InvestMacro

By Andrew Johnston, Coventry University and Robert Huggins, Cardiff University 

US semiconductor giant Micron is to invest US$40 billion (£33 billion) during the 2020s in chip manufacturing in America, creating 40,000 jobs. This is on the back of incentives in the recent US Chips Act, which has also unlocked major investments from fellow US players Intel and Qualcomm.

The EU is also making moves to boost computer-chip manufacturing at home, having similarly decided to try and take share from Asia following the severe global semiconductor shortages over the past couple of years. Over 70% of chips are currently made in Asia, with precarious Taiwan particularly important, making around 90% of the world’s most advanced chips.

In the UK, however, successive governments have overlooked the importance of having a home-grown industry for this vital component, which underpins not only computers and smartphones, but also things like cars, planes, satellites and smart devices. There is a clear absence of any strategic plan, and no way of riding on the coattails of the EU following Brexit. So what needs to be done?

The new race for chips

Micron’s decision to announce such a large investment in the US is directly related to the Chips Act. The act provides US$200 billion to build and modernise American manufacturing facilities, as well as promoting research and development in semiconductor technologies, and promoting education in STEM subjects to develop the next generation of chip designers.

The US continues to control the majority of IP in semiconductors, but Asia’s dominant manufacturing capacity is rapidly growing on the back of investments from the likes of Taiwan’s TSMC and Foxconn, and South Korea-based Samsung. There is also a need to compete with China, which recently surprised the industry by demonstrating world-beating technology.

Semiconductor manufacturing and ownership by country (%)

Earlier this year, the EU set out the scope of its own legislation to boost its share of production from 10% to 20% of the world total by 2030. It aims to promote “digital sovereignty” by supporting the development of new production facilities, supporting start-ups, developing skills and building partnerships. In total, the upcoming act should result in between €15 billion (£13 billion) and €43 billion (£36 billion) being invested in the sector.

The UK perspective

The UK once led the world in semiconductor manufacturing, with highly internationally innovative companies such as Plessey, Inmos, Acorn, Imagination Technologies and Cambridge Silicon Radio. There remain pockets of excellence and world-leading innovation, particularly in the design of semiconductors. Clusters in south Wales, the south west of England and east of England, for example, have a critical mass of activity. But they have lacked the necessary finance to upscale, and all the major investments elsewhere are putting the industry in an increasingly vulnerable position.

It’s not only the UK’s position in semiconductors that is under threat. A lack of capacity creates risks for the whole electronics supply chain, which could weaken the economy overall. For example UK car production has been severely curtailed by the recent chip shortages.

To avoid such problems, the UK needs to pass a Chips Act of its own. This would aim to kick-start the industry by incentivising investment in manufacturing facilities, called “fabs”. Some commentators have argued against this move, mainly due to the huge costs involved. But it would be money well spent to achieve digital sovereignty.

A UK act should incentivise investment both directly and indirectly. Direct funding would ensure increased manufacturing capacity by building new fabs or expanding and upgrading existing facilities, especially for chips related to sensors, power, consumer electronics and communication devices. The government could then also support the industry indirectly through policies such as tax credits for investing firms, land provision and support infrastructure.

Another priority should be to strengthen existing national competitive advantages around designing smaller chips with more efficient circuits and greater computing power. This would involve both improving the current generation of chips and developing new approaches such as “beyond CMOS” technologies, which promise faster and more dense chips but crucially with a lower energy requirement. Providing R&D grants or guaranteeing loans to explore, test and consolidate new designs would help to return the UK to the forefront of developments in the sector.

University funding

Finally, the UK needs to harness the knowledge and research expertise around design and manufacturing within its universities. This is spread around various institutions, including the universities of Cardiff and Swansea in Wales; Strathclyde and Edinburgh in Scotland; Queen’s University Belfast in Northern Ireland, which has its own foundry; and the University of Sheffield in England.

