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chip shortage

Can Biden solve the chip shortage after Trump's 'clumsy' approach?

Amid its trade war with China, the Trump administration's import tariffs and "clumsy" approach to semiconductor export controls have contributed, along with the COVID-19 pandemic, to an international chip supply shortage, Chad Brown, a fellow at the Peterson Institute for International Economics, writes for Foreign Affairs. The shortage has hit "a range of sectors," including makers of cars, microwaves, refrigerators, and washing machines.

But Brown believes the Biden administration has "laid the groundwork for a more resilient semiconductor supply chain" thanks to a willingness to cooperate with other countries, and he argues the U.S. will need to continue on that course "to protect their national security and stave off another economic crisis." That will require making sure Japan, South Korea, Taiwan, and Europe — which are "home to some of the world's most important equipment suppliers and chipmakers — are on the "same page," a task that won't be easy given tensions between Tokyo and Seoul, as well as potentially antagonizing Beijing by "coordinating policy with Taipei." 

The U.S. can't go it alone any longer, Brown writes, since unilateral, extraterritorial controls will prompt foreign manufacturers "to swap out U.S. equipment with tools from alternative suppliers," depriving Washington of its "only short-term leverage it had over the ultimate target, Chinese firms buying the chips." Along those lines, Brown argues that the U.S. and its partners will likely have to do away with "overly broad attempts to control everything" and collaborate on "tighter export limits ... on fewer technologies."

Brown acknowledges the U.S. and its allies will "have to accept that aligning their policies comes with costs" because China "will almost certainly carry out a more confrontational foreign and economic policy." That would likely result in an industry-wide revenue loss, which would have consequences for countries' research and development funding. To counter, Washington and its partners should "jointly fund an R&D consortium" and "pool resources for chip research," Brown writes. Read more at Foreign Affairs.