Gracelin Baskaran and Meredith Schwartz
Introduction
Semiconductors are a critical technology for economic security, and they are also incredibly mineral intensive. Semiconductors are present in all types of electronics, including smartphones, computers, automotives, energy storage, medical devices, lighting, and military and aerospace applications. Four indispensable minerals—gallium, germanium, palladium, and silicon—face significant supply chain risks. While current government funding and tax incentives, such as the Inflation Reduction Act (IRA), focus on addressing supply chain vulnerabilities and stimulating private investment, they are limited to metals used to manufacture electric vehicle (EV) batteries. Moreover, though the CHIPS and Science Act of 2022 was designed to boost semiconductor manufacturing, it does not include any support for the related mineral inputs.
The CHIPS Act provided over $280 billion for advanced chip manufacturing, packaging, and workforce development. The bill focused almost entirely on onshoring downstream capabilities, and as a result significant funding has gone to companies such as Intel and Micron to enable them to build and expand fabrication facilities for chipmaking. Yet the CHIPS Act did not include any provisions to incentivize the diversification of critical mineral supply chains for semiconductors. This is a major national security oversight. Without alternative sourcing, the semiconductor supply chain remains highly dependent on China and other U.S. adversaries. This has already backfired. In August 2023, China imposed export restrictions on gallium and germanium, alarming the U.S. semiconductor industry. China accounts for 98 percent of the world’s refined gallium and 68 percent of the world’s germanium production. The United States, meanwhile, produces no gallium and less than 2 percent of the world’s refined germanium. The U.S. Geological Survey (USGS) estimated that just a 30 percent supply disruption of gallium could cause a $602 billion decline in U.S. economic output, equivalent to 2.1 percent of gross domestic product (GDP), posing a significant economic threat.
No comments:
Post a Comment