US semiconductor dependence: Ticking time bomb for national security

An article from The Defense Post presents a compelling analysis of America's dependence on foreign semiconductor manufacturing and the potential risks this poses to national security. The central thesis emphasizes the critical need for the US to bolster its domestic semiconductor manufacturing capacity, arguing that this is essential not only for economic growth but also for safeguarding American defence and technological advancement.

The piece begins by framing the current global instability—highlighting escalating conflicts in the Middle East, the ongoing war in Ukraine, and China's aggressive moves regarding Taiwan—as a backdrop to the US vulnerability due to its dependence on foreign semiconductor manufacturers.

The analysis suggests that long-standing assumptions about global stability, especially regarding supply chains, can no longer be taken for granted. The growing geopolitical tensions increase the risks of supply chain disruptions, especially when essential technologies like semiconductors are involved.

The article stresses that semiconductors are integral to modern technologies, from military systems to consumer electronics. With advancements in artificial intelligence, remote work, and telehealth driving demand, the US is more reliant on foreign manufacturers than ever before.

The supply chain has been tested in recent years by disruptions like the COVID-19 pandemic and natural disasters, and the US now imports most of its semiconductors from countries like Taiwan, Malaysia, and China. The piece underscores the danger of this dependence, with Taiwan Semiconductor Manufacturing Company (TSMC) controlling a significant portion (68 per cent) of the global market.

The author warns that this reliance is risky, especially as geopolitical tensions rise. The longer the US delays bringing semiconductor manufacturing home, the greater the likelihood of severe consequences should a major disruption occur. The opinion piece positions the situation as a national security threat, particularly given that semiconductors are integral to defense systems and other sensitive technologies.

A significant portion of the piece focuses on the potential economic benefits of increasing domestic semiconductor manufacturing. The analysis points out that such investments could create jobs, foster innovation, and decrease reliance on foreign suppliers, which would benefit US defence capabilities and technological advancement.

The US already holds a significant portion (about 50 per cent) of the global semiconductor market, directly employing over 338,000 people and supporting nearly 2 million other jobs. The piece argues that expanding the industry, particularly by leveraging regional markets, could bring even more economic growth and job creation.

The CHIPS and Science Act of 2022 is highlighted as a key step in this direction. It has already sparked significant investment ($450 billion) and created tens of thousands of jobs, reinforcing the argument that policy intervention can have a substantial positive impact on the semiconductor sector. The article suggests that such investments not only address national security concerns but also support broader economic resilience and technological advancement.

The piece further calls for policies that support small businesses and startups, which could help diversify the semiconductor sector and drive innovation. Streamlining procurement processes and reducing regulatory burdens are essential to ensure that small businesses can scale up and become integral parts of the broader semiconductor ecosystem.

The article suggests revising federal procurement regulations, particularly the Federal Acquisition Regulation (FAR 19.502-6), to prioritize small businesses specializing in microelectronics and integrated circuits. By doing so, the US could expand its pool of subcontractors, supporting both large prime contractors and smaller players in the industry.

Additionally, the article emphasizes the importance of Section 8(a) contracts, which provide opportunities for small and emerging companies to partner with the government in developing novel semiconductor technologies.

The concluding message of the opinion piece is a call to action, urging Congress to act swiftly in fostering semiconductor design and production within the US rather than waiting for a crisis. The article contends that the risks of continued dependence on foreign manufacturers are too great, and action must be taken now to mitigate those risks.

By supporting policies like the CHIPS and Science Act, Congress can continue to foster investment and innovation in the semiconductor sector, ultimately strengthening the US economy and national security.

By Vafa Guliyeva