New U.S. policies regarding semiconductor chip manufacturing are sending shockwaves through the chip market.
Key Details
- As the chip manufacturing race between China and the U.S. escalates, top Asian chip stocks fell Tuesday.
- Samsung Electronics and Tokyo Electron stocks fell, but the world’s largest contract chipmaker Taiwan Semiconductor Manufacturing slid the most at 8.3%.
- The drop follows U.S. announcements on Friday outlining new restrictions on semiconductor chip exports.
Why it’s news
New policies from the Biden administration have encouraged chip manufacturers to do business in the U.S. rather than China. Following the chip shortage during the pandemic, U.S. officials grew concerned about national security as it related to semiconductor chips.
Semiconductor chips are found in nearly every piece of modern technology, from everyday microwaves to military equipment. Without control of this supply chain, the U.S. could face disaster if the supply were to be cut off.
Policies from the Biden administration including the Chips & Science Act and others encourage chip production in the U.S., restrict exports of certain chips used in artificial intelligence, and restrict the sale of semiconductor equipment to Chinese companies.
Since Thursday’s close, the policies have erased over $240 billion from global chip stocks, Bloomberg reports.
China responded to President Joe Biden’s announcement of these restrictions, saying that the move will hurt the global economy and affect supply chains.
Restricting sales of semiconductor equipment to Chinese companies will likely affect Chinese manufacturing. Most semiconductor equipment is controlled by the U.S. and allies. Without support from these industries, China will struggle to continue its manufacturing, Bloomberg reports.
Backing up a bit
President Biden’s policies to draw chip production to the U.S. seems to be working so far.
Micron, one of the largest U.S. chipmakers, plans to invest $15 billion in a new factory located in Boise, Idaho. The company held a groundbreaking ceremony Monday.
Construction on Micron’s new factory will begin in 2023. When completed, it will be the largest chipmaking cleanroom, or fabrication room, in the U.S. at 600,000 square feet.
By 2025, parts of the factory will be operational and the factory will continue to expand in phases. When completed, the facility is estimated to create 17,000 jobs.
Companies like IBM and Intel are also investing in new U.S. locations.