By Zhū Jīng (朱晶) / Read China
Editor’s Note: This article was distributed by a Chinese government accepted source, but we believe it is worthy of a wider audience because it provides documentation of important ongoing dialogue within top circles in China unavailable elsewhere.
Integrated circuit is a fundamental, pioneering and strategic industry related to national economic and social development. Western countries, led by the United States, have adopted various sanctions and suppressive measures against China in an attempt to promote the restructuring of the global industrial chain and “de-Chinaization”, with the IC industry bearing the brunt.
Recently, the United States introduced the “2022 Chip and Science Act” and joined forces with Japan, South Korea and Taiwan to form a “four-party chip alliance” to build an alliance to “block” China, in an attempt to isolate China’s IC industry from the global supply chain system.
The U.S. has adopted a “small yard and high wall” policy to curb China’s scientific and technological progress in key areas of integrated circuits, and internally pushed the “Chip and Science Act of 2022” in an attempt to guide advanced manufacturing, especially integrated circuit industry links back to the local community through large investment subsidies. This series of “wall” “decoupling” measures, a serious disruption of the global IC supply chain, but also make China’s IC industry is facing severe external competition.
The history of U.S. legislation in the field of integrated circuits
S&T legislation has long been an important tool in the U.S. struggle for leadership in cutting-edge technologies, and great importance has been placed on synchronizing S&T legislation with technological development.
The U.S. was the first country to develop and manufacture integrated circuits, and the first country in the world to legislate separately to protect the intellectual property rights of integrated circuits. In 1984, the U.S. passed the Semiconductor Chip Protection Act, which established a new type of intellectual property protection for mask products fixed in semiconductor chips and codified it in Title 17 of the U.S. Code – “Copyright”.
In 2007, the America COMPETES Act took effect. Its main purpose is to keep the United States innovative in the 21st century and to enhance American competitiveness, requiring a $33.6 billion investment in a range of federal science and technology research programs.
According to the bill’s plan, in 2007-2010, the federal government will implement an infusion program for a series of science-related federal agencies, including the National Institute of Standards and Technology, the National Science Foundation, and a number of science programs under the Department of Energy. The bill also proposes to support a number of new government programs in the areas of semiconductors and new energy sources, in addition to a new “Technology Innovation Program” to fund small and medium-sized companies to conduct high-risk, high-return research.
In 2014, the Revitalizing American Manufacturing and Innovation Act was passed in the U.S. Congress, formerly known as the U.S. National Manufacturing Innovation Network Program, stemming from a major U.S. national strategy to promote the return of manufacturing in the wake of the financial crisis. The bill amends the National Institute of Standards and Technology (NIST) Act to authorize the U.S. Secretary of Commerce to implement the Manufacturing Innovation Network program under the NIST framework to establish manufacturing innovation centers nationwide. The bill specifies that the innovation center should focus on nanotechnology, advanced ceramics, photonic and optical devices, composites, bio-based and advanced materials, hybrid technologies, and microelectronic device tool development.
On August 9, 2022, President Biden signed the Chip and Science Act of 2022. The scale and scope of funding support for the IC industry in this bill far surpasses all previous bills, and is considered “the most significant government intervention in industrial policy in decades” and will provide “geopolitical competition with China”. long-term strategic support for “geopolitical competition with China.
Content and Impact of the U.S. Chip and Science Act of 2022
The Chip and Science Act of 2022 involves a total of $280 billion to be implemented over five years. The amount of funding involved in supporting chip development is $52.7 billion, designed to encourage companies to develop and manufacture chips in the U.S. and provide a 25% investment tax credit for these companies, worth $24 billion. The next five years the U.S. in the chip field to invest government funds close to $ 80 billion.
The United States focuses on supporting the construction of advanced chip manufacturing capacity.
The funding allocation plan in the Chip and Science Act of 2022 is shown in Table 1, and nearly 3/4 of the amount of funding for the IC sector directly supports chip manufacturing, indicating that the U.S. is eager to change the current layout of global IC manufacturing capacity. Currently, 75% of the global chip manufacturing capacity has been transferred to the Asia-Pacific region, while the U.S. domestic capacity has dropped from 38% in 1990 to 12% today.
