The Global Semiconductor Industry Faces a Policy Earthquake: Technological Competition in an Era of Regionalization and Diversification

The Global Semiconductor Industry Faces a Policy Earthquake: Technological Competition in an Era of Regionalization and DiversificationIn the past six months, the global semiconductor industry has witnessed a dramatic shift in policy, driven not only by intensifying technological competition but also by a reassessment of industry supply chains and a move towards regionalization and diversification. Trump's outspoken criticism of the CHIPS and Science Act and his frequent pronouncements on the semiconductor industry have reignited global concerns about semiconductor security and independent development

The Global Semiconductor Industry Faces a Policy Earthquake: Technological Competition in an Era of Regionalization and Diversification

In the past six months, the global semiconductor industry has witnessed a dramatic shift in policy, driven not only by intensifying technological competition but also by a reassessment of industry supply chains and a move towards regionalization and diversification. Trump's outspoken criticism of the CHIPS and Science Act and his frequent pronouncements on the semiconductor industry have reignited global concerns about semiconductor security and independent development. Japan, South Korea, Europe, Southeast Asia, mainland China, and Taiwan have all adjusted their policies, rapidly introducing various policy measures, subsidies, and investment plans to bolster their semiconductor capabilities. The policy changes behind this technological race reflect a redefinition of semiconductor strategies by different countries and regions. Will these new policies lead to further deglobalization of the global semiconductor market?

I. The United States: Trump's Criticism and the Future of the CHIPS Act

Last month, Trump again launched a scathing attack on the CHIPS and Science Act. In a nearly three-hour interview, he called the Act "terrible," arguing that massive funds were flowing to wealthy corporations and suggesting that attracting chip manufacturers to build plants in the US should be achieved through higher tariffs rather than government subsidies. He also criticized Taiwan for "stealing the American chip industry," likening the relationship to "mob protection money."

This wasn't Trump's first criticism of the semiconductor industry. In a previous interview with Bloomberg, he claimed Taiwan had stolen US chip business and suggested Taiwan should pay for it. These statements caused significant volatility in the global semiconductor market, leading to sharp declines in the stock prices of several semiconductor giants. Trump's pronouncements on chips have, to some extent, become a barometer for the global semiconductor market.

A Trump return to the presidency would significantly impact US semiconductor policy. Currently, the Biden administration is accelerating the implementation of the CHIPS Act, aiming to complete the distribution of subsidies before a potential Trump return. While the US Department of Commerce has allocated over 90% of the $39 billion appropriation, only one binding agreement has been announced to date. The next two months are crucial for the more than 20 companies still in negotiations.

Some companies, including TSMC and GlobalFoundries, have completed negotiations and are expected to receive funding soon. However, companies like Intel, Samsung, and Micron are still working through substantial details in their contracts. The Biden administration hopes to finalize more agreements by the end of 2024, directing funds to companies that meet specific milestones. The prospect of a Trump presidency adds urgency, prompting the Biden team to try to insulate its industrial policy initiatives from partisan politics, and chipmakers to avoid renegotiating terms under a new administration.

Despite Trump's criticism of the CHIPS Act as "terrible," Republican House Speaker Mike Johnson has said he will seek to "streamline" the Act, not repeal it. Therefore, the CHIPS Act is not expected to be directly overturned in the foreseeable future. Industry insiders generally believe the CHIPS Act will largely remain in its current form. The Trump administration pushed for TSMC's Arizona plant, and federal regulations will compel spending of the congressionally approved CHIPS Act funds during a second term, including the $39 billion for direct awards through fiscal year 2026.

Sujai J. Shivakumar, a senior fellow at the Center for Strategic and International Studies (CSIS), believes that the election does not change fundamental geopolitical challenges. The CHIPS Act has broad bipartisan support and is a cornerstone of the government's commitment to the US economy and national security. However, a Trump administration might seek to strip out elements they consider social priorities, such as requirements for childcare facilities or expectations that firms negotiate with local unions and reduce factory environmental impact.

Republicans say that if they regain full control of Congress next year, they plan to push for reforms through the budget reconciliation process, focusing on streamlining environmental requirements and expanding tax credits. The concern for businesses isn't about changing the total amount of subsidies, but about potential further delays in disbursement. Many projects have reached initial milestones, and government officials say the first tranches of funding will be disbursed as soon as contracts are signed. But giants like Intel, Micron, and Samsung are still in negotiations, which could well extend beyond a potential Trump return. The Biden administration aims to allocate most of the funds before the end of its term, but Trump could try to terminate and renegotiate already signed federal contracts. The potential change in presidential administration introduces considerable uncertainty into the future development of the US semiconductor industry and has far-reaching global implications.

