The NY Times on 6/12, ran a story on how China’s technological ambitions are eliciting rare bipartisan agreement in Washington, with lawmakers considering investing tens of billions of dollars in America’s semiconductor industry over the next five to ten years to help the United States retain an edge over Beijing.
The following story could be modified by doing a “find and replace” substituting displays for semiconductors and chips. The difference being that the US let go of the display industry in the 80’s and we have no remaining strong contender.
A bipartisan measure introduced this week is one of several proposals that would provide substantial funding for the semiconductor industry. The efforts reflect a shifting consensus in Washington, as lawmakers look to more expansive government intervention in private markets to help American firms compete. The future of the semiconductor industry is viewed as particularly significant because it is a foundational technology that can give nations an edge in innovation.
China has been shoveling billions into developing its own chip industry, which has long been dominated by the United States and has helped propel a boom in 5G technology, artificial intelligence and robotics. The United States only accounts for around 12 percent of global semiconductor production capacity. Decades ago, domestic designers began turning to foundries in places like Taiwan and South Korea to manufacture their chips. While past government subsidies have largely focused on chip research, the latest bill puts a heavy emphasis on domestic manufacturing. A centerpiece, which would put more than $22.8 billion toward the industry, is a new trust fund for federal grants to match state subsidies to encourage new factories. As much as $10 billion a year could be placed in the fund, with the money to come from the import tariffs the administration has placed on China, rather than a congressional appropriation.
A Shift in Congress
The shift in Congress mirrors one in the Trump administration, which has rejected traditional Republican support of free trade in favor of a more managed approach to compete with China. Mr. Trump’s advisers have zeroed in on the semiconductor industry, which was born in the United States but has partly migrated to Asia in recent decades, as the test case for their plan to use trade and technology policies to return manufacturing to American shores.
China still lags in the production of the most advanced semiconductors, but its technology is improving quickly. The Trump administration has warned that China is using subsidies, targeted investments and cybertheft to try to gain a technological edge. Chip factories — which now routinely cost as much as $10 billion and can take years to construct — also help set the pace of innovation. By developing new production processes that squeeze more transistors on tiny squares of silicon, manufacturers can lower the cost for performing calculations and storing data. Intel, which has major factories in three U.S. states, for decades led that technology race. But the company was several years late on delivering its latest production process, allowing TSMC. and Samsung to claim a lead. South Korea, Israel, Ireland, Germany and other countries have offered generous incentives to attract chip makers.
China to Achieve Self Sufficiency
Concurrently, China’s display industry enters its 2nd five year plan and will be self-sufficient by 2025. U.S. industry and the US military is finding it difficult to acquire certain displays outside of China. Supplying our pilots, submariners and soldiers with Chinese made devices does not work in today’s political climate and certainly not if there is a cold or God forbid a hot war with the Chinese. Action is necessary to remain viable by marshalling support for a US display fab industry. The promise of Foxconn in Wisconsin is not the answer. Let’s educate the bill’s sponsors, Senators John Cornyn, Republican of Texas, and Mark Warner, Democrat of Virginia, and Representatives Michael McCaul, Republican of Texas, and Doris Matsui, Democrat of California and get a display program going in the US.
How did this happen?
During the turn of this century the display industry was driven out of North American by an emphasis on the next best cheapest display. Even the defense industry moved from secure bases of supply to a commercially off the shelf (COTS) model. Similar to the way our country has become dependent on China’s pharmaceutical producers, sourcing at the lowest cost became the supply chain mantra. Asia with its lower labor costs and looser environmental requirements, took advantage of our price conscious attitude and the display industry and North American companies encouraged the change. Companies such as Westinghouse, where the active matrix was invented, Electrohome, Zenith and RCA gave way to Sony, Toshiba Sharp and Panasonic. As even lower cost venues were sought LG, Samsung AUO and Innolux entered the market. Today China dominates the LCD market with companies like BOE, CSoT, HKC, and CEC Panda. As Samsung and LG pioneered the OLED segment, China’s panel maker’s adopted the technology and will soon have >50% of the total capacity.
At the time of writing, there is not a single display manufacturer in North America. While there are still a few specialized players such as Kopin and eMagin that focus on micro OLED displays, but on a larger scale there is no one. On an economic basis alone, manufacturing in North America is a recipe for disaster as no one can compete against the Chinese display makers with their high volume factories which are heavily funded by the government. The response is not to wave the white flag and acquiesce to China. We should be pursuing a strategy similar to the one adopted by the semiconductor industry.
One Factory is Not Enough
The challenge is not just to on rely on a one off factory as per the Foxconn gesture, but to build an entire industry to support the end product being a display. Displays are the only human interface to the digital world and their supply is imperative to daily living. Imagine getting up in the morning and peering at your analog watch, yes digital watches have a display. Then reaching for you mobile device, oh yeah, can’t read anything since there is no display. Then getting up and going to the kitchen for breakfast. What appliances do we use that have digital information? How about turning on the radio since there are no TVs? Can’t read email as our laptops and monitors do not exist. Heading for the office, hopefully the car doesn’t have a digital dash. Oh yeah, apple car play or android auto, useless since there is no navigation display. Shall I keep going? The bottom line is that displays are part of our daily lives and without them, we would be back in time.
But all our displays are made in Asia. What would happen if a trade war or other disturbance breaks out? Are we willing to take that risk? Just look at the recent chaos caused by a lack of toilet paper and face masks. Supply chains have been disrupted. One takeaway from COVID-19, “never to have “all your eggs in one basket”. Our government and industry needs to create a balanced supply chain with international and local supply of not only displays but most products. China subsidized LG’s Guangzhou fab with 65% of the capital; they subsidize Chinese companies with >80% of the new capital. Why shouldn’t we do the same? It creates jobs, preserves the local technology and balances the supply chain. (BY)
By Barry Young is CEO of the OLED Association