The UK government has funded over £1 billion of university research into semiconductors since 2006, but the US and EU chips acts highlight just how much more is required. There is also a need to focus university funding on commercial outcomes that will translate into sales and increase the UK’s market share. Brexit has limited funding opportunities by raising uncertainties about the UK’s future involvement in the European “Horizon” scheme, which is the EU’s main R&D funding programme. It may therefore require a national replacement.

Clearly, the national outlay to deal with COVID and the current cost of living crisis will constrain potential government investments in the coming years. But the recent semiconductor shortages have also made clear that a degree of self-sufficiency in this key enabling technology will be vital to ensuring economic resiliency in a highly volatile and unpredictable world.

About the Author:

Andrew Johnston, Professor of Innovation and Entrepreneurship, Coventry University and Robert Huggins, Professor of Economic Geography, Cardiff University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Jonathan B. Santo, University of Nebraska Omaha and Kelly Rhea MacArthur, University of Nebraska Omaha 

The Research Brief is a short take about interesting academic work.

The big idea

Women in statistics classes do better academically than men over a semester despite having more negative attitudes regarding their own abilities, according to our recent study in the Journal of Statistics and Data Science Education.

Using data from more than 100 male and female students from multiple statistics classes, my colleague and I assessed gender differences in grades over the course of a semester. As part of the study, students also answered surveys at the start and end of the semester that measured six different things: their fear of statistics teachers in general; their thoughts about the usefulness of statistics; their perceptions of their own mathematical ability; their anxiety in taking tests; their anxiety in interpreting statistics; and their fear of asking for help.

Overall, we found that students with more negative perceptions of their own mathematical ability had lower grades over the course of the semester. What’s even more interesting are the gender differences that emerged.

Even though men and women scored similarly on exams at the start of the semester, women finished the semester with almost 10% higher final exam grades. This was the case even though women had significantly worse attitudes about their mathematical abilities at the start of the semester than their male counterparts.

At the beginning of the semester specifically, women were more likely to rate their mathematical abilities as lower than men in the class and report more anxiety toward exams and toward interpreting statistical findings. However, each of these self-assessments improved over the course of the semester such that women’s attitudes didn’t differ from men’s by the end.

Meanwhile, the grades of male students who reported fear of statistics teachers or fear of asking for help decreased more sharply over the course of the semester. For men whose attitudes improved during the semester, grades also improved – though not as much as women’s grades improved.

Why it matters

A number of studies have shown that from an early age, boys and girls learn math equally well.

However, girls are less likely to be called on in math classes than boys, even when they raise their hands as much as boys do. Moreover, some teachers unconsciously grade girls’ math tests more harshly than boys’. By middle school, gender differences in math scores emerge. These factors may contribute to adult women’s being more likely to rate themselves as less mathematically skilled than men. As a result, women are also less likely to pursue STEM – science, technology, engineering and math – occupations.

The results from our study, in line with others, bolster the notion that women have the potential to do as well as men, and even better, in STEM fields, such as statistics. We contend that women would benefit from additional mentoring to encourage them as they begin pursuing STEM-related education.

Undergraduate students at the University of Nebraska Omaha collaborate on a group assignment for a STEM course.
Derrick Nero, University of Nebraska Omaha, CC BY-NC-ND

What still isn’t known

The evidence above provides hints at some of the causes of the gender discrepancy in perceived ability. However, there is much we still don’t know.

For example, why did the attitudes of the women in our study improve over time? Was it based on their confidence in their abilities as their grades improved, or did their statistics teachers influence their perception of their own abilities over time?

More research is needed to understand exactly how women differed from men in their attitudes over the course of the school semester, among other questions. In particular, we’d like to disentangle exactly which classroom or instructor factors can lead to better attitudes among students, ultimately translating to better grades.

About the Author:

Jonathan B. Santo, Professor of Psychology, University of Nebraska Omaha and Kelly Rhea MacArthur, Associate Professor of Sociology, University of Nebraska Omaha

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By ManMohan S Sodhi, City, University of London and Christopher S. Tang, University of California, Los Angeles 

Speaker Nancy Pelosi’s visit to Taiwan has elicited a strong response from China: three days of simulated attack on Taiwan with further drills announced, plus a withdrawal from critical ongoing conversations with the US on climate change and the military.

