echoes of the past: semiconductor shortages and their impact on us growth

2025-02-21 general

Washington, Friday, 21 February 2025.
five years ago, a global semiconductor shortage triggered inflation and stunted us economic growth. this event highlights the critical need for a robust and secure semiconductor supply chain. the current administration is pushing for policies to strengthen domestic chip manufacturing and reduce reliance on foreign sources. the ‘digital manifesto’ initiative aims to guide the trump administration in establishing us leadership in digital policy, prioritizing semiconductor supply as a key strategic interest in the ai race. the chips act has already spurred $450 billion in private investment.

the push for domestic manufacturing

The US aims to secure domestic semiconductor sources and diversify its trading partners [1]. This strategy mitigates potential supply disruptions and bolsters the nation’s position in the artificial intelligence (AI) race [1]. The CHIPS Act has catalyzed approximately $450 billion in private sector investments in US semiconductor manufacturing [1]. These investments span new facilities, operations research, and talent development [1]. Expanding tax and research & development incentives could further stimulate industry growth [1].

tariffs and trade tensions

The Trump administration’s threat of imposing 25% tariffs on foreign semiconductor chips introduces uncertainty [1]. Taiwan’s chip exports to the US are approximately $7.4 billion, representing 4.5% of Taiwan’s total chip exports [7]. Taiwan’s Minister of Economic Affairs, Kuo Chih-hui, argues that high tariffs on semiconductors would harm the US, given the close partnership in semiconductors and AI [7]. Zhang Jiahao, a US memory chip company vice president, believes that without Taiwan’s wafer foundry service, the US chip design advantage would be difficult to maintain [7].

big tech’s ai chip ambitions

Major technology firms are developing their own AI chips to compete with Nvidia’s H100 GPUs [5]. Microsoft, OpenAI, Tesla, Google, Amazon, and Meta are among those seeking to reduce costs and reliance on Nvidia [5]. Microsoft plans to unveil its AI-designed chip, code-named Athena, at its upcoming developer conference [5]. Developing chips like Athena could cost around $100 million annually [5]. If competitive with Nvidia, these chips could reduce costs by a third [5].

market impacts and challenges

The global semiconductor supply chains face significant changes due to substantial government and industry investments [1]. These shifts could impact market dynamics and investment strategies. Despite US sanctions, AI chips have reportedly made their way into Chinese universities and military institutions [4]. This indicates potential vulnerabilities in export controls. Tesla’s CEO Elon Musk noted that chip shortages are significantly delaying Powerwall battery production [6]. Demand is around 80,000 units, but production is estimated at only 30,000 to 35,000 units this quarter [6].

Bronnen

chip shortage us economy