program, of which $16.7 billion has been allocated to multiple projects, including TSMC's two Japanese foundries.

Aerial photo of a semiconductor factory in Kikushiro Town, Kumamoto Prefecture, Japan (top) and the planned construction site of TSMC (Taiwan Semiconductor Manufacturing Co., Ltd.) (bottom) on April 11, 2024 local time. (Source: Visual China)

Japan's Ministry of Economy, Trade and Industry released a revised "Semiconductor and Digital Industry Strategy" in June last year, aiming to triple sales of Japanese-made semiconductors to about $96.3 billion by 2030.

Rather than direct financing and subsidies from the United States and Japan, the South Korean government is more inclined to provide guidance to the country's deep-pocketed chaebols. In the field of semiconductors, the South Korean government has supported an estimated $246 billion in spending.

According to Reuters, South Korea announced in January this year that it intends to build a large semiconductor cluster in Yongin, Gyeonggi Province, south of Seoul, by promoting Samsung Electronics and SK hynix to invest 622 trillion won (about 3.28 trillion yuan), claiming to be the "world's largest semiconductor cluster".

On May 10, Choi Sang-mo, South Korea's vice prime minister of economy and minister of strategy and finance, announced that the South Korean government will promote a support package of more than 10 trillion won (about 52.7 billion yuan) to strengthen the competitiveness of the country's semiconductor industry. Yonhap News Agency said that although it is not a project with direct financial support, it is the first time that the South Korean government has formulated a large-scale policy project for the semiconductor industry, which aims to "compete with major countries."

On January 15, 2024 local time, Yongin, Gyeonggi Province, South Korea, the construction site of the "Semiconductor Super Cluster". (Source: Visual China)

But according to Bloomberg, there is one potential danger that has cast a shadow over the surge in government subsidies around the world: "overcapacity" in chips.

Sara Russo, an analyst at Bernstein, said: "All of this manufacturing investment, which is driven by government investment rather than primarily market investment, could ultimately lead to a situation of overcapacity." "However, this risk can be mitigated by the time it takes for the planned new capacity to come online.

The U.S. government is pressuring allies in Europe and Asia to limit the flow of equipment and technology used to make cutting-edge chips to China amid intensified global semiconductor competition. This move has caused the global industrial chain and industry people to complain, and countries such as the Netherlands, Japan and South Korea are unwilling and hesitant.

Paul Triolo, a former U.S. government official and China and technology policy researcher at Madeleine Madeleine Stonebridge Group, said the U.S.-led crackdown "has provided a tremendous incentive for Chinese companies to improve their capabilities, move up the value chain, and cooperate with each other," as well as more action by the Chinese government.

Bloomberg mentions that so far, US Republican presidential candidate Trump has not stated his plans for semiconductors. But during his presidency in the United States, he imposed technology-related sanctions on China and threatened to impose tariffs of up to 60 percent on Chinese goods if he won this year's election. The report quoted the head of the consulting firm as saying that no matter who enters the White House, the US-China technology war will further intensify.

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