The US chip bill hurts others as well as itself.

The $52 billion "Chips and Science Act" promoted by American politicians over a year was recently passed by the U.S. Senate. However, unlike the industrial policies introduced by other countries, the purpose of the U.S. bill is not pure - it wants to use the bill to promote the development of its own semiconductor industry, and also to use the bill to dig holes for the development of China's semiconductor industry.

The US government claims that the bill is aimed at rebuilding its own chip manufacturing capabilities. Data from the media WSJ shows that since 1990, the US market share of global semiconductor production capacity has dropped from 37% to 12%. Although US IC companies still hold the right to speak in the global semiconductor industry, the continuous decline in production capacity has threatened the US chip hegemony.

At the same time, the bill also reveals strong political implications. It is reported that in addition to clearly stipulating that American companies are not allowed to export chip products to China, the bill also requires relevant departments to conduct inspections on Chinese people who go to the United States for exchanges and studies. Through these regulations, the US government has also upgraded industrial competition to the political level, sending a political signal of confrontation with China.

However, judging from the interests of all parties involved in the bill, these actions of the US government are more like shooting itself in the foot. Because neither the bill nor the "chip 4 chip four-party alliance" is in the interests of participating companies, nor in the interests of its own allies.

Acts that violate the law

As the most globalized industry, the progress of semiconductors is strongly dependent on global division of labor.

Currently, East Asia has become a highland for the development of the global semiconductor industry. It has not only formed a huge semiconductor consumer market, but also has three-quarters of the world's chip production capacity. There are chip manufacturers such as TSMC, Samsung and SMIC in the region, as well as chip design companies such as MediaTek and Huawei that were born here.

However, this situation is not shaped by government orders, but by market rules. Specifically, the concentration of semiconductor manufacturing in East Asia is the result of the global manufacturing transfer. After the process of economic globalization began in the 20th century, East Asia, relying on latecomer advantages such as demographic dividend, has completed the transformation of its industrial structure while taking over the manufacturing industry of developed countries.

For semiconductor companies in Europe and the United States, East Asia, with its mature industrial structure, also has cost advantages over their own countries. Taking semiconductor factories with the same production capacity as an example, the Boston Consulting Group said that the cost of building and operating a semiconductor factory in the United States for 10 years will be one-third higher than in East Asia.

At the same time, the concentration of semiconductor industry manufacturing in East Asia is also a result of consumer market orientation. The manufacturing industry generally follows the principle of layout near the market, and the chip industry, which is essentially a manufacturing industry, is no exception. While East Asia continues to form manufacturing advantages, it has also spawned a huge semiconductor consumer market. Among them, China is the world's largest single semiconductor consumer market. Data show that global semiconductor sales in 2021 were US$555.9 billion, and sales in the Chinese market were US$192.5 billion, accounting for about 35% of the total global semiconductor product sales.

It is worth noting that China's chip consumption is heavily dependent on imports. This is obviously not good news for China, but it is good news for European and American semiconductor companies. Because it means they will be able to gain more profits from the Chinese market. Attracted by huge consumer demand, European and American companies have also accelerated their accumulation in East Asia, exacerbating the decline of the US chip manufacturing capacity.

So, can the US government reverse the global chip market structure driven by market laws through new developments?

From the perspective of enterprises, although the US government has to spend a huge amount of dollars to subsidize semiconductor companies, this still cannot dispel the concerns of enterprises. Because while they receive subsidies from the US government, they also have to give up their factories that have been in operation for many years, give up tens of thousands of skilled workers, give up the advantages of East Asia, pay the high fixed costs of returning to the United States to build factories, bear the social pressure from American unions, politicians and environmentalists, and bear higher shipping costs. All of the above disadvantages are not wise choices for enterprises.

Take TSMC as an example. It is a company originally from Taiwan Province of my country, but now it has to build a factory across the Pacific Ocean in the United States. This not only requires it to come up with a large amount of funds, but also requires it to bear many additional costs. This is undoubtedly unwise for TSMC, which made its fortune by manufacturing foundry products, but TSMC can only be forced to accept it.

