Why Biden's plan to boost semiconductor chip manufacturing in the U.S. is so critical

If you take stock of all the high-tech gadgets around you right now, including the device you're currently using to read this article, you'll find that they all need semiconductor chips to function.

And most of these chips are not made in the U.S.

The Biden administration wants to change that, with the president signing the CHIPS and Science Act into law this week. It will allocate more than $50 billion to bring semiconductor chip manufacturing to the U.S. and away from its current production hub in East Asia.

Sourabh Gupta is a senior Asia-Pacific policy specialist at the Institute for China-America Studies and joined All Things Considered to discuss what this means for our gadgets, and what it could predict about the future of American tech manufacturing.

This interview has been edited for length and clarity

Interview Highlights

On what would happen if the U.S. lost access to its semiconductor chip imports from Asia

Life would come to a standstill if we don't have the chips, which is like oil — it is the resource that runs our electronics, and effectively that runs our life in many ways. A car has hundreds of chips in it. And we are not talking of the most sophisticated cars. We're not talking electric vehicles. We are talking your average car.

We're talking just television sets — something as straightforward as that. The gamer kids are not going to have much of their entertainment if the chips don't come. What the chips also do is provide the foundation for a lot of innovation, next-generation innovation — what has been dubbed as the fourth industrial revolution.

On whether the CHIPS Act goes far enough to prevent that potential slowdown

It is sufficient. There is a lot of money, and a lot of it is frontloaded — literally $19 billion frontloaded in the next 12 months to support chip manufacturing in the U.S. But we don't need to have all chips or a very significant number of chips made in the U.S.

We just need a certain amount of chips which will not hold the U.S. in a situation of blackmail or in a situation of peril if there is a war in East Asia, or if there are others just general supply chain snafus.

On whether this law effectively shores up the U.S.'s position and curbs China's influence in chip manufacturing

It absolutely does [shore up the U.S.'s position], but it doesn't necessarily curb China's influence. It forces China to be able to come up with greater indigenous innovation to catch up with the U.S. - and its East Asian peers - in terms of chip manufacturing.

East Asian manufacturers are conflicted with regard to the CHIPS Act and having certain disciplines imposed on them in terms of expanding capacity in China. But that having been said, they value the importance of the United States. And so the way they are trying to proceed going forward is asking the U.S. federal government to allow them to continue to produce legacy chips in China — chips which are not cutting-edge -— while they will produce the cutting-edge chips in their home countries and in America so that that technology which goes into cutting-edge chips does not bleed into China and enhance China's productive capabilities in any way.

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