Illustration: Chen Xia/Global Times
We are all in the same boat; we rise and fall together. This is what the United States stood for when it was unrivaled, managing the world with self-confidence and a sense of mission. But not anymore. He began to feel uneasy, especially with advanced technologies like semiconductors, and even worried that his helmsman’s seat would soon be taken.
The share of modern semiconductor manufacturing capacity based in the United States fell from 37% in 1990 to 12% in the early 2020s. advances. Moreover, its production of high-end chips lags behind China’s Taiwan region and South Korea, with insufficient R&D and capital investment as well.
To maintain its grip, the country that resents following the example of others wields tools previously despised by itself. In early August, President Joe Biden signed into law the CHIPS and Science Act which provides financial incentives to stimulate domestic supply of semiconductors, including subsidies and tax cuts, which is hardly compatible with a “liberal” economic system.
The United States is unequivocal about federal support for its semiconductor industry. Act earmarks $52.7 billion for “American semiconductor research, development, manufacturing and workforce development” and provides a 25% investment tax credit for the production of semiconductors and related equipment. This huge outlay serves a clear government-defined purpose: to revitalize the domestic manufacturing industry and build supply chain resilience. Such state planning, combined with an industrial policy designed for one sector, is rarely seen in the United States. After all, this country hates intervention so much that it has coined the term “state capitalism” for economies where “the state is the main actor and judge, and uses markets for political purposes”.
Government ownership is not free, but with “strong barriers” prohibiting recipient companies from building certain facilities in China and other “countries of concern” for 10 years. Amid what the United States calls “fierce competition” with China, the Commerce Department, responsible for crafting and implementing the law, could be empowered to censor U.S. semi- drivers to ensure compliance and dictate exemptions for doing business with reported countries.
Once an apparent globalization fundamentalist peddling the liberal economic order, the United States is now backtracking on its commitment to the WTO, which prohibits “subsidies that are contingent, whether solely or among several other conditions, on the use of products domestic rather than imported”. and “specific subsidy” which “explicitly limits access to a subsidy to certain companies”.
According to Washington, it is time for the world to move from globalization to Americanization. He spares no effort to build neo-colonies for US strategic supplies and technologies. On the supply side, the United States is campaigning to reduce its dependence on others and bring production back to the country. Morris Chang, co-founder of Taiwanese chipmaker TSMC, has criticized Intel and other US companies for pushing to relocate chip supply chains out of “selfish interests”. The US Department of Commerce has even asked major chip companies, including TSMC and Samsung, to “voluntarily” submit key information, sometimes trade secrets. If companies refuse to cooperate, the United States has other tools to compel them to provide the necessary data, said Gina Raimondo, Secretary of Commerce.
On the demand side, the United States has long added Huawei and other Chinese tech companies to a list of companies that American companies cannot do business with unless officially authorized. The latest “poison pill” of the CHIPS law will further strain China-US trade relations along the semiconductor industry chains.
The United States also forces its allies to select trading partners according to ideological criteria. A former British intelligence officer revealed in a recent article that former President Donald Trump’s deputy national security adviser once shouted for five hours at British officials, asking them to remove Huawei from British telecommunications networks without giving convincing justification.
But excluding China does little good for American interests or its image. China’s semiconductor import bill is $300 billion a year. In 2018, a quarter of this bill came from American companies. And U.S. companies could lose 18 percentage points of global share and 37% of revenue if the government completely bans sales to Chinese customers, according to the U.S.-based Boston Consulting Group.
As it strives to decouple the semiconductor industry, what the United States is doing now amounts to removing the chip from a computer, leaving everyone in the system to bear the consequences.
The author is a commentator on international affairs, writing regularly for CGTN, Global Times, Xinhua News Agency, etc. He can be contacted at [email protected]