From a practical point of view, Foxconn's Wisconsin factory is a lesson for TSMC. Foxconn's Wisconsin factory was once called the "eighth wonder of the world" by former US President Trump. At the beginning of the construction of the factory, the US government also promised Foxconn that it would provide it with financial subsidies. However, at present, this "miracle" of the world has shown signs of stopping work, and Foxconn's construction of the US factory has gradually become a dead end.

Chip 4 that harms others and yourself

Semiconductors are an industry high ground that countries around the world are competing for. Whoever has stronger manufacturing technology will be able to stand at the top of the global industry chain and share the industry dividends brought by technological leadership. For the United States, where the "law of the jungle" is deeply rooted, the ultimate winner of the battle for the high ground of chips can only be itself.

Perhaps out of such considerations, while the United States introduced bills to suppress China, it also did not forget to pull in allies such as Japan and South Korea, claiming to build a chip 4. In the eyes of industry insiders, this alliance is not only an upgrade plan for the United States to suppress China's chip industry, but also an important means to control its allies.

In fact, in addition to Taiwan's active response to the US call, Japan and South Korea are well aware of the real intention behind the "Quad Alliance". Facing the "sincere" invitation from the United States, the attitudes of Japan and South Korea are completely opposite. Among them, as a "loyal ally" of the United States, the Japanese government is very positive, while the South Korean government is obviously not so enthusiastic about the alliance.

Judging from the actions of the Japanese and South Korean governments, they seem to have their own calculations. As for Japan, it chose to support the alliance in order to boost its own semiconductor industry. Not long ago, Japan and TSMC reached a cooperation agreement. The latter will build a factory in Japan, and the former will provide it with a subsidy of 400 billion yen.

However, after the news came out, the outside world said that the cooperation between the two was for their own reasons. Industry insiders believe that TSMC's decision to build a factory in Japan is actually to use the name of the alliance to circumvent potential sanctions from the US government in the future. Japan's subsidy to TSMC is to regain the craftsmanship of semiconductor manufacturing and improve its semiconductor industry chain.

If Japan had not signed the Plaza Accord with the US government, its brilliant semiconductor industry would not have fallen into recession, and its economy would not have regrettably "lost" 30 years. Now, Japan seems to have seen the "hope" of restoring its former industry from the "Quad Alliance".

In comparison, the South Korean government's calculations are undoubtedly more realistic than those of the Japanese government. Although South Korea has not yet made a clear statement on whether to join the alliance, it has also been continuously introducing policies to promote the development of its semiconductor industry. Outside analysts believe that the reason why South Korea has not made a statement on the alliance is that China is an important chip trading partner of South Korea, and the latter's chip companies have also built a large number of factories in China. If South Korea chooses to join the alliance, it would be tantamount to suicide.

On the other hand, Korea Know Joining the alliance cannot solve the crisis faced by its own chip industry. The biggest rival of South Korea's chip industry is not only China, but also the major members of "chip 4". Take the material ban between Japan and South Korea as an example. Even if South Korea is happy to join the alliance, Japan's ban on South Korea may not be lifted. If South Korean companies build factories in the United States, the United States forces them to transfer core technologies, which is undoubtedly a fatal blow to South Korea.

For the US government, whether its intention to suppress China can be achieved depends not only on whether the chip bill can take effect, but also on whether the "Quadrilateral Security Alliance" can be formed.

At present, the effectiveness of the chip bill depends on the enthusiasm of enterprises to participate, while the effectiveness of the "Quad Alliance" depends on the willingness of all parties. It is not easy for the United States to monopolize the semiconductor industry chain through these, after all, the examples of the "Plaza Accord" and the suppression of Japanese companies are still vivid.

It is true that China is still unable to achieve complete self-sufficiency in chips, but the US's self-serving bills and alliances are more like shooting itself in the foot. Take the smartphone industry as an example. Chinese smartphone brands have always maintained close cooperation with US chip companies. For every phone sold by Chinese mobile phone companies, US chip companies can make more money. In the future, with the US chip bill and the "Quad Alliance", China's "chip" shortage problem will also be reflected in the income statements of US companies.

Why bother with a bill that hurts others and yourself?

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As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.