This strong reaction was predictable. President Xi had earlier warned President Biden not “to play with fire”. Of course, if Pelosi’s visit hadn’t gone ahead, the Biden administration would have faced a strong reaction from both parties in Congress for not standing up to China’s threat to Taiwan or human rights issues regarding Tibet and Xinjiang, not to mention Hong Kong.

So where does it leave trade between the world’s two leading powers?

How business trumped ideology

Consider the not-too-distant past. The US supported the Republic of China against Japan in the Pacific war of 1941-45. When the Chinese leadership fled to Taiwan in 1949 following the victory of Mao Zedong’s communists in the Chinese civil war, Washington continued to recognise the exiled regime as China’s legitimate government, blocking the People’s Republic of China (PRC) from joining the United Nations.

This shifted in 1972 following President Nixon’s historic visit to China (in a move to isolate the Soviets). The US now recognised the PRC as China’s sole government and accepted its One China policy. It downgraded its Taiwan relations to merely informal, while affirming a peaceful settlement to the mainland communists’ claim that this was a breakaway province that had to be assimilated.

This opened US-China trade, ending a US trade embargo in place since the 1940s. Economic ties proliferated in the 1980s under Mao’s eventual successor, Deng Xiaoping, helping the Chinese economy to multiply while the US enjoyed lower consumer prices and a stronger stock market.

Western manufacturing firms either outsourced to Chinese firms or set up operations themselves. They benefited from cheaper production and – for those outsourcing – not having to own factories or deal with labour issues. In turn, the Chinese gained tremendous manufacturing capability.

As China’s middle class grew wealthier, the country became a major target consumer market for US firms such as Apple and GM. The Chinese authorities insisted this was done through local partner firms, transferring technology in the process and further enhancing the nation’s manufacturing know-how.

The growing Chinese threat

China and the US captured more than half the growth in GDP across the world from 1980 to 2020. US GDP grew nearly five times from US$4.4 trillion (£3.6 trillion) to US$20.9 trillion (£17.3 trillion) in today’s money, while China’s grew from US$310 billion to US$14.7 trillion.

China is now the second largest economy, although the IMF, World Bank and CIA consider it the largest once purchasing power is taken into account (see chart below). The US is still well ahead on per capita income (US$69,231 vs US$12,359 in 2021), though China’s is now that of a “developed” country, having lifted 800 million people out of poverty in the process.

The US has become increasingly concerned about China’s faster economic growth and the fact that the US buys much more from its rival than the other way around. This drove the big decline in US domestic manufacturing that famously helped Donald Trump to win the US presidency.

Chinese and US GDP based on purchasing power parity 1990-2021

Equally, the rivalry has extended to other areas as China has sought a leading role on the world stage. Both nations are nuclear powers, although the Chinese military has only 350 nuclear warheads to America’s 5,500.

China has a larger navy, with some 360 battle force ships compared to the US 297, although China’s are mostly smaller – only three aircraft carriers compared to America’s 11, for example. The two countries are also competing in space to bring astronauts to the Moon and establish the first lunar base.

All this has threatened American dominance, while President Xi has also been much more forthright both domestically and internationally than any Chinese leader since Mao. The US has gradually become more hostile, starting with President Obama’s pivot towards other Asian nations in 2016 and then President Trump’s public complaints and eventual sanctioning of China’s “unfair” trade practices.

Trump imposed extra tariffs on goods imported from China in 2018 and restricted China’s access to various semiconductor manufacturing technologies in 2020, while the Chinese responded with countermeasures along the way.

When President Biden took office in 2021, he began highlighting long-simmering complaints about human rights issues in Xinjiang and the threat to Taiwan (while still endorsing the One China Policy). He also imposed sanctions on certain Chinese companies of a kind not been seen since the Mao-era trade embargo.

US trade in goods to China 2011-21

Biden also banned goods from China’s Xinjiang region on the grounds of forced labour in 2022, affecting the purchasing of goods by many western companies. China reportedly moved workers to other parts of the country to enable western companies to keep purchasing.