The Chip and Science Act of 2022 provides direct support for chip manufacturing to the tune of $39 billion, of which $2 billion is for traditional chip production and the remaining $37 billion is for capacity building at advanced process nodes (14nm and below).
Under the process set forth in the bill, each project would receive a maximum subsidy of no more than $3 billion, indicating that at least 12 additional advanced process lines would be added to the U.S. within five years.
In accordance with the provision of 25% for these enterprises, worth $ 24 billion investment tax credit to measure, the total investment of enterprises in advanced process production lines close to $ 100 billion, coupled with government subsidies of $ 37 billion, it is expected that within 5 years, the United States will have nearly $ 140 billion amount into the construction of advanced chip manufacturing capacity, according to the advanced process capacity per 10,000 tablets / month investment in $ 2 billion, the next 5 years The United States will add more than 700,000 pieces / month of advanced production capacity. And the current global advanced process capacity of only 1.22 million pieces / month. According to this projection, after 5 years, the United States will add advanced chip production capacity will account for 30%-40% of the total global advanced process capacity, fully enhance the U.S. chip manufacturing industry in the global discourse.
For the first time, the United States has targeted the rise of China’s IC industry through legislation.
The text of the Chip and Science Act of 2022 specifies that companies receiving federal incentive funds are prohibited from expanding or building new capacity for advanced semiconductors in “specified countries, such as China, that pose a threat to the national security of the United States” for a period of 10 years, and that companies that violate the prohibition or fail to correct the violation may be required to refund the federal grant. Companies that violate the ban or fail to correct the violation may be required to return the full amount of the federal grant.
The bill also requires agencies receiving NSF (National Science Foundation) funding to annually disclose financial support for countries of priority concern (China, Russia, North Korea, Iran) and allows NSF to reduce, suspend, or terminate funding in certain circumstances.
This is the first time the United States through the legislative approach to curb the development of China’s integrated circuit industry by limiting the eligibility of subsidies. Before the bill was introduced, the United States put together Europe, Japan, South Korea and other allies and partners to establish a “four-party chip alliance”, a multi-pronged approach to comprehensively suppress China’s IC industry. The Chip and Science Act of 2022 is an attempt to build a complete support system and continue to widen the technology gap with China.
The bill’s support for U.S. integrated circuits is not limited to the advanced manufacturing level, but also includes $11 billion in funding to support the National Semiconductor Technology Center (NSTC), the National Advanced Packaging and Manufacturing Program, and other R&D and workforce development programs, close to $3 billion in funding for talent and workforce development in integrated circuits, civil-military integration, and collaboration between the U.S. and its allies on advanced semiconductor technologies and collaboration in the supply chain.
In addition, the bill also provides for the allocation of more than $170 billion over the next five years to authorize NSF, the Department of Commerce and other departments to increase investment in research and development in key areas of science and technology, mainly applied to artificial intelligence, quantum computing, advanced manufacturing, 6G communications, energy and materials; partly for education and talent development in science, technology, engineering and mathematics to promote U.S. research capabilities in cutting-edge scientific fields Upgrade.
The Chip and Science Act 2022 is a well-designed high-tech industry planning document that builds a complete set of ecological support system from advanced manufacturing capabilities, cutting-edge technology research and development, talent training, technology application and alliance cooperation to continue leading the IC industry.
The main features of U.S. legislation in the field of integrated circuits
U.S. science and technology policy and legislation, involving the number of bills related to integrated circuit technology and industry is not small, but the support is increasingly strong. According to these bills, the following characteristics can be summarized.
One is to keep up with the times. U.S. science and technology legislation pays attention to the synchronization with the times, and constantly adjusts and adapts with the development of science and technology. For example, in the 1980s, the U.S. government formulated and amended a series of laws and regulations in order to strengthen scientific and technological research and development and promote the development of high-tech industries, such as amending the Antitrust Act; enacting the National Cooperative Research Act in 1984; enacting the Federal Technology Transfer Act in 1986 to promote the commercialization of scientific research results; supporting the innovative activities of small businesses, enacting the Small Business Innovation Research Act in 1982 and the Technology Competitiveness Act in 1987. The Technological Competitiveness Act of 1987.
