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How the new CHIPS Act could ease supply constraints

LEILA FADEL, HOST:

For most of us, it required a global supply chain disruption to realize that semiconductors power nearly everything. From cellphones to cars, to refrigerators, small silicon transistors keep the global economy running. But Taiwan, China and South Korea dominate manufacturing of the most advanced microchips. So Congress recently passed the $260 billion CHIPS and Science Act, with more than $50 billion to build new manufacturing facilities called fabs. I spoke with research analyst Will Hunt of Georgetown University's Center for Security and Emerging Technology about the U.S. dependency on tech from abroad and how that relates to the tensions between China and Taiwan.

WILL HUNT: The most urgent threat that needs to be addressed with the CHIPS and Science Act funding is the possibility of a Chinese invasion of Taiwan. If China were to invade Taiwan tomorrow, the U.S. and the world, really, would lose access to 85% of all leading-edge microprocessors, about two-thirds of more mature microprocessors and also about half of all DRAM chips, which are one of the two major types of memory chips. So those are the chips that go into, basically, all electronics, you know, everything from smartphones to weapons systems to supercomputers.

And it's sort of hard to wrap your head around the economic and security implications of, you know, a potential Chinese invasion because we would simultaneously be facing a major foreign policy crisis. There would be shortages in the chips that are powering, you know, intelligence and military applications, as well as critical infrastructure. And there would be a global and domestic economic crisis...

FADEL: Wow.

HUNT: ...Which could dwarf the current chip shortage in terms of its economic impacts.

FADEL: You know, it's interesting because we're seeing the impact of the grain shortage with Russia's invasion of Ukraine and the disastrous effects it has on global food supplies. And so this really would be the tech equivalent if we saw some type of disruption when it comes to the chips in Taiwan and that manufacturing.

HUNT: That's right. And I think it's even, unfortunately, potentially, much more dire (laughter). The recent semiconductor shortage that we've seen has been driven by just a sudden increase in demand, which is comparatively mild, actually. Whereas what we're talking about is losing large chunks of the leading-edge chips that really power the whole global economy. So it's - modeling the potential impacts is an incredibly uncertain business. But you can easily end up with, you know, trillions of dollars of the economy impacted.

FADEL: What would that look like?

HUNT: It's really difficult to even imagine. But certainly, it would impact leading-edge research that's being done on large supercomputers or just data centers. And then there are all sorts of downstream industries that rely on chips. And it's not all leading-edge chips as well. I mean, it's things like cars. Of course, we've seen the price of cars skyrocket, especially used cars. An increasing proportion of the value of cars comes from semiconductors, mostly not leading-edge. Even the trailing-edge chips are substantially concentrated in Taiwan and China. So it would be an economy-wide impact.

FADEL: It feels so massive, though. And this - and these escalating tensions are happening right now. Is the CHIPS Act something that actually is a solution here?

HUNT: I think it's certainly an important and historic part of a potential solution. It's the beginning. So passing the CHIPS and Science Act is certainly a first step. And then the next steps that are needed - I mean, you need to, first of all, make sure that the funding goes to the right places. So semiconductor fabrication facilities cost huge amounts of money. So if you're not building the right kinds of facilities in the United States, then you might not actually be creating more resilience to these kinds of worst-case scenarios.

Then you also have to make sure that you're working with allies to also make sure that they're mitigating against these risks. And then you need to make sure that, you know, structural issues are addressed, so things like high-skilled STEM talent being able to come to the United States from abroad and stay, things like streamlining permitting processes for building fabs. It takes longer to build fabs in the United States than it does in other countries, just largely because of permitting issues. So making sure that it's possible to build fabs on a reasonable timeline, I think those are some of the things that...

FADEL: Yeah.

HUNT: ...We need to prioritize going forward. But it certainly has a real potential to make a difference if we play our cards right.

FADEL: Will Hunt, thank you so much for your time.

HUNT: Thank you very much. Transcript provided by NPR, Copyright NPR.