Advanced semiconductors are essential to both civilian consumer goods and military equipment. In recent years, the industry has been dominated by products from the Taiwan Semiconductor Manufacturing Company (TSMC) which is based in Taiwan. The United States does not have the ability to reproduce the manufacturing capability of TSMC, so if China were to take control of Taiwan, the US could be unable to procure these high-end computer chips.
In 2022, the US Congress passed a law attempting to spur domestic chip manufacturing capabilities with subsidies and tax breaks.1 The Biden administration has since imposed export controls on computer chips to China to try to hamper China’s ability to build similar chip-manufacturing capabilities. Some observers argue that a mature semiconductor industry in China would present a threat to US interests, because China could threaten to stop the flow of chips for political leverage.2 China has responded with announcements of investments in its own domestic chip industry.3 The US government has also tried to stop the trade of China’s semiconductors to Russia, citing the Russia-Ukraine war.4 But chips are also integral to many consumer goods, and limits to trade in chips will distort prices for consumers. Restricting trade to China may foster the US’s domestic chip industry in some ways, but it also represents lost sales by US-based firms.
Advise President Biden about whether the United States government should continue and intensify export restrictions on advanced semiconductors. Consider tradeoffs between the possible economic and security effects of various policies, as well as which domestic constituencies stand to benefit or lose.
This policy memo is due at the end of week 10.
1 Information from: Jeremy Mark and Dexter Tiff Roberts. (2023). “United States–China semiconductor standoff: A supply chain under stress.” Atlantic Council. February 23, 2023.
2 Ben Noon. (2023). “Biden Needs to Broaden Semiconductor Sanctions on China.” Foreign Policy (April 3).
3 Matthew Gooding. (2023). “China has a $143bn semiconductor plan to beat US chip sanctions.” Tech Monitor (August 16).
4 Katrina Northrop. (2023). “The Sanctions Sieve.” The Wire China (April 2).
