Notes from a CSIS Virtual Event: Strategic Competition and the U.S. Semiconductor Industry

August 3, 2020

By Sevan Araz On July 23rd, the Technology Policy Program at the Center for Strategic and International Studies hosted a virtual discussion on the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, a bipartisan draft bill that aims to extend financial incentives to support the U.S. semiconductor manufacturing industry.  Panelists included Senators John Cornyn (R-TX) and Mark Warner (D-VA).   Supply chain vulnerabilities coupled with the risks of outsourcing the strategically and economically critical semiconductor manufacturing industry were major drivers for the landmark bill. Senator Cornyn delved into the national security anxieties fomented by the pivot of semiconductor manufacturing to Asia, and raised particular alarm at Chinese efforts to expand semiconductor manufacturing capabilities and siphon market share. To remedy these economic and security concerns, the bill proposes using financial incentives to encourage firms to establish manufacturing facilities in the United States. The recent decision of the Taiwan Semiconductor Manufacturing Company to erect a chip plant in Arizona was cited as a testament to the potential of subsidies to coax manufacturing activity. While describing the bill’s embrace of industrial policy, a marked departure from years past, Senator Warner pointed to the critical need to thwart China’s capacity to replicate its success with 5G across other strategic technological frontiers. Senator Warner also raised the importance of multilateral engagement and potential alliances.   The Senators also discussed the fate of U.S.-China economic relations. Senator Warner discussed tech titans’ accommodation of Chinese whims—and the associated risks. The seizure of intellectual property was cited as a major concern. As an example of recent policy efforts to combat China’s predatory economic strategies, Senator Cornyn pointed to the FIIRMA Act of 2018, which expanded the jurisdiction of the Committee on Foreign Investment in the United States to scrutinize foreign investments. Throughout the exchange, both speakers pointed to the benefits of bipartisan cooperation in crafting and advancing national security policy. Closing off the discussion, the Senators touched upon the importance of public-private partnerships in sustaining efforts in strategic sectors of the economy, including the semiconductor industry, and maintaining the U.S. technology edge.

A recording of the event can be found here: https://www.csis.org/events/online-event-strategic-competition-and-us-semiconductor-industry

Sevan Araz is a research intern with the Technology Policy Program at the Center for Strategic and International Studies in Washington, DC.

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