If the Biden administration has its way, many more electronic chips will be made in factories in, say, Texas or Arizona.
They will then be shipped to partner countries such as Costa Rica, Vietnam and Kenya for final assembly before being sent out around the world to power everything from refrigerators to supercomputers.
These places might not be the first to come to mind when you think of semiconductors, but administration officials are engaged in intense negotiations as they seek to transform the global semiconductor supply chain.
Core elements of the plan include getting foreign companies to invest in chip manufacturing in the United States and finding other countries to build factories to complete the work, in what Washington officials and researchers call part of a new “semiconductor diplomacy.”
The Biden administration argues that producing more of the brains behind electronic devices in the U.S. increases the country's prosperity and security. President Biden touted his efforts in an interview with ABC News on Friday, saying he has gotten South Korea to invest billions of dollars in semiconductor manufacturing in the United States.
But a key part of this strategy plays out outside the United States, and the Administration is working with partners to ensure that investments in the United States are more durable.
Progress on this early effort could help achieve some of the administration's broader strategic goals. The Trump administration wants to ease security concerns about China, which is expanding its chip manufacturing while threatening Taiwan, a global center of semiconductor technology. It also wants to reduce the risks of disruptions to the semiconductor supply chain, risks that were made clear by the coronavirus pandemic and the Ukraine war, both of which disrupted global shipping and manufacturing.
“The emphasis is on doing everything we can to expand the capacity of different countries and make global supply chains more resilient,” said Ramin Toloui, a Stanford University professor who recently served as assistant secretary of the State Department's Bureau of Economic and Business Affairs, a position at the forefront of diplomatic efforts to build new supply chains.
The administration aims to do this not only for semiconductors but also for green energy technologies such as electric vehicle batteries, solar panels and wind turbines – industries in which China is by far the largest player.
Biden and his aides have said dominance by Chinese companies is a human rights issue as well as a national security issue, given that some manufacturing takes place in the Xinjiang region, where authorities have forced some members of Muslim ethnic minorities to work in factories.
Tolui said that during the three years of the Biden administration, the United States has attracted $395 billion in foreign investment in semiconductor manufacturing and $405 billion in the development of environmentally friendly technologies and the production of clean electricity.
Many of the companies investing in these manufacturing industries in the U.S. are based in Asia, including Japan, South Korea and Taiwan, known for their high-tech industries, as well as Europe. One of them is South Korean semiconductor manufacturer SK Hynix, which is building a $3.8 billion factory in Indiana. The project is the state's largest investment ever and could bring more than 1,000 jobs to the region, according to the State Department.
Secretary of State Antony J. Blinken mentioned the project last month in a speech to a Maryland conference aimed at promoting foreign investment in the United States, stressing that he hopes Biden's legislation will attract foreign investment to American high-tech manufacturing by “modernizing our roads, rails, broadband and power grids.”
He added that policy efforts aim to “strengthen and diversify supply chains, revitalize domestic manufacturing, and promote key industries of the future, from semiconductors to clean energy.”
The Commerce Department also plays a major role in efforts to strengthen the semiconductor supply chain, disbursing $50 billion to U.S. companies and organizations for semiconductor research, development and manufacturing.
Commerce Secretary Gina Raimondo has led a thorough review of the global semiconductor supply chain to identify vulnerabilities and has been consulting with foreign governments about opportunities for additional investment overseas.
The topic was a focus of Ms. Raimondo's visit to Costa Rica this spring, where she met with local officials and executives from Intel Corp., which has a factory in the country. (Mr. Truy spoke at a conference on semiconductor manufacturing in Costa Rica in January.) She also discussed diversifying the semiconductor supply chain during trips to Panama and Thailand.
But it will be difficult to restructure global supply chains to be less reliant on East Asia, whose semiconductor fabs offer more cutting-edge technology, a better pool of skilled workers and lower costs than U.S. factories can expect.
Taiwan produces more than 60% of the world's semiconductors and nearly all of the cutting-edge chips used in computers, smartphones and other devices.
By comparison, the U.S. semiconductor industry could face a shortage of up to 90,000 workers over the next few years, according to some estimates.
Governments in China, Taiwan, South Korea and other countries are also actively subsidizing their semiconductor industries.
Still, billions of dollars of new U.S. investment are expected to shift global supply chains somewhat: The U.S. share of global chip manufacturing is projected to grow to 14% by 2032 from 10% now, according to a May report from the Semiconductor Industry Association and the Boston Consulting Group.
Some administration officials are deploying a more coercive form of semiconductor diplomacy to stop China from copying U.S. technology. That approach has focused on persuading a handful of countries, notably Japan and the Netherlands, to block companies from selling some semiconductor-making equipment to China.
Alan Esteves, the Commerce Department's director of export control, visited Japan and the Netherlands last month to try to persuade them to block their companies from selling certain advanced technologies to China.
By contrast, Tolui and his aides are traveling the world, scouting countries and companies that want to invest in U.S. industry and set up factories at the end of their supply chains. Tolui said his office's work is one component of Biden's recent legislation to boost manufacturing jobs in the U.S., including the Infrastructure Act and the Chips Science Act.
The CHIPS Act provides the administration with $500 million a year to build secure supply chains and protect semiconductor technology. The State Department is using the money to find countries to target for supply chain development. Officials are organizing studies in various countries to see how they can bring infrastructure and workforces up to certain standards to ensure smooth assembly, packaging and shipping of chips.
Countries currently participating in the program are Costa Rica, Indonesia, Mexico, Panama, the Philippines and Vietnam, and the U.S. government plans to add Kenya.
Job training is a priority in building this supply chain, said Truy, who is in discussions with Arizona State University and looking into partnering with overseas institutions to develop training programs, including Vietnam National University in Ho Chi Minh City, which Truy visited in May.
Martin Lasser, managing director of China-focused research firm Datena, said this network of alliances is a strategic advantage the US has vis-à-vis China.
It would be too expensive for the U.S. to try to do it all on its own, he said, and doing so alone would ignore the reality that technology today is more global than it was decades ago, and different countries play important roles in the semiconductor supply chain.
