Yellen Pushes To End American Dependence On China For Computer Chips
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Treasury Secretary Janet Yellen said on Monday that she is working to reduce American dependence on the Chinese supply chain for semiconductors.

Yellen is meeting with Asian allies in an effort to “friend-shore” trade ties with trusted economic partners, according to Reuters. In an interview with the outlet, Yellen said that the U.S. has “real concerns with respect to China” and its willingness to threaten exports of manufactured goods bound for other countries.

“Resilient supply chains mean a diversity of sources of supply and eliminating to the extent we can the possibility that geopolitical rivals will be able to manipulate us and threaten our security,” Yellen explained. Although U.S.-China trade relations are not “totally negative or escalating into tremendously hostile territory,” Yellen noted that the communist nation has “used coercion to pressure a number of countries whose behavior they have disapproved of” — including Japan, Australia, and Lithuania.

Taiwan, China, South Korea, and Japan maintain nearly 80% of global semiconductor manufacturing capacity, according to the Brookings Institution, with Taiwanese companies like TSMC producing over 90% of cutting-edge chips smaller than 10 nanometers — the class of chips used in cell phones and computers.

Yellen — who plans to tour facilities run by South Korean consumer electronics company LG during her visit — remarked that the nation has “tremendous strengths in terms of resources, technology, abilities” and a “substantial capacity to produce advanced semiconductors.”

Many Asian economies enacted harsh lockdown measures in response to COVID, causing bottlenecks in the global semiconductor supply chain. Some automotive companies, for example, have been forced to limit or pause production, worsening inflationary pressures as vehicle prices surge at the highest rate in decades. According to the most recent Consumer Price Index (CPI) report from the U.S. Bureau of Labor Statistics, new and used vehicles are 11.4% and 7.1% more expensive since June 2021, respectively.

Lawmakers have proposed the $52 billion CHIPS for America Act — but because the funding has not yet reached chipmakers, companies such as Intel, TSMC, and GlobalFoundries recently issued “public warnings” that they might “scale back their plans to make semiconductors” in the United States, according to the U.S. Department of Commerce.

Intel CEO Pat Gelsinger said at a recent panel event that his firm could increase chip production in Europe due to legislative delays in the U.S. “The rest of the world is moving rapidly despite the inability of Congress to get this finished,” he remarked, noting that Asian countries are also passing new incentives.

The U.S. represents 12% of global semiconductor manufacturing and 25% of global semiconductor demand, according to Radford University management professor Zachary Collier.

In reaction to high inflation, National Economic Council Director Brian Deese said on CNBC last week that the U.S. can address the cost pressures by passing new incentives for the semiconductor industry. Yet the official was pressed on the notion that higher spending is a sustainable answer to the record inflation, which follows $6 trillion in federal stimulus packages enacted in response to COVID.

“I think you have to look at the unique situation that we’re in as an economy and think about how do we build more supply, how do we increase the productive capacity of our economy, so that we actually can supply more goods, bring prices down,” said Deese, who formerly worked as a senior adviser to President Barack Obama. “We know the answer on semiconductors exactly. We need more supply of those goods.”

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