As the world becomes increasingly reliant on semiconductors, President Trump’s targeted tariffs on imported chips threaten to disrupt global supply chains and upend the tech industry. But what exactly are semiconductors, and why do they matter so much?
What are Semiconductors and Why is Trump Targeting Them?
Semiconductors, also known as microchips or integrated circuits, are tiny fragments of raw materials such as silicon that are altered through a process called doping to conduct electricity. This allows them to be used as electronic switches, speaking the binary language of 0s and 1s that underpins computing.
The Importance of Semiconductors in Modern Technology
Semiconductors are found in devices such as smartphones, laptops, vehicles with electronic control systems, remote car keys, sensors, routers, switches, and communication infrastructures. They enable global connectivity by forming the backbone of the internet. In addition, they can be found in wind turbines and solar farms, playing a crucial role in sustainability.
A semiconductor is a material that has electrical conductivity between that of a conductor and an insulator.
It can control the flow of electric current through it by applying a voltage.
Semiconductors are made from silicon, which is doped with impurities to alter its electrical properties.
They are used in a wide range of applications, including computers, smartphones, and solar panels.
The Global Supply Chain of Semiconductors
The UK, US, Europe, and China rely heavily on Taiwan for semiconductors. The country’s Taiwan Semiconductor Manufacturing Company (TSMC) provides over half of the world’s supply to tech giants such as Nvidia, Apple, and Microsoft. As a result, TSMC has been caught up in ‘chip wars’ between the US and China.
Located in East Asia, Taiwan is an island country with a rich cultural heritage.
The island has been inhabited since the Neolithic era, and its strategic location has made it a hub for trade and cultural exchange between China, Japan, and Southeast Asia.
Taiwanese culture is a unique blend of Chinese, Japanese, and indigenous influences, reflected in its cuisine, festivals, and architecture.
Taiwan's capital city, Taipei, is home to many historical landmarks, including the Longshan Temple and Chiang Kai-shek Memorial Hall.
Why Trump is Targeting Semiconductors
President Trump aims to encourage firms to manufacture more products in the US through his ‘reciprocal’ tariffs. However, it may be set to change as Trump announced tariff rates for imported semiconductors. National security concerns about microchips being produced or sourced from elsewhere are also cited by the president and his administration.
How Could the US Make More Semiconductors?
The US has spent colossal sums of money in recent years to boost technology manufacturing on its shores. Companies such as TSMC have already boosted their US presence in response to previous legislation under the previous administration. However, production at the site has faced delays due to a shortage of skilled workers, which may present a wider challenge to increasing US-based semiconductor manufacturing.
The Role of Investment and Funding
The US government committed $6.6bn in awards to TSMC after it built a factory in Arizona. However, resolving the staff shortage required bringing thousands of workers over from Taiwan. The US Chips Act incentivised firms to move chips manufacturing in the US in return for funding awards. To overcome the challenges, significant investment and funding are needed to boost technology manufacturing on its shores.
The United States Chips and Science Act (US CHIPS Act) is a federal law aimed at promoting American leadership in semiconductor manufacturing and research.
Signed into effect on August 9, 2022, the act allocates $52.7 billion to support domestic chip production and development of advanced technologies.
Key provisions include tax credits for chip manufacturers, funding for research and development, and investments in workforce training programs.
The US CHIPS Act is expected to reduce reliance on foreign suppliers, enhance national security, and drive innovation in the tech industry.
- www.bbc.co.uk | What are semiconductors and why is Trump targeting them?
