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Policymakers aim to boost US semiconductor chips, critical tech industries

U.S. Rep. Ro Khanna, D-Calif., fourth from left, speaks during a news conference outside the U.S. Capitol Oct. 20, 2021, n Washington. Khanna’s said his version of the Endless Frontier Act could get a vote in the House in January as lawmakers seek to protect the nation’s supply of critical semiconductor computer  chips. (Photo by Alex W...

A House bill that would boost research for critical technologies and industries may get a vote early next year while members of the Biden administration are stumping for the inclusion of legislation that would pump billions of dollars into domestic production of vital semiconductor computer chips.

The U.S. Senate passed the United States Innovation and Competition Act in June, but a House version has yet to move out of committee since initially being referred in April. This week, the chief sponsor of the House bill, Rep. Ro Khanna, D-Calif., said he has been told by congressional leadership that they intend to bring the measure to a vote sometime in January.

“Candidly, it should have passed the House a while back, we’ve been pushing on it and it’s been too slow,” Khanna said during a Dec. 7 virtual event hosted by the Silverado Policy Accelerator. “We finally have a commitment to get it out the House in January, and then it will go to conference.”

Like the Senate version, Khanna’s bill would establish a new directorate at the National Science Foundation to conduct research on emerging technologies like artificial intelligence, advanced manufacturing and high-performance computing. It would also task the White House Office of Science and Technology Policy with developing a strategy for improving U.S. industry competitiveness for technologies that relate to U.S. national security.

During the same event, Rep. Mike Gallagher, R-Wis., who also sits on the House Armed Services Committee and focuses on national and cybersecurity issues, said he believed the House version of the Endless Frontier Act may have been delayed due to jurisdictional turf wars among different committees, a common issue in cyber policy.

He warned that given the tight schedule lawmakers are working with, there may not be a lot of time for lengthy negotiations between the House and Senate.

“I think there are many — myself included — that are of the mind that just given the nature of the congressional calendar, given how closely divided it is, the wisest course of action would be taking what the Senate was able to pass and passing that throughout the House, perhaps with a debate about inserting some guardrails in there or shoring up a few issues,” Gallagher said.

Meanwhile that same day, Secretary of Homeland Security Alejandro Mayorkas called for Congress to pass the CHIPS for America Act, which was included in the bill that passed the Senate and would create a new $52 billion pot of federal funding assistance to entice companies that research, design and manufacture such computer processor chips to set up domestic facilities in the United States.

“Semiconductors are vital to our economy and critical infrastructure, but we rely heavily on foreign manufacturers for our own supply. I urge Congress to pass the CHIPS Act as a part of the USICA legislation to boost domestic semiconductor research, design, and manufacturing,” Mayorkas posted on Twitter Tuesday.

For years, policymakers have fretted about potential disparities in the semiconductor supply chain, but a global shortage of processor chips over the past year has highlighted just how dependent many industries, products and services are on the technology, as everything from computers and smartphones to cars and new PlayStation 5s have had to slow production well below demand.

Like many countries, the U.S. has not invested in domestic manufacturing of such chips, preferring to rely on manufacturers in Taiwan and other countries. Now, it’s clear that beyond cybersecurity concerns, this approach can leave the U.S. and other countries in a weak position during times of significant supply chain disruption.  

Additionally, a long-simmering territorial and sovereignty dispute between China and Taiwan have given rise to concerns in some national security circles about the potential for a future Chinese invasion. Apart from the massive potential for damage and loss of life, it would also have serious ramifications for the global semiconductor industry.

Taiwan is the world’s leading manufacturer of computer processing chips, accounting for more than 60% of the $83.5 billion global foundry market. Much of that comes from a single business, Taiwan Semiconductor Manufacturing Company, which accounted for 54% of total foundry revenue last year and is relied on by U.S. tech behemoths like Apple, Qualcomm and others.

China is the world's dominant provider of rare metals and minerals — vital components to the production of most modern technologies, including computer chips. Such minerals are actually prevalent around the world, but China is one of the only countries that has built a robust industrial production base to process and refine those materials.

Gallagher said he worries that geopolitical rivals like China could take more concerted and purposeful steps to choke off the U.S. from processor chips and other technologies in the future.

“I view ensuring access to semiconductors really as a matter of national sovereignty at this point, because without them any country could functionally be held hostage, and certainly the Chinese understand this right now.”

The U.S. has made its own plays to freeze out Chinese technology companies and industries, who American officials say are quasi-legally obligated to assist the Chinese government in national security matters and represent a potential cybersecurity risk for other countries.

As semiconductor experts Tery Daly and Jordan Schneider noted in Lawfare earlier this year, both the Trump and Biden administrations have leveraged U.S. economic and security sanctions to cut off Chinese companies from the global semiconductor market. These tools include “tariffs, increasingly restrictive approvals of mergers and acquisitions, joint ventures and export licenses for advanced technologies, the expansion of the Denied Persons List, and the enactment of the Foreign-Produced Direct Product Rule” as well as crusades against individual companies like Huawei.

The U.S. does hold some valuable cards in the debate: it has a strong domestic base for research and development and is “the dominant producer of electronic design automation software, and the United States and the United Kingdom are dominant producers of core intellectual property” that are used to program such chips, according to the Center for Security and Emerging Technologies.

For his part, Khanna is skeptical that China’s authoritarian government is capable of providing enough space for domestic industries to out-innovate its rivals over the long term.

“For anyone who thinks China is going to outstrip the U.S. in competition, in innovation, I have one question: Where is Jack Ma?” Khanna said, referencing the Chinese business magnate and former head of ecommerce giant Alibaba who appeared to disappear from public view shortly after he gave a speech last year that criticized Chinese regulators.

Khanna’s bill is just one of several ongoing discussions taking place in Washington to augment the security and reliability of critical domestic technology industries. Recently, the National Counterintelligence and Security Center listed semiconductor chips as one of five national security technologies that are key to future U.S. industry dominance, citing China and Russia as primary competitors.

Meanwhile, Rep. Jim Langevin told SC Media last week that one of his top priorities for the upcoming national defense authorization bill is including legislative language to establish critical technology security centers focused on industrial control systems, telecommunications and networking equipment, open source software and “critical” federal software like the kind necessary to fulfill President Joe Biden’s cybersecurity executive order.

"Basically the [centers] would, as I envisioned, provide the U.S. government with the capacity to test the security of technologies underpinning national critical functions … the government would have trusted, centralized entities that are focused on security testing and in some cases vulnerability management,” said the Rhode Island Democrat.

Derek B. Johnson

Derek is a senior editor and reporter at SC Media, where he has spent the past three years providing award-winning coverage of cybersecurity news across the public and private sectors. Prior to that, he was a senior reporter covering cybersecurity policy at Federal Computer Week. Derek has a bachelor’s degree in print journalism from Hofstra University in New York and a master’s degree in public policy from George Mason University in Virginia.

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