Second, focus on the protection and support of the frontier areas of science and technology. The scope of protection of U.S. science and technology legislation covers almost all frontier areas of science and technology. 1984 “Semiconductor Chip Protection Act”, the 2007 “America COMPETES Act” and the “2022 Chip and Science Act”, all key integrated circuit technology in frontier areas to financial support for the promotion of U.S. science and technology development and innovation have played a great role in the continuous flow of scientific and technological achievements; integrated circuit Achievements have long been at the forefront of the world.
Third, the legislation in the field of integrated circuits in particular reflects its value orientation of hegemonic supremacy. The current momentum of the United States in the development of science and technology is clearly declining, the continued decline in the global share of advanced manufacturing capacity of integrated circuits is very illustrative, and therefore hopes that through a high subsidy policy and a strict legal system to prevent the government subsidies chip manufacturers to invest in China to expand production capacity, prohibit the relevant institutions to participate in the “foreign talent recruitment program The government’s policy of high subsidies and a strict legal system will prevent government-subsidized chipmakers from investing and expanding their production capacity in China, prohibit relevant institutions from participating in “foreign talent recruitment programs”, and block technological exchanges to reduce the space for Chinese companies to survive in the international market.
Fourth, it is difficult to ensure the continuity of the implementation of the relevant bills and the efficiency of their implementation. The separation of powers system in the U.S. makes some of their major policies cumbersome to implement, and even if they are introduced in the form of bills, they are prone to be a formality because politicians still have the pursuit of votes to consider.
Changing trends in U.S. legislation in the field of integrated circuits
As the U.S. policy of “containment and full competition” with China becomes clearer and anxiety about its “national security” grows, the following trends in U.S. legislation in the field of integrated circuits are likely in the future.
First, the scale of funding to support the integrated circuit sector will grow. Before the introduction of the Chip and Science Act of 2022, the U.S. science and technology legislation in the field of integrated circuits involved in the bill.
The IC industry was not a priority area of support in the America COMPETES Act of 2007 or the Revitalizing American Manufacturing and Innovation Act of 2014, and the scale of support funding was limited. The Chip and Science Act of 2022 is the first large-scale subsidy for a single industry in U.S. history. With the increasing status of integrated circuits in national security strategy and the exponential increase in R&D costs in this industry, the amount of support funding involved in future U.S. legislation in this area will be increasingly high.
Second, the level of export control has been continuously strengthened, especially in the field of cutting-edge integrated circuit technology export control. All along, the U.S. has been pushing forward with the revision of the Export Administration Act, Export Administration Regulations, and has been tightening the export of high technology, especially focusing on the export and re-export of strategic materials in high-tech fields. This trend is underscored by the various restrictions against China under the Chip and Science Act of 2022 and the EDA tool embargoes that immediately follow the Act regarding advanced manufacturing equipment up to 14nm and EDA tools to be used for 3nm GAA technology.
As ICs enter the post-Moore era, the next generation of cutting-edge technologies may change the “competitive track” and “rules of the game”, and the U.S. will tighten restrictions on high-technology export controls against China, as well as restrict international cooperation and exchanges of high-tech talent. As a result, it will be more difficult for China to obtain relevant technology resources from abroad.
Third, through the U.S. Federal Communications Commission and the U.S. Federal Trade Commission, they are strengthening their audits of data from Chinese related companies and promoting privacy and data protection issues through various NGOs to restrict Chinese companies’ innovative models as a way to suppress and marginalize Chinese companies.
At the same time, through the National Institute of Standards and Technology, it will develop various cybersecurity standards, conduct comprehensive cybersecurity reviews on the grounds of protecting the U.S. national supply chain, audit the commercial data and technological achievements of Chinese high-tech companies, and force Chinese companies to comply through the active cooperation of leading U.S. companies. In addition, the U.S. will further strengthen regulation of its research institutions, emphasizing research security and controlling possible “foreign influence” on research talent and research activities.
New changes in the global IC industry landscape and the impact on China
The U.S. and other Western countries are ignoring the basic fact that the division of labor in the global IC industry brings mutual benefits to all countries from the political interests of great power competition, forcibly cutting off the industrial chain, using technological advantages to promote “de-China” and reconstruct the industrial chain, blocking the upgrading pace of China’s IC industry and maintaining its global dominant position. This brings a lot of uncertainty to China’s deep participation in the global IC industry division of labor.
