If the Biden administration prevails, many more electronic chips would be produced in factories located in, say, Texas or Arizona.
They would then be shipped to partner countries, such as Costa Rica, Vietnam or Kenya, for final assembly and sent around the world to power everything from refrigerators to supercomputers.
These places may not be the first that come to mind when you think of semiconductors. But administration officials are trying to transform the world’s chip supply chain, and they’re negotiating hard to do it.
Key elements of the plan include convincing foreign companies to invest in U.S. chipmaking and finding other countries to set up factories to do the work. Officials and researchers in Washington call it part of the new “chip diplomacy.”
The Biden administration argues that producing more of the tiny brains of electronics in the United States will help make the country more prosperous and safe. President Biden boasted about his efforts in his interview with ABC News on Friday, in which he said he had persuaded South Korea to invest billions of dollars in chipmaking in the United States.
But a key part of the strategy is unfolding beyond America’s borders, where the administration is seeking to work with partners to ensure that investments in the United States are more durable.
If the nascent effort goes forward, it could help the administration achieve some of its broader strategic goals. It wants to ease security concerns about China, which is ramping up its chip production while threatening Taiwan, a global chip technology hub. And it wants to reduce the risks of disruptions in the chip supply chain, risks that have become apparent during the coronavirus pandemic and the war in Ukraine, both of which have thrown global shipments and production into disarray.
“The goal has been to do our best to expand capacity across a diverse set of countries to make those global supply chains more resilient,” said Ramin Toloui, a Stanford professor who most recently served as assistant secretary of the State Department’s Bureau of Economic and Trade Affairs, which is at the forefront of diplomatic efforts to establish new supply chains.
The administration aims to do that not just for chips, but also for green energy technology like electric vehicle batteries, solar panels and wind turbines. China is by far the biggest player in those sectors.
Mr Biden and his aides say the dominance of Chinese companies is a national security issue as well as a human rights problem, given that some manufacturing takes place in Xinjiang, a region of China where officials force members of some Muslim ethnic groups to work in factories.
In the three years of the Biden administration, the United States has attracted $395 billion in investment in semiconductor manufacturing and $405 billion in green technology and clean energy manufacturing, Toloui said.
Many of the companies investing in this type of manufacturing in the U.S. are based in Asian countries known for their tech industries, such as Japan, South Korea and Taiwan, and in Europe. One is SK Hynix, a South Korean chipmaker that is building a $3.8 billion factory in Indiana. The State Department says the project is the largest investment ever in the state and has the potential to bring more than 1,000 jobs to the region.
Secretary of State Antony J. Blinken mentioned that plan in a speech last month at a conference in Maryland aimed at encouraging foreign investment in the United States. He said he hoped that legislation signed by Mr. Biden would attract foreign investment in U.S. high-tech manufacturing by “modernizing our roads, our railroads, our broadband, our electric grid.”
Policy efforts, he added, aim to “strengthen and diversify supply chains, boost domestic manufacturing, and stimulate key industries of the future, from semiconductors to clean energy.”
The Commerce Department has also played a major role in efforts to strengthen the chip supply chain, providing $50 billion to companies and organizations for chip research, development, and manufacturing.
Commerce Secretary Gina Raimondo has conducted a thorough study of global chip supply chains to identify vulnerabilities and has worked with foreign governments to discuss opportunities for further investment abroad.
The topic was a focus of Ms. Raimondo’s trip to Costa Rica last spring, when she met with local officials and executives from Intel, which operates a factory there. (Mr. Toloui spoke at a semiconductor manufacturing conference in Costa Rica in January.) She also discussed diversifying the semiconductor supply chain during trips to Panama and Thailand.
But reworking global supply chains to be less dependent on East Asia will be a challenge. East Asian chip factories offer more cutting-edge technology, a larger pool of talented engineers, and lower costs than American factories.
Taiwan produces more than 60 percent of the world's chips and nearly all of the most advanced chips used in computers, smartphones and other devices.
By comparison, according to several estimates, the U.S. semiconductor industry could face a shortage of about 90,000 workers in the coming years.
Governments in China, Taiwan, South Korea and other countries are also aggressively subsidizing their own chipmaking industries.
Still, billions of dollars in new U.S. investment are expected to shift global supply chains somewhat. The U.S. share of global chip production is expected to rise to 14 percent by 2032, from 10 percent now, according to a May report from the Semiconductor Industry Association and Boston Consulting Group.
Some administration officials have adopted a more coercive form of chip diplomacy to prevent China from developing versions of American technology. That approach has focused on convincing a handful of countries, notably Japan and the Netherlands, to block companies from selling certain chipmaking tools to China.
Alan Estevez, head of the Commerce Department's office of export controls, visited Japan and the Netherlands last month to try to persuade those countries to block local companies from selling certain advanced technologies to China.
Instead, Mr. Toloui and his aides have been flying around the world to identify countries and companies that might want to invest in American industry and set up factories that would be the end point of the supply chain. Mr. Toloui said his office’s work was part of Mr. Biden’s recent enactment of legislation to create more manufacturing jobs in the United States, including the Infrastructure Act and the CHIPS and Science Act.
The CHIPS Act includes $500 million in annual funding for the administration to create secure supply chains and protect semiconductor technology. The State Department taps into that money to find countries for supply chain development. Officials are organizing studies in a number of countries to see how infrastructure and workforces can be brought up to standards to ensure seamless assembly, packaging and shipping of chips.
Countries that are now part of the program are Costa Rica, Indonesia, Mexico, Panama, the Philippines, and Vietnam. The United States government is bringing Kenya.
Vocational training is a priority in building this supply chain, Mr. Toloui said. He has talked with Arizona State University about partnering with foreign institutions to develop training programs. One such institution is Vietnam National University in Ho Chi Minh City, which he visited in May.
Martijn Rasser, chief executive of Datenna Inc., a China research firm, said this network of alliances represents a strategic advantage for the United States over China.
For the United States, trying to do it all on its own would be too expensive, he said. And doing it alone would fail to acknowledge the reality that the technology is now much more globally distributed than it was a few decades ago, with multiple countries playing important roles in the chip supply chain.