Semiconductors have emerged as a key battleground between the U.S. and Russia and the growing Cold War between the U.S. and China
The chips are imperative for almost every type of technology out there today. But while American tech companies design the world’s most advanced chips, none are actually made in the U.S. Almost all of them come from Taiwan. Commerce Secretary Gina Raimondo, 52, said the market failed to get it right in the case of semiconductors. Almost all of America’s advanced chips are produced in Taiwan, something that could pose a national security threat.
“We allowed manufacturing in this country to wither on the vine in search of cheaper labor in Asia, cheaper capital in Asia, and here we are,” she said. “We just pursued profit over national security.”
Semiconductors and Russia
The global chip war ramped up when Russia invaded Ukraine in 2022, Raimondo said. The Commerce Department expanded export controls to stop American semiconductor technology used in drones, missiles and tanks, from being sold to Russia.
In a 2022 congressional hearing, Raimondo said that Russia had begun using semiconductors from dishwashers and refrigerators for its military equipment. More than two years into the war, the Russians are still working their way around the semiconductor issue.
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“It’s absolutely the case that our export controls have hurt their ability to conduct the war, made it harder,” Raimondo said. “And we are enforcing this every minute of every day, doing everything we can.
Commerce’s Bureau of Industry and Security monitors and polices the ban on any company in the world from selling products with American chips in them to Russia.
Semiconductors and China
Tensions have also escalated between China and the U.S. over access to advanced microchips.
In October of 2022, the U.S. implemented export controls as part of an effort to keep American technology out of China. The restrictions, which focused on advanced semiconductors and chip-manufacturing equipment, were tightened a year later. President Biden addressed it in his State of the Union address this year.
“I’ve made sure that the most advanced American technologies can’t be used in China,” he said.
The Chinese warn that these export controls could trigger an escalating trade war.
China was the top supplier of goods to the U.S. in 2022 and the third largest purchaser of U.S. exports, according to the Office of the U.S. Trade Representative. Around 750,000 Americans would be out of work if trade between the countries was cut off.
“We want to trade with China on the vast majority of goods and services. But on those technologies that affect our national security, no,” Raimondo said.
While high-end microchips are used in some consumer products, they’re also used in nuclear weapons and surveillance systems.
“We know they want these chips and our sophisticated technology to advance their military,” Raimondo said.
Her toughness on the topic has made her a target in China, where fake ads show her promoting a Chinese-made smartphone. Last year, the government in Beijing hacked Raimondo’s email.
When Raimondo visited China last year, tech company Huawei introduced a new smartphone with an advanced, Chinese-made chip.The Chinese chip is years behind what’s available in the U.S. and, Raimondo said, is a sign that the export controls are working.
“We have the most sophisticated semiconductors in the world. China doesn’t,” she said. “We’ve out-innovated China.”
The outsourcing of semiconductor production
The U.S. may have out-innovated China, but there’s no doubt that Taiwan has played a hugely important role. Ninety percent of advanced chips are manufactured in Taiwan, which has been under threat from China in recent years.
China has threatened to invade Taiwan, which would potentially cut off U.S. access to the chips manufactured there.
“That’s a problem,” Raimondo said. “It’s a risk. It makes us vulnerable.”
Raimondo grew up with firsthand knowledge of what happens when jobs are outsourced. Her father worked in the Bulova watch factory in Rhode Island for almost 30 years before the company abandoned its factory in 1983 and moved its operations to China.
It influenced her career choices, from when she studied economics at Harvard to when she left a high-paying job as a venture capitalist to run for public office in Rhode Island, becoming state treasurer and, later, the state’s first female governor.
Bringing jobs and manufacturing back to the U.S.
In late 2020, Biden, then president-elect, called Raimondo about leading the Commerce Department, which until then managed — without much fanfare or headlines — a mishmash of agencies and assignments, ranging from monitoring the weather to measuring the level of contaminants in household dust.
Once at Commerce, Raimondo began to lean on Congress to fund her $100 billion programs, including $50 billion for 2022’s bipartisan CHIPS and Science Act, which is now being implemented as a way to reduce America’s reliance on Taiwan.
Last month in Arizona, Raimondo announced her first award for making leading-edge chips in the U.S. to Intel. The Biden administration said the agreement would provide Intel with up to $8.5 billion in direct funding and $11 billion in loans to be used for computer chip facilities in Arizona, Ohio, New Mexico and Oregon.
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She’s made two other big awards totaling $13 billion to Taiwan-based TSMC, and the South Korean company Samsung, to make the world’s most advanced chips in Arizona and Texas.
Raimondo is also focused on another huge initiative, the Internet For All program, designed to connect the millions of Americans — largely in rural America — who don’t have access to high-speed internet. Together, she says, the Internet For All and the CHIPS Act initiatives will create about a half-million jobs by 2030.
In her three years in Washington, Raimondo has elevated the Commerce Department — and its secretary — into a high-profile player. The stakes are high.
“China wakes up every day figuring out how to get around our regulations,” Raimondo said. “We’ve got to wake up every day that much more relentless and aggressive.”