China is facing increased resistance to catch up in key areas of integrated circuits. In May 2021, the Korean government released the “K-Semiconductor Strategy” with the vision of “creating the world’s strongest semiconductor supply chain,” and set out 16 promotion projects in four major areas: building the “K-Semiconductor Industrial Belt,” increasing semiconductor infrastructure construction, strengthening the foundation of semiconductor technology development, and improving the crisis response capability of the semiconductor industry. The National Assembly intends to enact a special law on semiconductors, which will focus on human resource development, infrastructure support, investment support, and R&D acceleration programs.
In June 2021, Japan made comprehensive plans for the development of semiconductors, digital infrastructure and digital industries, and formulated the Semiconductor Digital Industry Strategy with the goal of expanding domestic semiconductor production capacity. Europe introduced the European Chip Act in February 2022, proposing to mobilize public and private sector funds to invest 43 billion euros (about 300 billion RMB) by 2030 to build a prosperous ecosystem and ensure the EU’s leading position in the semiconductor sector.
The above bill reflects that the United States and Europe and other countries will support the development of the integrated circuit industry as a long-term goal, and to a certain extent to ensure the continuity of its industrial policy. This will make a large number of funds, key talents and enterprises keen to transfer to the United States, Europe and other advanced countries, weakening China’s ability to access international industrial resources and innovation factors.
At the same time, almost all the advanced countries in the field of integrated circuit-related bills or policies to increase technology export control have clear provisions, which makes the contribution of international enterprises in China’s technology spillover and talent training will be reduced, and the long-standing reliance on “exogenous” innovation in China to obtain the opportunity to improve technology will be greatly reduced, in The obstacles to catching up in key areas of integrated circuits will increase significantly.
In recent years, China’s IC supply chain “cut-off” risk has increased. The U.S. has not substantially changed its competitive stance on China from the comprehensive blockade policy on integrated circuits in China under Trump to the targeted blockade and selective decoupling implemented by the Biden administration.
In addition, the Biden administration also proposed a new “investment, joint, competition” strategy, pulling together Europe, Japan, South Korea and other partners to set up a “four-party chip alliance”, multi-pronged approach to China’s integrated circuit industry to open a “siege “the momentum.
On the one hand, the United States tries to control key resources, key technologies and key supply chains of Europe, Japan, South Korea and Taiwan in the fields of IC process, packaging, equipment, materials and memory, etc., to push China out of the global IC industry map, and thus destroy the current China-centered electronic information manufacturing network and industrial chain of tens of trillions of output value, shaking China’s market as a major manufacturing country. China’s industrial upgrading and economic development will be delayed.
On the other hand, the U.S. is ready to escalate sanctions and embargoes against China to further intercept memory equipment, 14 nm and below advanced process equipment, advanced EDA tools and other fields, while blocking access to cutting-edge technology cooperation with Europe, Japan, South Korea and other countries to achieve “precise decoupling” from China in the field of cutting-edge technology. “The U.S. is strengthening import and export controls in key technology areas. The United States in the field of key technologies to strengthen import and export controls, so that China’s IC supply chain cut off the risk of a significant increase.
China’s IC market cycle fluctuations uncertainty increased. The IC industry has been generally affected by the macro economy, and the cyclical nature is very obvious. But in recent years by the impact of rising trade protectionism, the new crown pneumonia epidemic, the global IC industry chain division of labor and cooperation is broken, companies seeking to establish both resilience and robustness of the supply chain more urgent willingness to strengthen stockpiling and safety stock, coupled with the U.S. implementation of targeted sanctions against specific Chinese companies and “cut off supply “threat, the global IC supply chain system can not function properly, resulting in a global chip shortage situation in 2021.
Due to the global economic downturn, the global IC supply chain system will gradually change from a “comprehensive lack of core” to a “structural lack of core” in 2022, especially for consumer electronic chips, which will enter a long process of destocking from the third quarter of 2022.
The demand for chips in new energy vehicles, data centers, and industrial fields is still full and maintains a certain tightness. This shift and adjustment of the IC market supply relationship triggered by the uncertainty and opacity of the global supply chain will likely become the norm, making China’s IC market cycle fluctuation uncertainty increased, bringing more tests to the survival and development of China’s related enterprises.
