What has happened?
- The US House of Representatives passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Bill,
- To provide assistance and subsidies worth $280 billion, particularly focused on its semiconductor industry, which is facing competition from China.
- The bill would provide “$52 billion in subsidies and additional tax credits” to companies that manufacture chips in the US.
- Another $200 billion is being allocated for scientific research, especially in artificial intelligence and other novel technologies.
- In a rare show of unity, the bill was passed with the help of some Republican lawmakers despite their party’s general position on subsidies.
- Many republicans opposed the bill on this principle while some democrats, like Bernie Sanders, opposed the extension of what he called “welfare” to corporations in a time of inflation.
Why the bill has been passed now?
- It was a result of many factors coming together, a major one being the push for it by Chuck Schumer, the leader of the Democratic Party in the Senate or the upper house of the US parliament or Congress.
- He had been attempting to persuade a few Republicans about the need for this legislation since at least 2019, he said.
- There was also lobbying by some chip manufacturers.
- Last year, a global shortage of semiconductors or chips led to the recognition that the US needed its own substantial
- And since 2020, the growing use of devices like laptops in homes has further increased demand.
- At the moment, about 75% of the world’s reliance on semiconductors is met by East Asia.
- In particular, Taiwan and South Korea’s Samsung have been at the helm of manufacturing them, but China has been upping production as well.
- There is also a nationalistic argument here, with the US pointing to dependence on China as a cause for worry.
- The bill’s summary said: “Only 12% of chips are currently manufactured domestically, compared to 37% in the 1990s, and many foreign competitors, including China, are investing heavily to dominate the industry.”
Why are chips so important?
- They are instrumental in running most electronic devices used in our daily lives.
- Made from materials like silicon that “semi-conduct” electricity, the chips are used in the form of data-storing memory chips, or logic chips that run programs and act as the “brains” of a device.
- The manufacturing of chips requires a lot of precision, as well as investment.
- Additionally, they need very particular conditions, where even small disturbances around or inside the manufacturing unit can interfere with production.
- At the time of the shortage last year, Samsung had warned of a “serious imbalance” in supply and demand globally, leading to a shortfall in the production of electronic goods.
- A Bloomberg report said that some broadband providers were facing delays of more than a year when ordering internet routers.
- Apple said that supply constraints were affecting sales of iPads and Macbooks, leading to billions of dollars lost in revenue.
How china has responded?
- One provision in the bill prohibits any semiconductor company that receives financial assistance through the newly passed CHIPS bill,
- From supporting the manufacture of advanced chips in China.
- Before the bill was passed, Zhao Lijian, a Chinese foreign ministry spokesman said that the US “should not put in place obstacles for normal science, technology and people-to-people exchanges and cooperation”.
- China’s state-run media organisations like the China Daily and Global Times criticised the provision that would punish US companies for dealing with China,
- And accused it of being the “latest representation of Washington’s bid to exclude China from the global supply chains.”
Q) What happens to the resistance of a pure semiconductor when heated?
- The resistance increases
- The resistance decreases
- The temperature remains the same
- All of the above