U.S. and China Strengthen Semiconductor Investments for Military Power

The U.S. invested approx. $4B in Intel’s military chip facilities
The U.S. says, “Let’s reduce dependence on Asia, including Taiwan
China invested $5.3B in a new memory company
Responding to U.S. regulations by strengthening capabilities

As semiconductors become a lever of geopolitical power and military strength, the United States and China ramp up investments to ensure their semiconductor industries’ independence. The U.S. government is expected to provide over $4.4 billion in grants to Intel to build military semiconductor production facilities at Intel’s Arizona plant. China, facing U.S. regulations such as restrictions on semiconductor technology exports, is investing $6.2 billion in a new memory chip company to achieve technological independence.

◇ U.S. Supports Intel with Semiconductor Support Act Budget to Lower Semiconductor Import Dependence

The U.S. government plans to use a portion of the Semiconductor Support Act (CHIPS Act) budget to build military semiconductor production facilities. The location of the facilities and the scale of the grant have not been publicly announced. Still, the Wall Street Journal (WSJ) cited sources saying the Biden administration would spend up to $4 billion to build a military semiconductor production facility at Intel’s Arizona plant site.

The U.S. has previously encouraged global companies to invest in the U.S. through the Semiconductor Support Act. Still, the reality is that the budget is being used to support domestic companies, reduce dependence on semiconductors from East Asia, and establish a self-sufficient system. The WSJ analyzed, “Advanced military semiconductor chips are essential in the manufacturing process of missiles and fighter jets, as well as in artificial intelligence (AI) and cyber warfare. The government’s plan to build military semiconductor facilities shows the White House’s intention to secure semiconductor chips needed for military power.” Earlier this year, Gina Raimondo, the U.S. Secretary of Commerce, also stated about the Semiconductor Support Act, “Investing in the stability of domestic semiconductor chip supply is investing in national security.” However, some of Intel’s competitors and Senators are concerned about the government investing a large amount of grant money in a single company like Intel. According to the WSJ, three Senators argued in a letter to Secretary Raimondo that “if a single company is given all the grant money and entrusted with defense facilities, investment in other companies that build the defense industry base will be limited.”

◇China Invests $6.2 Billion in New Memory Chip Company

The Chinese government is rolling up its sleeves to strengthen its capabilities in response to U.S. regulations, striving for semiconductor technology independence. According to a Bloomberg report, the Chinese government has decided to invest $6.2 billion in a new memory chip company, ‘Changxin Xinchao Technology,’ which opened in 2021. The ‘Big Fund,’ China’s representative semiconductor investment fund, and investors linked to the government of Hefei City in Anhui Province provided the funds. The Big Fund’s investment, which had been faltering due to the involvement of fund managers in corruption, has been gradually increasing this year.

Bloomberg analyzed, “The Chinese government’s massive investment in Changxin Xinchao shows that China is striving to achieve semiconductor technology independence and create a breakthrough against U.S. sanctions targeting the country.” Although Changxin Xinchao is a startup, it shares some shareholders with Changxin Memory Technologies (CXMT), a major Chinese DRAM semiconductor company. CXMT, which is aiming to compete with global companies such as Micron and Samsung Electronics and is pushing for an IPO, was added to the U.S. export control list last October.

By. Baek Joo Yeon