Bipolarity is back

COVID-19 further increased the distance between the two countries. After China’s zero COVID policy helped to disrupt supply chains and cause product shortages, the Biden administration began calling for reduced dependency on its rival.

US firms have duly been restructuring their supply chains. In June, Apple moved some iPad production from China to Vietnam, albeit also because of growing demand in south-east Asia.

Near-shoring to Mexico is gaining momentum. Apple manufacturers Foxconn and Pegatron are considering producing iPhones for North America in Mexico rather than China to take advantage of lower labour costs and the free-trade agreement between the US and Mexico.

Two global blocs are increasingly emerging, with US treasury secretary Janet Yellen in April calling for “friend-shoring” with trusted partners, dividing countries into friends or foes. The Biden administration announced at the June G7 meeting a new “Partnership for Global Infrastructure and Investment”. Aiming to mobilise US$600 billion in investments over five years, this is an overture to various developing countries already being courted by China under its similar Belt and Road Initiative.

Days earlier, China had hosted the annual BRICS summit, which includes Brazil, Russia, India and South Africa. It welcomed leaders from 13 other countries: Algeria, Argentina, Egypt, Indonesia, Iran, Kazakhstan, Senegal, Uzbekistan, Cambodia, Ethiopia, Fiji, Malaysia and Thailand. Xi urged the summit to build a “global community of security” based on multilateral cooperation. Iran and Argentina have since applied to join the bloc.

We are already seeing what bipolarity will mean for vital components and commodities. In nanochips, the US is leading a “chips 4” pact with Japan, Taiwan and possible South Korea to develop next-generation technologies and manufacturing capacity. China is investing US$1.4 trillion between 2020 and 2025 in a bid to become self-reliant in this technology.

Another big issue is cobalt, which is essential for making lithium batteries for electric vehicles. To secure supply from the Democratic Republic of the Congo, which produces 70% of world reserves, China has navigated Congolese politics, lobbying powerful politicians in mining regions. By 2020, Chinese firms owned or had a stake in 15 of the DRC’s 19 cobalt-producing mines.

As China hoards cobalt supplies, the US seeks alternatives. GM is developing its Ultium battery cell, which needs 70% less cobalt than today’s batteries, while Oak Ridge National Laboratory is developing a battery that doesn’t need the metal at all.

Silver linings

As US-China relations have moved from building bridges in 1972 to building walls in 2022, countries will increasingly be forced to choose sides and companies will have to plan supply chains accordingly. Those seeking to trade in both blocs will need to “divisionalise”, running parallel operations.

American companies wanting to serve Chinese consumers will still need to manufacture in China or other nations within that bloc, while Chinese companies will need to do the same in reverse. Interestingly, Chinese companies have been rapidly buying farmland and agriculture-based companies in the US and elsewhere.

Yet though the new supply chains will almost certainly increase costs for western consumers and dampen China’s growth, there will be benefits. Supply chains should be more resilient to future crises and also more transparent, while reduced transportation (and reliance on Chinese coal) should cut carbon emissions. This should help to meet the UN Sustainable Development Goals on environmental and social sustainability.

The cobalt and nanochips examples also show how the US-China rivalry is catalysing innovation. And importantly, global trade will continue growing as countries depend on each other, even as trade links change.

It will certainly take time to find an equilibrium. It took years for the USSR and US to figure out how to co-exist without getting into direct military conflict. Hillary Clinton wrote in 2011 as Secretary of State that “there is no handbook for the evolving US-China relationship”, and that remains the case today.

At any rate, the businesses that thrive in this new environment will likely be those that plan for a divided world with divisional supply chains. The recent Taiwan row will probably not lead to direct military conflict; rather it will reinforce a trend that has been gathering momentum for a decade or more.

About the Author:

ManMohan S Sodhi, Professor of Operations and Supply Chain Management, City, University of London and Christopher S. Tang, Professor of Supply Chain Management, University of California, Los Angeles

This article is republished from The Conversation under a Creative Commons license. Read the original article.