US Commerce Dept To Review Semiconductor Supply Chain

The US Department of Commerce has announced a new review, in a sign of the continuing geopolitical tensions around the world, and the importance of semiconductors.

The Commerce Dept announced on Thursday that it “will launch a new survey in January 2024 that will serve as a foundation for continued analysis of the capabilities and challenges of the broader US semiconductor supply chain and national defense industrial base.”

The move comes after the importance of securing semiconductor supplies was highlighted during the Covid-19 pandemic, coupled with the growing tensions with China over the issue of Taiwan – the source of much of the leading semiconductor manufacturing.

Chip supply chain review

As part of its response to the chip shortage scare during the Coronavirus pandemic, the United States in 2022 enacted the Chips and Science Act, in order to encourage and significantly boost American semiconductor manufacturing and research over five years.

The Chips Act set aside $39bn in direct grants and about $75bn in loans and loan guarantees, and has catalysed more than $230bn in private semiconductor investment, including from chip giants such as Taiwan Semiconductor Manufacturing Co (TSMC), Intel, Micron Technology and Samsung Electronics.

President Biden has previously made clear that it was a matter of national security for the US to make its own chips.

This month the US awarded a $35 million (£28m) grant to the American subsidiary of UK aerospace firm BAE Systems in the first semiconductor grant under the 2022 Chips and Science Act.

Now the US Department of Commerce will in January 2024 begin a new survey to examine the US semiconductor supply chain and national defence industrial base to address national security concerns from Chinese-sourced chips.

China concerns

The US said the intent of the survey is to identify how US companies are sourcing current-generation and mature-node semiconductors, also known as legacy chips.

This analysis will inform US policy to bolster the semiconductor supply chain, promote a level playing field for legacy chip production, and reduce national security risks posed by the People’s Republic of China (PRC).

“Legacy chips are essential to supporting critical US industries, like telecommunications, automotive and the defense industrial base,” said Secretary Gina Raimondo, who recently said China is not our friend. “Addressing non-market actions by foreign governments that threaten the US legacy chip supply chain is a matter of national security.”

“Over the last few years, we’ve seen potential signs of concerning practices from the PRC to expand their firms’ legacy chip production and make it harder for US companies to compete,” said Raimondo. “To get ahead of these concerns, the Department of Commerce is taking proactive measures to assess the US semiconductor supply chain by collecting data from US companies on the sourcing of their legacy chips.”

“Government alone cannot create and sustain a robust supply chain – we need industry at the table,” said Raimondo. “This survey will empower the Department with the data we need to inform our next steps in building strong, diverse, and resilient semiconductor supply chains.”

Raimondo has also recently defended the department’s latest round of export controls aimed at China introduced in October, saying they were aimed at defending the “rule of law here and around the world”.

The Bureau of Industry and Security (BIS) within the US Commerce Department will launch the survey, which focuses on the use and sourcing of PRC-manufactured legacy chips in the supply chains of critical US industries.