Chip industry war: When products as small as nails become a ‘hot spot’ between the world’s two largest economies

Tram Ho

Đại chiến ngành chip: Khi sản phẩm bé bằng móng tay trở thành điểm ‘nóng’ giữa 2 nền kinh tế lớn nhất thế giới - Ảnh 1.

According to Business Insider (BI), the world is “thirst” for electronic chip products. From smartphones to refrigerators in the kitchen, from military missile systems to electric cars all need electronic chips.

Today, every aspect of human life is involved, if not dependent, on this semiconductor industry’s nail-sized product.

That’s important, but electronic chips are not easy to produce, especially modern new chip lines. The industry required massive, sophisticated machinery, precious materials, and an astonishing array of high-level techniques.

That is why the production of electronic chips is currently carried out by a global supply network and only a few corporations hold certain advantages. For example, Taiwan’s TSMC currently controls 90% of hardware production of high-end chips.

Đại chiến ngành chip: Khi sản phẩm bé bằng móng tay trở thành điểm ‘nóng’ giữa 2 nền kinh tế lớn nhất thế giới - Ảnh 2.

With such importance and difficulty to manufacture, it is not surprising that the BI newspaper predicts a chip development race will explode. If it is said that the Cold War is a nuclear arms race between the Soviet Union and the United States, electronic chips may be the starting point for a new race between economic powers.

“Strategists in both Beijing and Washington understand that all modern technologies today, from missiles to military drones to transport equipment, require electronic chips,” said Associate Professor Chris. Miller of Tufts University, and author of “Chip Warfare,” said.

With the complicated developments of the pandemic in China and the current shortage of electronic chip supply, the US has an opportunity to intensify the race in this semiconductor segment. But in reality it is not so easy.

The Heart of Silicon Valley

America’s position in the manufacturing of electronic chips has been eroded over many decades. A report by the American Semiconductor Industry Association (SIA) shows that the US market share of electronic chip manufacturing has dropped from 37% in 1990 to only 12% in 2020.

Faced with this situation, the Washington government did everything to save it to bring the chip factory back to the US. In August 2022, the US Congress passed the “CHIPS Act”, thereby spending up to $ 280 billion in research investment for the semiconductor segment.

Massive investment from the federal to state governments has led many companies to move factories back to the US. For example, Intel, the leading US semiconductor manufacturer, has spent $ 20 billion on the world’s largest chip manufacturing facility project in the state of Ohio. It is expected that this factory will employ at least 3,000 workers after completion in 2025.

“We once helped build Silicon Valley. Now we’re going to make the heart of it,” Intel CEO Pat Gelsinger told Time during the project announcement in January 2022.

Intel looked at 38 different locations across the US before choosing New Albany-Ohio as the location for the new factory. In addition to the fact that there is enough cooling water for chip production, the abundant middle-class labor force is also a reason for this decision.

Besides, the suburbs with the data centers of Amazon, Google and Facebook also make New Albamy more attractive.

Đại chiến ngành chip: Khi sản phẩm bé bằng móng tay trở thành điểm ‘nóng’ giữa 2 nền kinh tế lớn nhất thế giới - Ảnh 3.

US President Joe Biden visits Intel’s world’s largest chip factory project in Ohio

Many research reports show that the new factory will give employees an average salary of 135,000 USD/year, about 70% of the work will be related to engineering, thereby requiring a degree or equivalent qualification.

Of course, this largest private project in Ohio State history received a warm welcome from the local government. Even before the company announced the project, the state of Ohio approved a new budget in June 2021 to attract mega investments.

Then in the fiscal 2022-2023 budget, Ohio continues to have support such as tax incentives, reducing or completely eliminating property taxes for projects worth more than 1 billion USD…

After a week since Intel announced the project, Ohio State continues to announce a support package worth $ 2 billion, the largest support budget in the history of this state. This budget package includes $700 million in highway expansion and infrastructure upgrades, $600 million in investment for Intel’s own project, and $650 million in corporate income tax incentives.

On the part of the New Albany government, this locality has the longest property tax exemption in history with Intel’s project, the term is 30 years. The government here even merged the land of the surrounding town to have enough land to build a factory for Intel.

Challenge

According to BI, the large budget and tax incentives for Intel will force Ohio and New Albany to make other trade-offs due to limited local resources.

In theory, thousands of jobs will be created when Intel’s mega-project is completed because they will bring countless small businesses and taxpayers to Ohio. Many estimates suggest that Intel’s factory can create up to 10,000 local jobs, thereby increasing tax revenue and economic development.

Ironically, Ohio State University research shows that instead of benefiting everyone, this project sucks up limited local resources.

Đại chiến ngành chip: Khi sản phẩm bé bằng móng tay trở thành điểm ‘nóng’ giữa 2 nền kinh tế lớn nhất thế giới - Ảnh 4.

In the years leading up to Intel’s arrival, the state of Ohio was in trouble because residents protested against the local government giving too many incentives to real estate developers.

Reports that the population of downtown Ohio will grow from 2 million in 2010 to 3 million in 2050 have become an excuse for the state government to give tax incentives to real estate businesses.

But with a limited budget, in 2021 alone, schools in this state have lost up to $51 million in tax revenue because of these incentives.

“Incentive programs mostly benefit the rich in the central region, while the budget erodes for nearly 30,000 children, more than half of which are from households with incomes below the poverty line.” Ohio State University’s report states.

With Intel continuing to enjoy a series of large support packages, the problem of housing and public service budget shortages in Ohio becomes even more serious. As a result, protests broke out in 2022 when 4,500 teachers took to the streets in August.

The Ohio teachers union’s first protest since 1975 ended only when the local government pledged concessions.

In addition, the construction of the project by Intel also pushed up real estate prices in Columbus-New Albany, Ohio. The rent for a one-bedroom apartment here has increased from $600 in 2015 to $1,000 in 2023.

As a reminder, for construction, Intel will need to use 7,000 construction workers and then 3,000 factory workers.

Lack of water

Ohio is not the only place receiving the project to build an electronic chip factory. Thanks to the CHIPS Act support budget, New Yorks, Texas or the city of Phoenix-Arizona also receive similar projects.

However, to produce chips, factories will need millions of gallons of water every day, and in places like Arizona, this is a huge challenge.

Đại chiến ngành chip: Khi sản phẩm bé bằng móng tay trở thành điểm ‘nóng’ giữa 2 nền kinh tế lớn nhất thế giới - Ảnh 5.

However, Intel said it employed more than 10,000 people and contributed $3.9 billion to Arizona’s GDP in 2019. Regarding water, the company said that 80% of the plant’s water in 2020 comes from recycling, thereby reducing the amount of water used by the common pipe.

So instead of using 14 million gallons of water per day, Intel’s plant only costs about 2.8 million gallons (1 gallon = 0.0037 m3).

In another aspect, the BI newspaper said that even if the electronic chip factories are built, the US still does not have many advantages. Assembly and packaging will still be completed overseas, not the US.

Even with key manufacturing technologies, the US is still lagging behind next-generation chip manufacturers in Asia. Not to mention other manufacturers also poured billions of dollars to continue to develop in this electronic chip race.

*Source: BI

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