Biden to sign chips bill in a boost for satellite supply chains

TAMPA, Fla. — A bill that would give $52 billion in subsidies to US chip makers promises to galvanize domestic production, although it will take time to alleviate a semiconductor shortage that has been delaying satellite projects.

US President Biden is set to sign the bill, dubbed the Chips and Science Act, after it passed House and Senate votes last week. It comprises $280 billion in total support for America’s manufacturing and technological capabilities.

The legislation aims to boost US competitiveness in the global semiconductor market with grants, tax credits and other incentives in response to China’s growing dominance in the sector.

It also comes as a lack of chips and other spacecraft components during the pandemic have been slowing down satellite projects and increasing costs.

But while there will be a lag between the bill’s approval and when new fabrication facilities can be brought online to improve supply, reducing US dependence on foreign suppliers also has security implications.

Nearly four-fifths of global fabrication capacity was in Asia as of 2019, according to the US Congressional Research Service.

Although the figures show China had 12% of the world’s capacity, the US-based Semiconductor Industry Association said last year that China’s investments in the sector put the country on track to command the largest share of global production by 2030.

Meanwhile, the Congressional Research Service said US share of semiconductor fabrication capacity has declined from around 40% in 1990 to 12% in 2020.

Most advanced types of chips are also largely made in Taiwan, which is the subject of mounting political tensions with China.

“Space applications are an area where a secure and reliable source of chips is critical to mission success,” said Zachary Collier, an assistant professor at Radford University in Virginia.

Reducing reliance on foreign suppliers would help ensure chips are not tampered with in ways that could impact their integrity and reliability, which Collier said “could result in loss of life or mission failure in a manned space flight, or unauthorized access to sensitive satellite data. “

He said: “Increasing domestic manufacturing capacity is an important step towards building a secure and trusted end-to-end semiconductor ecosystem, which is needed to support space, defense, critical infrastructure, and many other sectors.”

Onshoring manufacturing capabilities will increase supply chain traceability, Collier added, and knowing where chips have been and who has handled them throughout their lifecycle is necessary “to make an assurance case that the components used in space applications are secure.”

Jim Taiclet, the CEO of satellite maker Lockheed Martin, told President Biden during a July 26 White House event that a secure supply of chips is essential both to national security and to the aerospace industry’s industrial base.

“We got to have confidence in the security of the hardware itself – that it has not been tampered with or degraded when we receive it and put it into our aircraft, missiles, satellites etc,” Taiclet said according to a White House transcript.

Along with almost all Democrats, 24 Republicans in the House and 17 in the Senate voted to pass the legislation, called Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act.

Critics of the bill say it will contribute to record inflation and have questioned whether cash-rich semiconductor companies should be subsidized.

“The five biggest semi-conductor companies that will likely receive the lion’s share of this taxpayer handout, Intel, Texas Instruments, Micron Technology, Global Foundries and Samsung, made $70 billion in profits last year,” Sen. Bernie Sanders, the Vermont independent, said in a July 15 statement.

“Does it sound like these companies really need corporate welfare?”

The legislation also authorizes about $100 billion in spending over five years on scientific research.

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