Lest you take it for a joke, here’s a link to the page in the U.S. Senate website saying the CHIPS Act was named after Creating Helpful Incentives for the Production of Semiconductors (CHIPS) in America. Yet it was still a shock when the U.S. Commerce Department barred U.S. persons, including American companies, citizens, and residents from working in semiconductors in China.
The Wall Street Journal searched the boards of listed Chinese semiconductor companies and found 43 U.S. persons, “from chief executive to vice president and chairman.” They will now have to choose between their jobs and the passports connecting them to their lives in the U.S.
It’s a serious issue for western suppliers of chip makers too. Chip lithographer maker ASML, a Dutch company, sent an email to his American employees telling them to stop all work for customers in mainland China because of the sanctions. ASML fabrication machines are the only ones to produce the most advanced chips, in five nanometers or less, so their business still looks strong despite the new limitations. Its American competitors are more impacted, and not just by the sanctions.
American chip fabrication supplier Lam Research said they expect a 20 percent drop in the market next year because of reduced demand for electronics. It was the clearest forecast yet of a downswing in the giant chip cycle that started with the pandemic, says the WSJ.
That’s how chip maker suppliers are computing the news. Chip makers themselves also see the market going down, but some of them plan to continue investing anyway to gain share in the most profitable segments. For example, Samsung expects a 15 or 20 percent drop in the price of memory chips, a saturated segment, so it is planning to expand its advanced offerings to better compete against TSMC, the leading advanced chip maker for Apple and other top consumer brands.
Despite softer sales of computers and phones this year, TSMC has also confirmed new investment plans. It’s building manufacturing plants in Japan to hedge against geopolitical risk in its home base in Taiwan. It had previously announced new manufacturing plants in the U.S. too.
The U.S. government is not waiting for the market to bring the semiconductor industry back to America either. Following the CHIPS Act, President Biden has announced new investments with IBM and is headed to Syracuse, NY on October 27th to visit the site of a new $100-billion plant from Micron.
Ronnie Chatterji, who is coordinating the deployment of the CHIPS Act at the U.S. government, told NPR that “one-third of the inflation increase in 2021 was because of cars … We couldn’t get the chips we needed to build the cars. And when you can’t get the chips you need to build the cars, workers get furloughed and prices go up.”
On top of the economy, chips are also important for defense, and media is already talking about “the chip wars.” It’s tempting to blame the U.S. government for intervening in an industry that moves so fast, but to be fair the Chinese government is also handicapping the technology industry for its own reasons of national interest. In any case, so much government attention could trip off the wonder circuit of global logistics that for years sent the latest consumer electronics from China to your door in the U.S. The act has a comic name, but the play could be a tragedy.
You Just Got a New Computer Anyway
One reason why chip makers are readjusting: personal computer sales are down almost 20 percent year over year in the last quarter, its sharpest drop in twenty years, says Verb’s latest report. A lot of people and companies bought new computers during the pandemic and seem to be sticking with them for now. Intel seems to be the chipmaker hardest hit by the news.
Microsoft Offers New Microchip
“They wouldn’t let me bring a leaf blower in here, so I brought a hair dryer instead. With Voice Focus turned on, you can’t hear it,” says Microsoft Technical Fellow Steven Bathiche as he dries his hair on camera to show off the capabilities of a new computer equipped with the Microsoft SQ3 chip, which can filter out any kind of background noise from your live video calls.
Surface Pro 9 computers using the new chip can also reframe your live video feed so that you’re always at the center and highlight your eyes, over 5G, while offering more battery life than models without these capabilities. The reason is that the SQ3 can run trillions of operations per second using “just a few watts of electricity,” explains Bathiche. We checked and the SQ3 is a five-nanometer chip, the first to run Windows as far as we know. Perhaps you do need a new computer.