DVD1179 (09/21/2023) Francis Chang, director of international engagement at the US CHIPS program office, poses at the US Embassy in Madrid. ANDREA COMASAndrea Comas
The chip crisis turned the world upside down in 2021 and part of 2022, paralyzing entire industries and aggravating the inflationary shock. A year later, the waters are calmer. But the West, with the United States in the lead, does not want new shocks: Joe Biden’s Government has mobilized more than 50 billion dollars (more than 47 billion euros) to bring semiconductor factories back to its country, reduce its enormous dependence on imports from Asia and cutting ties with China in the midst of a struggle for world economic dominance. Frances Chang, director of international participation for the Chips program – attached to the US Department of Commerce – speaks to EL PAÍS in Madrid, during a visit aimed at strengthening ties.
Ask. Why is there so much focus on chips?
Answer. Because they are in everything we use in our daily lives: from the tablet you are using right now to mobile phones; from cars to washing machines… They have become an integral part of our daily lives.
Q. What is the US looking for with its recent Chip law?
A. The goal is to help create a more resilient global semiconductor supply chain. The chip shortage after the pandemic led, in turn, to a car shortage and has had truly negative effects on the global, US and European economy. We have discovered that there was a concentration of production in very few places, and that this created difficulties. The United States must take an active role, but since we have begun to analyze the problem we have realized that we cannot do it on our own.
Q. Why?
A. Because semiconductors have many inputs: there are hundreds of them and they are very specialized. And they require an availability of critical minerals that is limited by the geology itself. That makes it, naturally, a global chain: it is impossible for a single country to be completely self-sufficient in the production of semiconductors. That is not the goal of the Chips law.
Q. What is the reason for your presence in Spain?
A. We want to do outreach with our partners and allies. Exchange information on how we see the present and immediate future of the (semiconductor) supply chain. And how we can work together for the benefit of both countries and, also, the world’s population.
Q. How?
A. Both countries have strengths in various parts of the supply chain. And there are others in which, however, deficiencies occur. That is why the US Congress and both parties (Democrats and Republicans) have decided to invest money in the industry. The idea is to identify bottlenecks: where overconcentration occurs.
Q. Why is the Chips law considered a national security initiative?
A. Because chips are crucial, not only in consumer products, but also in critical infrastructure, and we need the supply to be consistent and reliable. Climate change, a pandemic… Any setback can cause a major disruption in the supply chain.
Q. Have the factors that led to the semiconductor shortage last year now disappeared?
A. It is a complex issue. In fact, I myself am still learning about the semiconductor industry. It is very cyclical and it takes time for supply and demand to fall into line again. We are in a period in which things are a little more stable again, but, given their very nature, there will be periods of undersupply and oversupply.
Q. The risk of a new period of shortage is still there.
A. Let’s hope not, that’s why we are investing. We also have to be careful not to create an oversupply of some types of chips: the point is to have an adequate and reliable supply. And that, sometimes, implies to a certain extent redundancy and producing more than what you will need at specific times, to be prepared for the unexpected. That’s when the Government comes into play: if it were strictly up to the companies, we would have a just in time model (just in time, in which it is manufactured as it is needed) that has caused so much damage during the disruption in the supply chain. We have to go, rather, towards a just in case model (just in case, in which it is stored to avoid stock outages), although it is not the most economical for companies. That is why there must be public support and incentives that encourage more production to be prepared when the storm arrives.
Q. Is there any way to be 100% sure that an episode like this will not happen again?
A. I wish I could know (laughs). The best we can do is be sure that we have learned the lessons of the past and have put the right procedures in place.
Q. Some critics of the new US law question the idea of providing aid to a sector as profitable as semiconductors.
A. I think some market dynamics are oversimplified. There are producers who, for a long time, have gone to places where the (manufacturing) cost is the lowest, without necessarily taking into account other factors, such as climate change—using energy that is not clean—disruptions in supply chain… What we want is for companies to take into account all these non-financial costs.
Q. In a way, the US and Europe are competing with their plans for new semiconductor factories. Wouldn’t it make more sense to join forces?
A. Actually we are already joining forces. We have had many conversations with our European partners and are in constant contact with our counterparts. What makes sense for Spain, for example, makes sense for the United States: our objectives are quite complementary. The demand for chips is such that there is room for more production and, above all, for more diversified production. We support the announcements that have been made in Europe, and we do not see it as a competition. It is not a zero sum game.
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