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News > U.S.

US Chips Act to Destabilize Global Supply Chains

  • U.S. President Joe Biden.

    U.S. President Joe Biden. | Photo: Twitter/ @CGMeifangZhang

Published 29 August 2022

"What the United States is trying to do not only aims to contain China, but also limits the benefits of the U.S. allies," Li stressed.

The Chips and Science Act recently passed by the U.S. Congress will lead to destabilization of global supply chains in the chip industry, said Li Yong, a senior fellow at the China Association of International Trade.


The Pandemic Left The Global Semiconductor Supply Chain Fragile

The global chips industry has formed balanced supply chains through decades of international cooperation, and the U.S. chips act will disrupt such a cooperation model and impede global chip production efficiency.

The U.S. chip act is largely guided by the "America First" doctrine, said Li, noting that "this kind of chip hegemony pursued by the United States is at the expense of other participants in the industry."

The Chips and Science Act recently signed into law in the United States is purportedly aimed at promoting "re-shoring" of semiconductor manufacturing to the country by providing subsidies and tax credits to chipmakers.

The U.S. government, under the act, will provide over US$52 billion for American semiconductor research, development and manufacturing, and also offer a 25 percent investment tax credit for capital expenses.

If the manufacturing industry were transfered to the United States, the chip production costs would be raised and possible monopoly would emerge in the semiconductor field. "The consequence is that the balance in the industry will no longer exist due to hegemonic intervention," Li said.

Considering the high input in the semiconductor industry, Li pointed out that the US$52 billion pledged by the U.S. government is actually "a drop in the bucket," as even a manufacturing device can cost millions. Besides, comparative advantage of different participants in the production process will disappear, and the industry will lose the benefits from global division of labor.

"What the U.S. chip act aims for runs counter to a fair and free trade order. It also runs counter to the economic and market laws, and therefore it can hardly succeed, Li explained."

The expert also said that the U.S. attempt to politicize the chip production has threatened the safety of the chip industry, and the benefits brought by global technological and scientific cooperation will also be undermined.

In the semiconductor field, the United States has an absolute advantage in chip design, said Li. By implementing the chip act, "the United States is trying to weaponize such an advantage to maintain its hegemony in this area," he said.

To be more specific, he explained, "in its overall strategic layout, the United States will take chip technology as its core competency, and through controlling the chip production, it aims to control technological and scientific development of the whole world."

"What the U.S. is trying to do not only aims to contain China, but also limits the benefits of the U.S. allies. So the Act can hardly gain any support around the world," Li stressed.

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