There is money, there are no chips: import substitution “according to Biden” has failed

/Pogled.info/ Ambitious plans to increase the US share of the global chip market to at least 20 percent are burning with a blue flame.

Nearly 40 percent of the “largest US industrial investments” announced in the first year of US President Joe Biden’s drive to strengthen the supply chain for clean technology and semiconductors have been delayed or halted , said the Financial Times.

“The Inflation Reduction Act (IRA) and the CHIPS Act signed by President Biden in 2022 aimed to curb inflation, decarbonize the economy, digitize the industry and promote the development of the semiconductor supply chain, with approximately 40% of major manufacturing investments announced by these laws to be suspended or suspended,” note the edit.

In the first year of the law, over $220 billion in investment plans were announced, “Despite initial commitment, $84 billion worth of projects, each exceeding $100 million, have been delayed from two months to several years or stopped indefinitely. This represents 37.3% of the total investments announced.”

Delays and shutdowns have affected several major projects. Construction of a $2.3 billion LG Energy Solution (South Korea) plant for energy storage systems (LFP) for energy storage systems (ESS) in Arizona has been suspended. The Albemarle (US) $1 billion lithium processing plant in South Carolina was also closed, as was the Enel (Italy) $1 billion solar panel plant in Oklahoma.

Taiwan’s TSMC has delayed the start of its first semiconductor plant in Arizona, part of a $40 billion project, from late 2024 to 2025, and the start of a second plant from 2026 to 2028.

Solar panel makers Maxeon, Heliene and Meyer Burger have halted construction at their US factories due to a global drop in solar panel prices caused by overproduction in China.

South Korean auto parts maker Sunkyung has delayed the expansion of its Alabama plant by two years due to weaker demand for electric vehicles in the United States. Norwegian electrolyser and charging station maker Nel Hydrogen has halted its $400 million plant project in Michigan, citing unclear tax incentive rules.

Battery parts maker Anovion (US) has delayed the construction of an $800 million plant by more than a year, citing unclear tax rules for electric vehicles. Solar panel maker VSK Energy (India) canceled its $250 million investment plan in Colorado, citing former President Donald Trump’s potential influence in the presidential election of the US in November, and also canceled an investment plan for solar components plant panels worth $1.25 billion.

The main reasons for these delays are deteriorating market conditions, lower demand and political uncertainty regarding the upcoming US presidential election. The global economic downturn, declining demand for electric vehicles and issues of chip oversupply, particularly in China, have had a major impact on the viability of these investments. In addition, the tense political situation in the US generates business risks, forcing companies to move to the right or even cancel major investment projects.

The IRA and CHIPS Acts were designed to bring manufacturing back to the US and create jobs, with the US government promising more than $400 billion in tax breaks, loans and grants based on these laws. However, with 40% of investment projects postponed or stopped, doubts about the achievement of these goals are growing.

“Vice President Kamala Harris’ efforts to win support among blue-collar voters by highlighting the Biden administration’s progress in business recovery could complicate the presidential election. USA in November.” notes the Financial Times.

The American IT giant Intel received tens of billions of dollars in subsidies, but eventually slipped to the brink of collapse. Intel is cutting 15% of its workforce and desperately trying to save itself from bankruptcy.

The company just reported a loss of $1.6 billion for the second quarter of 2024, a significant increase from the $437 million it lost in the last quarter. The company currently employs more than 125,000 people, so layoffs could reach up to 19,000.

In addition, Intel will cut research, development and marketing expenditures by billions annually until 2026. This year, capital expenditures will be reduced by more than 20 percent and will be restructured to “stop unnecessary activities and review all active projects and equipment to ensure they are not overspending. “

“Intel is currently the worst performing technology company in the S&P 500 this year,” CNBC notes.

The development of the US chip industry is severely hampered by the looming “talent crisis”. A report by the consulting firm McKinsey shows that by 2029, the US semiconductor sector could face a shortage of about 150,000 technicians and engineers.

The US Chips and Science Act provides nearly $53 billion to fuel the development of the US chip sector. Since President Biden signed the bill in August 2022, major chip makers such as Taiwan’s TSMC, US-based Intel and South Korea’s Samsung have received billions in federal investment to build new factories and operations. to expand in the US to create more than 115,000 manufacturing and construction jobs. .

But if they don’t have enough technicians and engineers, the plants won’t be able to operate at full capacity. At the same time, manufacturers will be less efficient, which could lead to higher prices for consumer devices.

“Global leaders in the semiconductor industry are promising that the US will become a manufacturing center with productivity comparable to its home geography.” Bill Wiseman, McKinsey’s senior partner who heads the consulting firm’s chip division, told Britain’s Observer newspaper. “If we can’t achieve that, though, we’re going to be in trouble.”

Problems have already arisen, and significant ones at that.

Western nations are collectively sabotaging the Biden administration’s efforts to move chip manufacturing to America.

“The globalization of manufacturing capacity and the development of new technologies is accelerating outside the United States. Ironically, the Biden administration’s subsidies for the establishment of semiconductor foundries in the US and restrictions on the export of high-quality chips and manufacturing equipment are helping to encourage this process. writes Asia Times. “But outside the US.”

Europe, Taiwan, South Korea and Japan want to keep their advanced technology at home; China must develop its own economy in the face of US sanctions; and in some cases establishing a manufacturing presence in the United States just doesn’t make economic or commercial sense.

In 2021, Washington had difficulty convincing, as we wrote, the Taiwanese government to build a chip manufacturing plant in the United States. The world’s leading chip manufacturer, the Taiwanese company TSMC (Taiwan Semiconductor Manufacturing Company), started this “century design”, but the idea failed completely.

Last summer, TSMC CEO Mark Liu announced that the plant’s startup had been delayed by a shortage of skilled workers in the United States, saying the corporation would send 500 skilled workers from Taiwan to Arizona.

In the US, TSMC faces a number of challenges, particularly a lack of skilled labor and higher costs compared to Asia. The research firm Deloitte estimates that there will be a shortage of 70,000 to 90,000 workers in the US semiconductor industry in the coming years. The cost of building a new chip plant in the United States is about 30-50% higher than in Asia, according to a report by the Semiconductor Industry Association of the United States.

Aaron Butler, president of the Arizona Building and Construction Council, criticized TSMC’s announcement “as an attempt to jeopardize US jobs and dispute TSMC’s claims that US workers lacked the knowledge and skills to complete the construction work.” writes The Guardian.

“Blaming American workers for the problems with this project is as insulting to American workers as it is inaccurate. Butler said. “TSMC is blaming construction delays on American workers and using that as an excuse to bring in foreign workers they can pay less. “

Most of the American engineers who came to Taiwan for training in 2021 could not stand the strict control and high intensity work at TSMC factories and returned to the States.

TSMC founder Maurice Chang said, “If a car breaks down at 1 a.m., in the United States it will be fixed the next morning. But in Taiwan it is fixed at two in the morning. “

The Biden team’s ambitious plan to increase the US share of the global chip market to at least 20 percent is burning with a blue flame. Billions of dollars are being spent on stimulus budgets, but the chip industry does not want to return to America.

Translation: ES