Repercussions of U.S. chips act go beyond supply chain disruption

BEIJING, Sept. 2 (Xinhua) -- Signing the Chips and Science Act into law is the U.S. government's latest attempt to maintain technological hegemony and suppress competitors by bringing semiconductor manufacturing back to the country, Chinese analysts have said.

According to the White House, the act provides 52.7 billion U.S. dollars for American semiconductor research, development, manufacturing and workforce development, while also offering a 25-percent investment tax credit for capital expenses for manufacturing of semiconductors and related equipment.

While reshoring semiconductors is a long shot, the U.S. move will likely disrupt the global chip supply chain, distort fair competition and harm the whole industry, according to the analysts.

GLOBAL SUPPLY CHAIN DISRUPTION

It takes more than 1,000 processes and 70 instances of cross-border cooperation for a chip to reach its end-users, said Li Yong, a senior fellow at the China Association of International Trade.

Such an intricate yet balanced global supply chain, formed through decades of international collaboration, benefits all parties involved.

But the United States opts for its chips act. It means that the global supply chain will no longer feature a refined and professional division of labor, countries and companies will not be able to make full use of their comparative advantages, and manufacturing costs of products will rise, said Li.

In the long run, the protectionist move of the U.S. side will likely force other countries to follow suit and heavily subsidize industrial and supply chains of their own, thus derailing the current global cooperation and drifting away from marketization, analysts have said.

SECURING TECHNOLOGICAL HEGEMONY

The White House said in a fact sheet that the chips act will "strengthen American manufacturing, supply chains, and national security," and "keep the United States the leader in the industries of tomorrow."

The underlying meaning, as experts point out, is that the United States aims at maintaining its technological hegemony by building a full supply chain in the country.

By controlling both the design and manufacture of the chips, the United States wants to politicize the industry and suppress its competitors, or as the White House put it, "the countries of concern," experts have said.

"Monopoly, blackmail and coercion could all follow and the global supply chain would not be safe anymore," said Li.

The move, largely guided by the "America First" doctrine, is the latest example of the U.S. government's betrayal of fair competition and free trade.

Liu Guozhu, professor at Zhejiang University, highlighted the consistent hypocrisy of U.S. policy-making, which is intended to contain the high-technology industries of other countries.

The United States has been stretching the national security and ideological concepts when dealing with issues of science and technology, and thus "has poisoned the playing field" of the global market, especially the digital market, he said.

The world's largest economy is only willing to pursue its own development and is blocking the way for mutual development, Li said.

A DOUBTFUL MOVE

Despite the act's massive scale, Li said he noticed that both the chip industry and global media are bearish on the U.S. legislation.

"Few people believe that the chips act will succeed," he told Xinhua.

Li said for the chipmaking industry, the 52.7 billion dollars promised in the act is utterly inadequate, and there have already been worries that the money could be spent on boosting stock prices instead of the domestic industry.

A report by Bain &Company in 2021 found that there were limited short-term solutions to the chip shortage. The report estimated that it would cost about 40 billion dollars to add just 5 to 10 percent capacity across existing nodes.

The key issue for the U.S. chipmaking industry is not a lack of funds but a shortage of professionals, noted Yu Qiang, a professor with Beijing Technology and Business University.

"The human resource structure and reserve in the United States today does not match with the needs of the chip industry," Yu wrote in a column in Guangming Daily.

Besides the chips act, the United States has been intensifying its efforts to reshore manufacturing from overseas for years, which is yet to produce ideal outcomes.

In 2020, the manufacturing sector in the United States accounted for only around 11 percent of GDP, compared with about 12 percent in 2010 and 15 percent in 2000, data from the World Bank showed.