Biden defends US semiconductor subsidies as UK prepares to launch its own plan

Thu 27 Apr 2023
Posted by: Phillip Adnett
Trade News

Semiconductor being handled by gloved scientists

President Joe Biden defended US semiconductor subsidies, by saying that they were not designed to hurt Chinese industry, while UK prime minister Rishi Sunak is preparing to release his long-awaited microchip strategy.

Speaking after a meeting with South Korean president Yoon Suk-yeol in Washington, Biden denied that measures to restrict investments in China placed US allies such as South Korea in a difficult spot, and that both the US and South Korea would benefit from more resilient supply chains.

“It wasn’t designed to hurt China. It was designed … so we didn’t have to worry about whether or not we had access to semiconductors,” he said, pointing out that the US’s historic 40% share of the semiconductor market had sunk to 10%.

The administration’s CHIPS and Science Act is offering huge incentives for semiconductor manufacturing in the US, but it comes with conditions such as sharing excess profits and the prohibition of any significant expansion of operations in China.

Korean concerns

Bloomberg reports that South Korea’s Samsung Electronics and SK Hynix have voiced concerns about the onerous requirements.

However, president Yoon said the two countries had agreed to a dialogue on next-generation technology, including chips and batteries.

The FT has identified more than 75 large-scale manufacturing announcements in the US since the passage of both the CHIPS act and the Inflation Reduction Act, with firms committing roughly $204bn in large-scale projects to boost US semiconductor and clean-tech production as of April 14, while also promising to create at least 82,000 jobs. 

This is almost double the capital spending commitments of 2021 and nearly 20 times the amount in 2019.

UK chips need backing

Meanwhile in the UK, Sunak is preparing to pledge £1bn to the UK’s microchip industry despite calls for more money to match huge investment in the EU and US.

With the deal still to be finalised, sources told Politico that the Department for Science, Innovation and Technology was pushing for higher funding.

As it stands, the deal will reportedly focus more on skills and supply chain resilience rather than on getting into a “subsidy war” with foreign rivals.

City AM reports that the domestic chip industry had urged the government to formulate a unified plan to prevent the UK losing out to rival markets.

British chipmaker, Pragmatic Semiconductor, is considering moving operations overseas if the UK fails to produce a strategy which funds more domestic chip production, Bloomberg reported

Investment campaign

The government is looking to encourage US tech firms to invest in the UK with a new campaign featuring billboards across Silicon Valley.

Including a film narrated by Stephen Fry, the campaign highlights that the UK is the third country in the world to have a trillion dollar tech sector.

Deputy prime minister, Oliver Dowden, said:

“The UK tech sector is a wonderful success story. Only three countries in the world are in the trillion-dollar tech club - and we’re one of them. We’re home to some of the brightest minds and best universities, and our doors are open to any tech entrepreneur who wants to start the next Deepmind or Deliveroo.”