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In recent weeks, the semiconductor industry has experienced major shakeups.
It began with the resignation of Intel’s C.E.O., Patrick Gelsinger, followed by the Biden Administration’s announcement of expanded restrictions on technology exports to China, prohibiting the sale of advanced chips and certain machinery. More than one hundred (100) Chinese companies have been added to a restricted trade list. In response, China’s Commerce Ministry announced a ban on exporting certain rare earth materials to the U.S., including gallium, germanium, antimony, and superhard materials. These dual-use resources are vital for semiconductor production and have applications ranging from consumer electronics to advanced military technologies. China's restrictions mean exports will now face stricter end-user and end-use reviews.
These materials are used in our phones, computers, televisions, and more. Recently, chips have even been used to make artificial intelligence even smarter. The U.S. heavily relies on countries like Japan and Canada—both of which source materials from China—for semi-processed goods. Concerns are growing that additional materials, such as nickel and cobalt, may also face export restrictions from China. Meanwhile, four major Chinese industry associations (semiconductors, internet, automotive, and communications) have urged their members to reduce purchases of U.S. chips, potentially altering global supply chains.
Developments at Intel and U.S. Semiconductor Strategy
Intel, one of the leading U.S.-based chip manufacturers, has undergone several changes amidst geopolitical tensions. When re-hired in 2021, Intel’s former C.E.O., Patrick Gelsinger, devised a four-year strategy to build more U.S.-based chip factories and reduce reliance on outsourcing. This approach diverged from the industry norm, where companies typically focus on either chip design or manufacturing. Initially promising, the plan faced challenges as Intel lost one hundred and fifty billion dollars ($150,000,000,000) in value, falling out of the top ten (10) chip companies globally.
As one of the companies that received government dollars from the 2022 CHIPS Act, the government relies on Intel: one of the few U.S.-based companies able to make advanced chips for the defense industry. Under government incentives like the CHIPS Act, Intel has prioritized building domestic chip manufacturing facilities to support national security and reduce reliance on outsourcing. To reassure its position in these trying times, Intel just announced the addition of Eric Meurice, former President, CEO and Chairman of ASML Holding N.V., and Steve Sanghi, Chairman and Interim CEO of Microchip Technology Inc., to its board of directors.
New U.S. Trade Regulations
The Biden Administration’s new export control measures, effective December 31, 2024, prohibit shipments of advanced memory chips and specific chip-manufacturing equipment. They also mandate U.S. companies to conduct due diligence on Chinese factories they supply. Meanwhile, President-elect Donald Trump has pledged to impose steep tariffs on Chinese goods, which could potentially deepen the rift in U.S.-China trade relations. Adding to the complexity, a recent report from the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) examined chip use in supply chains supporting critical U.S. infrastructure. The report found gaps in companies identifying whether products contain chips from Chinese entities and warned that China's expanding production capacity is creating pricing pressures that could erode the competitiveness of U.S. chipmakers.
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