American Chip Manufacturing: New President New Plan?

Tough Things First

The reemerging American semiconductor industry is a little nervous about what President Trump will do regarding the CHIPS and Science Act, but CNBC reports Trump is unlikely to roll it back. In this Tough Things First podcast, Ray Zinn says only a robust American chip sector can thwart Chinese power grab through chip dominance.

---

Rob Artigo:…you ran Micrel as CEO, a semiconductor company, for 37 years. So you have some knowledge of how-

Ray Zinn: In Silicon Valley.

Rob Artigo: In Silicon Valley for 37 years. So this is right in your wheelhouse as far as your interest factor here. But, if you remember it was two years ago, a little bit over two years ago that President Biden signed the CHIPS and Science Act, which was $53 billion in funding to bring semiconductor supply chains back to the US and create jobs to support American innovation and protect our national security. One of those issues was that China made it a goal to have 90-plus percent. I can’t remember what you said the other day, but it was 90 something percent of the chip manufacturing would be on mainland China. 2025, and that apparently hasn’t happened.

Ray Zinn: Well, that’s the reason we were talking about this is because this is the first of the year, we’re into 2025. And it was actually 20 years ago, it was in 2005 China came out with a policy that they would fabricate 95% of all of their chips that they need for their business within China. And at the time in 2005 when they made that comment I remember discussing that with some of my cohorts and I said, the only way that they could do that is if they took over Taiwan. And that shocked me, I mean that they would say that because they’re basically saying we’re going to take Taiwan. Probably within the last five years, that’s all we’ve heard about is China wanting to take over Taiwan. Now they don’t say it’s because of chips, but that’s my understanding and my feeling is that that was the reasoning behind that policy.

If you look at how important semiconductors are, it goes to that CHIP Act that Biden signed, that 53 billion to encourage semiconductor companies to move their manufacturing back into the US. If we look at what prompted that, it is because of China’s view of, even though they haven’t come out and physically said it, taking over Taiwan. One of the most important countries in the world for semiconductor technology and manufacturing is Taiwan. And they produce, I think, somewhere around 20% of all semiconductors are produced in Taiwan. So let’s look at the importance of semiconductors.

Semiconductors are at the heart of electronics, and electronics are at the heart of the consumer economy. They’re in everything, refrigerators, washing machines, things that we’d never thought would need them, even hand mixers and microwaves, almost everything in your home now has electronics and they’re only going to become more important. So go semiconductors, so go electronics. So go electronics so go the world as you would. So the most important item in my mind of GDP growth around the world is semiconductors. And so this is an extremely important item and topic. That’s why Biden pushed this CHIP Act is recognized the importance of semiconductor technology.

Now, our country, the US never dreamed that countries like China would become so dominant in electronics at the time because… When that happened, by the way, let’s look at the time period, we’re talking about the ’90s. So it wasn’t until about 30 or something years ago that China really started eyeballing semiconductor technology. And they bought all the old used equipment, obsolete equipment, and they started putting together and encouraging through financial aid, China encouraged semiconductor manufacturing in China. And so China has been trying to become a Taiwan type country for semiconductors for the past 40 years.

And so that’s why we’re talking about this is to talk about this commitment that China made that by 2025 they would be a dominant player in semiconductor manufacturing. There’s a company in China, mainland China called SMIC, that’s Serum, Mary, India, C for China. I call that semiconductor manufacturing in China, that’s how I denote that acronym of SMIC. So SMIC semiconductors made in China as part probably the most important semiconductor manufacturing company in China, but they haven’t been successful as Taiwan, even though they’ve had access to the same equipment, they’ve had access to the engineering and so forth. They’ve hired a lot of engineers out of the US to go and set up that semiconductor manufacturing company in China. And so China is having a very difficult time succeeding.

So where they wanted 95% production by 2025, they’re only doing about maybe 30 or 40% of their chips that they need are manufactured in China. So they’re way off their goal. And so, that leads me to believe that semiconductor… I mean, that Taiwan is going to be a very important aspect of China’s policy to be more 95% in China, as you would, if they did acquire Taiwan. So that’s just something for us to note here at the beginning of 2025 and to keep our eye on to understand why I believe China is so persistent in wanting to take over Taiwan is because of chips.

So I hope that the Trump administration continues to support chip manufacturing in the US in some way, somehow. We need to make sure that we protect Taiwan and that we also protect semiconductor manufacturing in the US.

Rob Artigo: Yeah. And we could wrap this up just by noting that the story that I’m looking at here, where I got the update on the $53 billion is that, this story from August was saying that 30 billion had been sent to 23 projects in 15 states, which is a lot, and they projected 115,000 manufacturing and construction jobs. But that the rest of the funds would be allocated by the end of 2024. Do you think that with… There’s going to be some DOGE related cost-cutting and things like that in the government, but is this likely to be an area that Trump will see as continuing the opportunity? Because they’re projecting in this story that by 2032 the US would have 30% of the world’s leading-edge chips manufactured here in the US.

Ray Zinn: We want 95% actually here in the US. I’m hoping that somebody in the Trump administration listens to our podcast and understands the importance of supporting the semiconductor technology in the US because the US claims to be the most important economy, the most powerful country in the world, and we’re not going to be if we don’t stay as the most powerful semiconductor company in the world.

So any of you out there listening, make sure you get to your legislative leaders and promote making sure that the US is the dominant player in semiconductor technology in the world. If we do, God willing, we will continue to progress, our GDP will continue to grow. But if we don’t, God help us.

Rob Artigo: Yeah, yeah. I agree. That’s important for people to act and make sure that we financially support these industries because we can create a lot of opportunity that way. Thanks, Ray.

I’m looking at toughthingsfirst.com, that’s the place to go if you want to ask questions of Ray. You want to make some comments there, you can do that. And you can get more information there and you can also comment if you’d like, leave questions, give some feedback for the book, Tough Things First, and the Zen of Zinn series, 1, 2, and 3. You won’t regret it. Thanks, Ray.

Ray Zinn: Thanks, Rob.