What the US is doing with semiconductors to stave off China threat

The Departments of Commerce and Defense signed a memorandum of agreement on Wednesday in an effort to strengthen information sharing and coordination in doling out CHIPS incentive funds -- a move top U.S. officials say will shore up national security as China attempts to overtake the United States in semiconductor production.

The agreement signed on Wednesday ensures the Defense Department and Commerce Department coordinate on what the defense sector needs and ensures that it has the CHIPS to keep America safe, according to the Commerce Department.

"This agreement is an important step forward in increasing the capacity and resiliency of our domestic semiconductor industrial base," said Assistant Secretary of Defense for Industrial Base Policy Laura Taylor-Kale, who signed the MOA on behalf of the Department of Defense. "It is essential for DoD and DoC to consult one another to ensure we are making complementary investments that support a robust semiconductor industrial base. Both Departments are working together to expand domestic semiconductor production capacity in a coordinated fashion."

The agreement also allows for a national security review and ensures that semiconductors are made in America and used by the defense industry.

"Advancing U.S. national security is a top priority. Our Departments must work together and align on where and how we are making investments to strengthen the U.S. industrial base," said CHIPS Program Office Director Michael Schmidt, who signed the MOA on behalf of the Department of Commerce. "This agreement will enable our teams to coordinate the national security review of applications, produce semiconductor chips in America that our military relies on, and bolster our domestic supply chain resiliency."

Experts compare semiconductors to the brain for any machine with a computer system. Their prevalence in everyday items from cell phones to cars to microwaves and more means that production of these semiconductors is a lucrative industry -- and one with broader implications for international relations. Commerce Secretary Gina Raimondo has repeatedly said producing semiconductors in the U.S. is vital not only to the domestic economy, but also to national security, saying in a 2022 letter to congressional leaders that China, which has spent hundreds of billions of dollars developing its own semiconductor production, "is both determined to become the global leader in the industries of the future and has the means and resources to do so if we are not on our game."

"Over the last two years, China has produced more than 80% of new global capacity for certain mature chips, and their market share is growing. ... And the brutal truth is that, without manufacturing strength in the U.S., and the innovation that flows from it, we are at a clear disadvantage in the race to invent and commercialize future generations of technology," Raimondo said in February at Georgetown University’s School of Foreign Service in remarks applauding the CHIPS and Science Act.

The CHIPS and Science Act, signed in 2022, provided nearly $53 billion in funds to "support the domestic production of semiconductors and authorize[d] various programs and activities of the federal science agencies." The act, intended to address a nearly two-year global chip shortage that stemmed from supply chain issues related to the COVID-19 pandemic, also tasked the Department of Commerce with doling out funding to kickstart CHIPS manufacturing in the United States.