Semiconductors and Modern Industrial Policy

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.38.4.81

by hunglee2 • 2 years ago

61 44 2 years ago

pubs.aeaweb.org

chvid5• 2 years ago

It is part industrial policy and it is part economic war. The US hurts Chinese companies, whether it be Huawei or some crane manufacturer, with their export controls and national security "concerns".

At the end of this, decades from now. Will it have been worth it? Will the US have created a bigger economic loss in China than the value of their own lost business (whether directly or indirectly by the local alternatives these policies foster)?

So far, the US has done massive damage, that is for sure, but ultimately, I am not sure how the tally will be.

quonn• 2 years ago

What you like to call an economic "war" is simply policy.

Whether the policy is "There should be no barriers when trading with China" or it is "There should be many barriers when trading with China" - either way, decades from now. Will it have been worth it?

bilbo0s2• 2 years ago

This.

People are calling this war and it isn’t. It’s competition in markets and strategy to facilitate gaining marketshare in different markets.

And lo and behold, everyone wants to protect their own access to their own market.

Not everything is a war. I can tell you right now, with the new administration will come new policies that will have a segment of people in the EU and UK saying “economic war”. But it’s no more war than immigration quotas are “war”.

Let’s reserve that word for REAL war.

wumeow• 2 years ago

Putting scare quotes around "concerns" is hilarious given all our major telecoms were recently pwned so hard by Chinese hackers that they still have access months after they were detected.

singlewind• 2 years ago

This is economic war. China now is taking over the car economy from Japan, Europe and USA. And I believe they have ambitious on semiconductor as well. The world has demand on high end chips also require cheap chips which does the job.

bilbo0s2• 2 years ago

Don’t mean to sound like a broken record, but again, not everything is a war. With the new US administration, for example, will come new policies that will have a segment of people in the EU and UK saying “economic war”. But it’s no more war than immigration quotas are “war”.

Again, we should reserve that word for REAL war.

undersuit2• 2 years ago

If it's war why are we hobbling ourselves? We know exactly how China is winning. You don't see SMIC begging the PRC for more money from their equivalent of the Chips Act.

sudosysgen5• 2 years ago

SMIC is partly state owned, so funding them doesn't have the same issues with misaligned incentives as shoveling money into private corporations who may just pocket it through a loophole (remember the Broadband Act?). This makes the funding issue much easier, but it introduces other issues and requires very significant technical expertise from the state which can take a long time to build.

chvid5• 2 years ago

They get subsidies, maybe not at the Chips act scale, but sizeable. Possibly indirectly via subsidies to Huawei who then can pay top dollar for SMICs 7nm.

Besides their core business is profitable and they are publicly traded in Hong Kong.

michaelt• 2 years ago

We know exactly how China is winning.

An anti-intellectual campaign in the late 1960s [1] that eliminated almost all university education, except for in engineering (as engineering served the Great Leap Forward's goal of increasing agricultural and industrial production) ? Combined with a deliberate purge of the previous ruling class?

Thus creating the conditions for the country to be led by Jiang Zemin (electrical engineering, National Chiao Tung University) then by Hu Jintao (hydropower engineering, Tsinghua University) then by Xi Jinping (chemical engineering, Tsinghua University) ?

[1] https://en.wikipedia.org/wiki/Stinking_Old_Ninth

bsder• 2 years ago

It's not war, but we have seen this before.

It took VHSIC, Sematech, and a bunch of other initiatives to prevent the Japanese from collapsing the US semiconductor industry at the time. The subsidies from MITI almost crushed the US semiconductor companies.

