Warner Welcomes Senate Action on Domestic Semiconductor Manufacturing, U.S. Alternatives to Chinese Equipment Providers
May 20 2021
WASHINGTON – U.S. Sen. Mark R. Warner (D-VA), Chairman of the Senate Intelligence Committee, took to the Senate floor today in support of the United States Innovation and Competition Act, bipartisan legislation that includes Warner-led provisions to foster U.S. innovation in the race for 5G and shore up American leadership in the microelectronics industry. This speech comes one day after the Senate reached a bipartisan deal with a procedural vote to move forward with the legislation.
The United States Innovation and Competition Act – also known by an earlier name, the Endless Frontier Act – would help invest in domestic semiconductor manufacturing, packaging and advanced research and development by investing $52 billion to implement the CHIPS for America Act, a bipartisan law championed by Sen. Warner to help restore semiconductor manufacturing back to American soil. Semiconductors power modern technology, including cars, computers, smartphones and an increasing number of internet-connected ‘smart’ devices as varied as laundry machines to toothbrushes. A current production shortage of chips has backed up manufacturing supply lines in the United States, with major automobile manufacturers projecting $110 billion in lost sales this year due to factories sitting idle while waiting for components, and increased costs for goods such as televisions and home appliances dependent on imported semiconductors being passed on to U.S. consumers. Demand for semiconductors is expected to continue to grow, as internet connectivity and software processing is added to an ever-wider array of consumer, enterprise, and industrial products, services, and systems.
“The semiconductor industry, while we’ve seen some sliding, still represents one of the shining lights of our country’s innovation economy. And as a wider array of products and services depend on internet connectivity and software processing, the demand for semiconductors has only grown. Unfortunately, that leadership position we’ve had for so long is at stake,” said Sen. Warner on the floor of the U.S. Senate. “So the CHIPS Act, which was baked into the Endless Frontiers Act, directs agencies like the Department of Commerce, in consultation with others like our Intelligence Community, to make investments in microelectronics R&D a priority.”
He continued, “It emphasizes the need for multilateral effort with our allies and close trading partners to bring greater transparency and accountability to subsidies. It alignspolicies towards non-transparent, non-market competitors like the Chinese, and it makes sure that we have concerted and coordinated action both domestically and again, with our allies, on supply chain security and integrity. It invest billions in basic research related to advanced semiconductors, via DoD and a newly created National Semiconductor Technology Center – helping us maintain our lead in the design, prototyping, lithography and packaging of advanced microelectronics. And it makes an unprecedented investment in trying to build new foundries, fabs, and basic manufacturing facilities here in the United States so that we have that secure supply chain for the future.”
This crucial provision comes as the U.S. faces a decline in R&D and advanced manufacturing, including in advanced chip manufacturing. As Sen. Warner noted on the Senate floor, U.S. production of semiconductors and microelectronics has gone down from 37 percent in 1990 to just 12 percent today. By contrast, China has committed to invest $150 billion and produce at least 70 percent of semiconductors it consumes by 2030.
The United States Innovation and Competition Act also includes funding for the bipartisan Utilizing Strategic Allied (USA) Telecommunications Act, legislation Sen. Warner introduced to provide Western-based alternatives to Chinese equipment providers like Huawei and ZTE, which are heavily subsidized by the Communist Party of China and present serious risks to national security and the integrity of information networks globally.
“I was proud to work with two of my colleagues, Senator Burr and Senator Rubio. We put up a Public Wireless Supply Chain Innovation Fund to spur movement towards open-architecture and ‘leap-ahead’ technologies in our domestic mobile broadband market,” said Sen. Warner. “I believe that so-called ‘Open RAN’ represents the single best approach to tackling the 5G challenge – opening the radio access network to competition from a wider array of players, including startups, non-traditional players like software companies, and enterprise networking companies. That approach plays to U.S. strengths like software and network virtualization. And it means we have a wider set of firms – including American firms with healthier balance sheets – competing against Huawei. Because one thing that’s been clear over the past two Administrations: Our anti-Huawei message won’t work unless the U.S. proposes lower-cost Western alternatives.”
With the U.S. funding less than 28 percent of global R&D – down from 69 percent after World War II – the Warner-led provision would put forth $1.5 billion to invest in Western-based alternatives to Chinese equipment providers and $500 million to work with close allies and trading partners on the development and adoption of secure and trusted wireless infrastructure globally.
Sen. Warner’s remarks as prepared for delivery are available below:
I rise today in support of the Endless Frontier Act – a long-overdue bipartisan effort to invest in our country’s innovation and competitiveness.
I am pleased to see Congress finally taking action to shore up U.S. investment in the research, development, and manufacturing of critical technologies.
Without intervention, China will continue to outpace and outperform us in the global technology race – impacting our country’s economic well-being, our global influence, and our national security.
In recent years, China has rapidly ramped up investment in its domestic industries – and particularly in areas that confer long-term strategic influence.
For instance, China consistently increases its investment in the semiconductor industry, with a commitment to invest $150 billion and a goal to produce at least 70 percent of semiconductors it consumes by 2030.
And this is a global competition: South Korea, for instance, has pledged to invest over $130 billion over the next 9 years, while training 36,000 new microelectronics engineers and technicians. And Germany and 18 other EU members announced investments of up to $60 billion in key hardware like semiconductors over the next few years.