II. Japan: $65 Billion in Subsidies and Ambitions for Advanced Processes

A major achievement of the past three or four years has been attracting TSMC to build a factory in Kumamoto. In February, the TSMC Kumamoto plant officially started operations and plans to begin mass production later this year. However, Japan believes that relying solely on mature processes is insufficient and aims to secure a share of the advanced process market.

The Japanese government plans to provide at least 10 trillion (approximately $65 billion) in support by fiscal year 2030 to boost the semiconductor and artificial intelligence industries. Prime Minister Kishida Fumio stated that a new support framework will be created to attract over 50 trillion in public and private investment to drive industry growth over the next 10 years. This plan will be incorporated into the comprehensive economic package finalized in November.

The most direct beneficiary will likely be the government-backed Rapidus, which plans to mass-produce advanced chips. This support will take the form of subsidies, investments from government-related agencies, and debt guarantees for loans from private financial groups. The Japanese government will introduce a framework to strengthen the foundation of the AI and semiconductor industries, with a vision extending to fiscal year 2030, projected to have a 160 trillion economic impact. Relevant departments will prepare legislation to enable government agencies to provide debt guarantees and investment support for companies like Rapidus, aiming to submit the proposal to the Diet in 2025.

The Japanese government believes that establishing advanced technologies in the semiconductor field is necessary from an economic security perspective. Past government practices of allocating subsidies annually offered lower predictability, leading to a decision to shift to multi-year support to secure aid.

Looking back at the METI semiconductor revitalization strategy launched in 2020, it comprised three steps: strengthening domestic production capacity, forging an alliance with the US on next-generation technologies, and developing disruptive future technologies. From fiscal year 2021 to 2023, the Japanese government invested 3.9 trillion (approximately $27 billion) in the semiconductor industry, exceeding the proportion of GDP allocated by the US CHIPS Act.

The first step involved the establishment of Japan Advanced Semiconductor Manufacturing (JASM) in Kumamoto, a collaboration between TSMC, Sony, and Denso, to produce logic chips. JASM, having received the largest share of government subsidies, plans to build a second factory in Kumamoto by the end of the year, with partners including Toyota (in addition to the aforementioned TSMC Kumamoto plant).

The core of the second step of the METI strategy is Rapidus, a government-backed startup formed by an alliance of eight major Japanese companies: Toyota, Sony, Denso, Kioxia, NEC, NTT, SoftBank, and Mitsubishi UFJ. Rapidus is collaborating with IBM and IMEC, a leading European microelectronics research center, aiming for mass production of 2-nanometer chips by 2027. Under the new support framework, the Japanese government will support Rapidus's funding efforts in various aspects. To date, the government has decided to provide a subsidy of 92 billion for a project requiring 5 trillion in funding to initiate mass production.

Another development is the establishment of the Leading-edge Semiconductor Technology Center (LSTC) in 2022. LSTC focuses on R&D, while Rapidus handles production. LSTC is vital for the advancement of Japan's advanced semiconductor technologies, encompassing chip design, physical transistor design, high-speed response production processes, materials technology, and advanced packaging technologies.

In the third step of the METI strategy, Japan plans to develop disruptive technologies based on the convergence of photonics and electronics, potentially having profound implications for data centers and 6G technology, particularly in terms of ultra-high-speed data transmission, low latency, and energy efficiency.

Past slow support struggled to yield results in larger technological challenges, most notably with Rapidus, responsible for 2-nanometer production. Previous funding was clearly insufficient. With escalating geopolitical conflicts and increasing pressure from the US, Japan has implemented more aggressive measures.

III. South Korea: The Controversial Move to Eliminate Working Hour Limits

Semiconductors are crucial to South Korea's trade-oriented economy, accounting for 16% of its total exports last year, largely from Samsung and SK Hynix. The South Korean government has proposed numerous financial subsidy plans for chips. Now, it's even considering changes to labor laws.

The ruling party in South Korea has proposed legislation aimed at providing subsidies to semiconductor manufacturers and exempting them from national working hour limits to counter potential risks from possible actions by Trump. South Korean President Yoon Suk-yeol warned that Trump's threat of imposing heavy tariffs on imports from China might induce Chinese competitors to drastically cut export prices, impacting the market share of South Korean chip companies overseas.

This bill comes

Disclaimer: The content of this article is sourced from the internet. The copyright of the text, images, and other materials belongs to the original author. The platform reprints the materials for the purpose of conveying more information. The content of the article is for reference and learning only, and should not be used for commercial purposes. If it infringes on your legitimate rights and interests, please contact us promptly and we will handle it as soon as possible! We respect copyright and are committed to protecting it. Thank you for sharing.(Email:[email protected])