Thsoe who fail to study history, etc. etc.

glitchc• 2 years ago

Barring niche areas, US companies generally treat ICs as a commodity across vast swaths of commercial/industrial activities. In a sense, it's not very different from apparel, which is almost entirely outsourced. We would be in the same boat with automobile manufacturing were it not for unions. This is not going to change overnight. The costs of outsourcing would have to become prohibitively higher for domestic production to return in any appreciable amount. Until then, we should expect the torch to be carried by private industry (ex. Apple) who have other incentives to safeguard their IC production and supply chain.

amtc80• 2 years ago

Eh, Apple is like the company that moved their supply chain overseas. And essentially made industries, and Tim Cook CEO, because of it.

lotsofpulp2• 2 years ago

Apple is one of many companies that chose to source their components overseas. If they didn't, no one would be buying their products because they would be priced so much higher than competitors.

mikewarot• 2 years ago

Even if by magic we had all of the worlds fabs moved exclusively to the US and working at 100% capacity... we'd still need the rest of the infrastructure to actually make them useful, plastics and ceramics for packaging, discrete components, solder, connectors, pcb boards, assembly, etc... the Fab lines are only a tiny part of the big picture.

Who in the US makes surface mount resistors, capacitors, inductors, etc. in volume sufficient to meet all of our demand? (I'd love to be proved wrong here)

minetest2048• 2 years ago

Who in the US makes surface mount resistors, capacitors, inductors

Adding to this point, don't underestimate passive components! For some applications, such as RF, you can't just change inductors with another inductor that have the same inductance value. Because they will have different parasitic capacitance and resistance, which will affect RF performance.

Passive components are surprisingly involved, they even have their own news site: https://passive-components.eu/

EDIT: Its not just RF, capacitor selection matters for power converters too. Do you know that multilayer ceramic capacitors (MLCC) can lose 70% of their rated capacitance at high DC bias voltage? This is what happened if someone doesn't realize that: https://www.reddit.com/r/embedded/comments/1cs2c5l/todays_re...

If I specced an inductor or MLCCs, I can't just change it. This means if any country wants to have electronics supply chain in house, they need to bring all of the passive components back, or they can't manufacture things.

Electronics is not just 5nm chips, those chips that always in the news need support components

sevensor2• 2 years ago

Adding to your addition, let’s not forget the “raw” materials, which are a constant headache to keep supplied and qualified. Consider a not entirely hypothetical example where your regular supplier of sulfuric acid is late. Your iso tank runs out and you have to tap a drum. The drum is from a qualified source, but it’s been sitting around for a while. The drum may have started degrading; is the sulfuric still pure enough to use? If it’s not, you have to idle your billion dollar fab until you can source another iso.

Anyway, multiply this headache by nitric acid, hydrofluoric, bare wafers, several kinds of photoresist, arsine, phosphene, diborane, silane, cmp slurry, and dozens of other ingredients, plus oem spares for ten thousand different consumables for your equipment. Supply chain for semiconductors is no joke.

generuso• 2 years ago

Vishay is one of the large manufacturers of discrete semiconductors and passive electronic components. They maintain a significant manufacturing presence in the USA, with about a dozen of factories.

The legendary ATC (American Technical Ceramics), belongs to AVX which belongs to Kyocera. It also apparently manufactures all their high frequency capacitors in the USA.

So if we look at US manufacturing proper, it exists, though compared to the greater China, it is of course quite small, as one would expect, considering where most of the electronic assembly happens. However, if we look at the component manufacturing which is "not in China", then the situation is fine, with the dominant companies having hundreds of factories in Japan. Specifically, lots and lots of ceramic-based components (capacitors, resistors, filters, magnetics, etc) are manufactured in Japan (Murata, Kyocera, TDK) and to some extent by their subsidiaries in the USA and elsewhere. If we include Mexico, Eastern Europe, Israel, Philippines, a few factories in Western Europe, then the situation is quite balanced.

Here is an interesting article regarding capacitors: "Japanese companies hold a dominant market share of 56%, significantly ahead, while mainland Chinese MLCC manufacturers account for approximately 7% of the global total." https://www.cytechsystems.com/news/top-mlcc-manufacturers

Semiconductors and Modern Industrial Policy

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