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Updated: October 28, 2022 @ 8:17 pm
Ed Adamczyk
Ed Adamczyk
Let’s see, the Biden Administration, not quite two years old. It has heavily armed Ukraine, keeping NATO forces, including U.S. soldiers, out of the conflict but providing adequate firepower to put incompetently-trained and –led Russian soldiers at a disadvantage. Billions spent on that one.
It has moved the United States on the path to pandemic relief, replacing sunny-skies lies that trivialized the issue until over one million Americans died, with hard-headed urgency and a massive rollout of vaccines. The two relief checks cost billions but got the economy back on track, likely causing a run-up of inflation, but hey, other countries have it worse. Inflation is a global thing.
Here’s the one I like: a squelching of China’s access to microchip technology with aggressive Commerce Department limitations announced earlier this month. It means, in total, that China has to build its own damned microchips, tiny electrical processors – some are half the size of a virus — used in military equipment, spyware and satellites – as well as calculators, coffee makers and cellphones – instead of relying on anyone not in China for any step in the chipmaking process.
I am no expert on microchips but I know that the industry is horizontally integrated, which means that people in businesses all over the world conspire to design, test and make these ridiculously tiny processors. The opposite is vertically integrated, the way Henry Ford ran things: he owned the car factories, as well as the steel companies, as well as the iron ore companies from which steel was made. Only five places on earth make the machinery to make microchips; three are in California – Japan and the Netherlands are the others — and the time between order and delivery is measured in years. Their cost is measured in hundreds of millions of dollars. The global brainpower behind designing and then manufacturing them is staggering. The President’s executive order, launching the CHIPS and Science Act of 2022, essentially says that if you do any microchip business with China – from any country, friend or foe – you are no longer doing business in or
with the United States.
Think of it! as Groucho Marx would say. China has been cut off from anything not designed in, thought about, organized or manufactured in China. It also means more microchip work in the United States but that’s practically an afterthought for anyone not part of the Biden Administration, although Mr. Biden also crowed about a $20 billion federal investment in microchip technology when he visited the IBM headquarters in Poughkeepsie, N.Y., a few weeks ago.
“Semiconductors are one of the few sectors for which China still depends on the rest of the world,” Fahrad Manjoo wrote in the New York Times last week, noting that China spends more on those things than on oil. The legislation will strangle China’s capability of building – well, all those things with a microchip in them, notably military and intelligence hardware.
Microchips are ubiquitous to the point we rarely think of them, so the more I researched the issue the more impressed I am with the way the United States, and notably a bipartisan effort in Congress, put this out there. It’s the business and diplomatic equivalent of firing a naval missile which wipes out an enemy’s electrical grid.
It gets better. The United States may not have a monopoly on chipmaking, but it makes several models of the machines which make them that are not made elsewhere. So if you sit there in Israel, Iran or Uruguay and build some Chinese-designed chips for the Chinese market, you lose access to U.S.-made chip making machines. So there.
Man, this law has some chutzpah behind it! While not the sexiest or most explosive news story of the month, I suspect it will have an effect long after we’ve forgotten about Liz Truss, the playoff loss by the New York Yankees or the actions of whatever Kanye West calls himself these days.
When you start a car, fire a missile or light up the computer to interface with a satellite, you typically spend zero time thinking about who made the electrical components or where the factory is. Starting now, if you’re in China, the answer will be China, and analysts believe they’re decades behind the curve of technology in that category.
It seems to be a net gain for the United States, all because members of Congress identified it as a Good Thing, as Martha Stewart would say, without endangering U.S. troops, and the White House had the fortitude to stick it to China without anything exploding. I call it the story of the year, although the less said about it, perhaps the better.
Contact Ed Adamczyk at EdinKenmore@gmail.com.
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