China’s IC high-quality domestic substitution has become more difficult. As the United States continues to tighten the technology and supply chain restrictions on China’s integrated circuit industry, China began to implement the domestic replacement of key technologies and products, and in a series of industrial policies to promote the phased results.
In the fields of Xinchuang and Beidou, we have already achieved the replacement capability of the whole chain of domestic chips, contributing to the national “new infrastructure” strategy and the construction of party, government and military infrastructure. At present, the accelerated replacement process of China’s integrated circuits is facing a ceiling, and a large number of low-end products have completed shallow replacement, and there is an urgent need to tackle more key technologies in “neck” areas to achieve a high level of deep replacement.
Integrated circuit industry chain on some of the “hard bones” of the attack, often on the effective access to innovation resources and scientific planning and organization put forward higher requirements. China is currently facing a significant increase in the difficulty of high-quality domestic replacement situation.
On the one hand, due to the United States and other advanced countries consciously control the spillover of advanced technology, for China through scientific research cooperation, the introduction of cutting-edge talent and other channels to achieve technological upgrading set a number of obstacles.
On the other hand, there is still a large number of low-level duplication of construction, funds, talent and other innovation resources scattered, the need to focus on forming a synergy for a high level of domestic replacement. In addition, the lithography, 14nm advanced process, etc., the most core areas of China’s IC industry chain supply chain to play a “fortress” role, China also needs a strong, sustainable financial investment, efficient scientific coordination and organizational layout.
The restructuring of the global IC industry chain in the context of competition among major countries is accelerating. On the one hand, the cost and efficiency-oriented layout of the global IC industry chain is bound to give way to national security strategy to a considerable extent, and the opportunities for China to obtain globalization dividends by using comparative advantages are reduced, and the road of “post-hair” catching up is blocked, which brings great challenges for China to accelerate the upgrading of the IC industry. On the other hand, countries have followed China’s example to promote the development of IC industry with “national power”, which shows that China’s overall strategy of developing IC industry with national will is correct, strengthening strategic determination, exploring the establishment of a new type of national system, and actively carrying out the development of IC industry under the conditions of socialist market economy. If we strengthen our strategic determination, explore the establishment of a new national system, and actively carry out research in the “neck” area under the conditions of socialist market economy, we will be able to effectively cope with the challenges and risks of global IC value chain restructuring, and be invincible in the competition among big countries.
In the current situation, we need to further develop and improve in the following areas.
First, the organization at the national level to increase efforts to solve the “neck” in the field of key technology autonomy. For example, in the field of advanced processes, lithography and some key equipment, advanced EDA tools, key semiconductor materials and components, we still need to increase the organization at the national level to accelerate the realization of local substitution. Secondly, for the cutting-edge leading talents and engineers who participate in the above-mentioned special focus, give corresponding incentives commensurate with their contributions to ensure the efficiency and continuity of the research.
Second, make every effort to ensure the safe and stable development of the domestic IC manufacturing supply chain. According to the practical needs of large production lines, accelerate the verification process of domestic equipment and materials, while actively promoting the development and verification of equipment and materials and components required for advanced processes. Encourage enterprises to actively take multi-source and domestic countermeasures, actively seek non-U.S. and domestic suppliers for joint development and verification in key areas of high dependence on the U.S., and re-layout the independent supply chain system.
Third, give full play to the advantages of the domestic large-scale market to strengthen the “endogenous” innovation capacity in the field of cutting-edge new technologies. Support relevant enterprises to carry out research and development of new technologies and new processes, adopt the “horse race” and “unveiling” mechanism, and give new technologies and new processes the opportunity to “compete” in the new track to establish To establish a certain basic leading advantage in the new track, in order to bypass the supply chain restrictions in existing technology areas.
Fourth, continue to play the role of policy and finance to help the industry, and guide the development of the industry in an orderly and reasonable manner. The National IC Industry Development Promotion Plan has been introduced for nearly 10 years, and it is recommended to further strengthen the top-level design of the industry development, coordinate the planning, and introduce a new “ten-year plan” for China’s IC industry and a medium and long-term development plan to 2035, in order to strengthen the national will of IC industry development.