By contrast, over the past 10 years only 17 major semiconductor fabs have been built in the U.S. – while we’ve seen over 122 built elsewhere. In absolute terms, we’ve actually seen the number of facilities in the U.S. decline – going from 81 production facilities a decade ago to 76 today. And as a country we’ve gone from a 37% share of semiconductors and microelectronics production in 1990 to just 12% today.
In part, this is because the cost of new fabs is 25-50% higher in the U.S. – a delta, in major part, attributable to the significantly lower financial incentives government provides in the U.S. for new construction compared to in competing locales.
And for its part, China doesn’t plan on taking its foot off the pedal any time soon. Last year, President Xi Jinping announced a $1.4 trillion commitment through 2025 to develop advanced technologies like next-generation wireless networks and artificial intelligence. Technologies that will undergird entire ecosystems of innovation, commerce, and communications.
US semiconductor firms - and firms in the adjacent areas of lithography, packaging, and metrology – still lead the world. However, many of the key ingredients to our success… including federal support for R&D, investment in basic research, and support for advanced manufacturing… have declined over the last 20 years.
Simply put, we are just not keeping up.
Between 1995 and 2018, Chinese R&D investment increased by over 15 percent per year on average, compared to the United States, which averaged just over 3 percent growth per year over the same period.
Despite once championing investment in R&D and technological advancements, we are losing ground.
After World War II, the United States funded 69 percent of annual global R&D. Today, we fund less than 28 percent, with only 7 percent going to non-defense technologies like wireless communications.
To get back to where we once were and reassert US technology leadership, we need to re-prioritize foundational technologies to maintain not just our country’s economic leadership, but to ensure that countries with inconsistent values and objectives aren’t able to leverage control over these foundational technologies in worrisome ways.
As Chairman of the Senate Select Committee on Intelligence, I have long been banging the drum about the ways that the PRC has taken advantage of what makes our country and our economic system so great – our openness, our transparency, our technology, and our free markets.
The Chinese government, unfortunately, plays by a different set of rules.
The Chinese government is using all aspects of its society to increase China’s dominance– using all means at its disposal to establish its position as the world’s technology leader – often with opaque subsidies and financing that dramatically tilt the playing field towards Chinese vendors.
And unfortunately, for too many of these trading partners, the deal is simply too good to turn down… in part, because we haven’t worked, either on our own or better yet with our close allies, to offer a secure, competitively-priced alternative.
That’s why this bill is so important. It includes funding for the bipartisan Utilizing Strategic Allied (USA) Telecommunications Act, which fosters U.S. innovation in the race for 5G by providing $1.5 billion to invest in Western-based alternatives to Chinese equipment providers like Huawei and ZTE, and $500 million to work with close allies and trading partners on development and adoption of secure and trusted wireless infrastructure globally.
This is a bill I was proud to work on with my colleagues, Senator Burr and Senator Rubio.
And it would stand up a new Public Wireless Supply Chain Innovation Fund – to spur movement towards open-architecture, software-based wireless technologies, funding innovative, “leap-ahead” technologies in the domestic mobile broadband market.
I believe that so-call “Open RAN” represents the single best approach to tackling the 5G challenge – opening the radio access network to competition from a wider array of players, including startups, non-traditional players like software companies, and enterprise networking companies.
That approach plays to U.S. strengths like software and network virtualization. And it means we have a wider set of firms – including American firms with healthier balance sheets – competing against Huawei.
Because one thing that’s been clear over the past two Administrations: Our anti-Huawei message won’t work unless the U.S. proposes lower-cost Western alternatives.
Crucially, this bill also, invests in domestic semiconductor manufacturing, packaging and advanced R&D, with a $52 billion investment in the CHIPS for America law we enacted last year as part of a bipartisan effort by Senator Cornyn, Senator Schumer, Senator Cotton and me.
The semiconductor industry represents one of the shining lights of our country’s innovation economy. And as a wider array of products and services depend on internet connectivity and software processing, the demand for semiconductors has only grown. Unfortunately, experts note that the U.S. lead over China is shrinking each year.
The Endless Frontier Act would serve as a major step in shoring up American leadership in the microelectronics industry.
It directs – and empowers – key agencies like the Department of Commerce to make investments in microelectronics R&D a priority.
It emphasizes the need for multilateral effort with our allies and close trading partners – bringing greater transparency and accountability to subsidies… aligning policies towards non-transparent, non-market competitors… and underlining the need for concerted action on supply chain security and integrity.
It invest billions in basic research related to advanced semiconductors, via DoD and a newly created National Semiconductor Technology Center –helping us maintain our lead in the design, prototyping, lithography and packaging of advanced microelectronics.
And it makes an unprecedented investment in advanced manufacturing, with a focus on building new, advanced fabs in the United States to ensure a resilient and secure supply chain for the future. The $39 billion we provide in the form of investment incentives will mean that 7 to 10 new fabs are built here in the U.S. – something that will help ensure we never face the devastating supply chain constraints across a wide array of industries … from automotive to aerospace, biomedical, and other important sectors … that we have seen in the last year, stemming from a shortfall in semiconductor production.
The Endless Frontier Act serves as a once-in-a-generation opportunity to solidify U.S. leadership in science and tech innovation, strengthen our national security, and reinvigorate American ingenuity.
I urge my colleagues on both sides of the aisle to join me in meeting this challenge and investing in America’s competitiveness.