Expert Advice for the Biden Administration’s Approach to Semiconductor Policy

Expert Advice for the Biden Administration’s Approach to Semiconductor Policy

January 28, 2021

Over the past four years, the semiconductor industry has focused on U.S. trade policy with China. Congress and the Trump Administration strengthened federal laws to restrict foreign investment, control technology transfer, and established new federal research incentives. This pattern looks to be continuing as President Biden’s nominee to lead the Department of Commerce committed to answering China’s “unfair,” “anticompetitive,” and “coercive” trade policies in testimony before a Senate panel. Governor Gina Raimondo pledged to use the Commerce Department’s available tools, including “the entities list, tariffs, or countervailing duties,” to counter China’s trade practices.

Last Friday, the Lincoln Network convened an expert panel to talk about The Future of U.S. Semiconductor Policy and the challenge from the People’s Republic of China.

Dr. James Mulvanon, Director of Intelligence Integration at SOSI, drew from twenty years studying the Chinese information technology revolution with U.S. national security. He pointed out that the United States had offshored much of its IT supply chain to China while they were becoming a major cyber threat actor. He asked, how can we secure this supply chain given the trade and national security considerations?

Dr. Roslyn Layton, Co-Founder of China Tech Threat, said that semiconductor policy is something that everyone should be aware of, drawing on her economic and regulatory expertise. She warned that China wants to displace the United States as a leader for economic and military reasons which would have “grave effects.” She pointed out that some American firms are actually accelerating this decline themselves and said that the American policy response has not been sufficient.

Steven Ezell, Director of Global Innovation Policy at the Information Technology and Innovation Foundation (ITIF), pointed out that the semiconductor industry contributed to 2.7 trillion in the global economy. Ezell previewed a forthcoming report on Chinese mercantilism in the semiconductor sector and highlighted the need for an alliance approach to semiconductor competitiveness, urging a coalition of like-minded nations to work together to address this challenge.

My colleague, Dan Lips, discussed the semiconductor challenge through the prism of China’s use of sharp power and the risk of the spread of digital authoritarianism. He discussed the findings of his recent report, Answering the China Chip Challenge: Recommendations for U.S. Semiconductor Industrial Policy in 2021. He pointed out that the Biden administration had an opportunity to build upon the growing bipartisan support in Congress to address the China semiconductor challenge.

Dr. Layton urged the Biden administration to go further to address the risk of technology transfer. She pointed to over 100 firms and factories making semiconductors in China and cited Dr. Mulvenon’s research, which shows specific firms’ links to the Chinese military. She argued that American companies should not be doing business with them. “The Trump Administration has done a lot. They’ve put the ball in front of the goal. The Biden team can just kick it in,” Dr. Layton commented.

Dr. Mulvenon discussed the need for a global coalition (including partners in Europe and Asia) to address these supply chain risks and prevent technology transfer to China. He also discussed the challenge of applying controls only to companies, since the PRC is adept at reprioritizing companies within its industrial policy strategy. “We should be trying to protect certain equipment rather than playing whack-a-mole with certain companies.”

Mr. Ezell urged concerned people to become involved in this policy discussion and urge their representatives to address the challenge to the semiconductor sector. “Talk to your Congress member. Talk to your policymakers about the need to invest in R&D and...the need for the United States to have serious technology competition strategies in areas like semiconductors.”

The members of the 117th Congress have a lot on their plate and even more people in their ears as America’s problems, both at home and abroad, pile up. Our panelists, plenty of technologists, national security experts, and congressional officials insist that microelectronics are an economic and security imperative--it is the hill we need to die on. If we want to avoid falling further behind, the topic of semiconductors cannot be put on the backburner. The Biden Administration needs to seriously tackle the semiconductor challenge in a multi-pronged approach and do so within the first 200 days. Understanding the pandemic is front of mind, ignoring the political capital required to push strong industrial policy forward will put American economic and national security at-risk.

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