Ryan Stancil,
Editor
June 14, 2021
It’s a rare thing indeed that the two sides of the United States Congress agree on anything.
Yet that’s exactly what happened last week.
Last Tuesday, in a 68-32 vote, the Senate passed the $250 billion U.S. Innovation and Competition Act.
The bill contains several provisions, but the big one is the $52 billion that it sets aside for semiconductor research, design, and manufacturing. Specifically, this is being done not just to combat the ongoing semiconductor shortage affecting different industries, but to keep up with China’s continued expansion.
It’s no secret that China has been growing economically and militarily, thus taking a bigger role on the world stage.
But it’s only fairly recently that the U.S. has been taking that growth seriously.
Leadership is beginning to realize how weak domestic semiconductor production equals a loss of leadership in scientific innovation. Likewise, it opens up holes in national security and loses the race in global competitiveness.
And when you think about all of the industries this bill is meant to help, it makes sense.
Consumer electronics and the automotive industry are the two most talked about because they are the two industries that affect the lives of the average consumer more than any other in this crisis.
But the nearly $700 billion defense and aerospace industry is just as affected by this mounting crisis.
Military hardware is getting increasingly sophisticated to the point where it has come to rely on semiconductors just as much as smartphone makers and tech companies do.
And then you have assets like satellites, radar systems, robots, and unmanned aircraft. These are things that are becoming more common in modern military operations, and so the demand for the semiconductors that power them is only going to rise with time.
That’s a problem not just because of the ongoing shortage, but because large parts of the supply chain rely on overseas plants and manufacturers. That can and has led to issues like theft and counterfeit products entering the supply chain, potentially putting American lives in danger.
The passage of this bill comes at a time when relations between the U.S. and China are strained and have been for years.
What started with the Trump administration’s trade war has since continued with the Biden administration taking various actions to make the U.S. more self-reliant at the expense of drawing China’s ire.
Officials from Beijing were quick to denounce the passing of the bill, but the reality of it is that this likely won’t be the last time we see something like this.
This semiconductor shortage — combined with the ongoing story of China’s expansion and harassment of allied countries in the South China Sea — crafts a story that will shape the next few decades.
The bill will now move on to the House of Representatives and then the President’s desk. President Biden has already signaled his support for it, saying:
“We are in a competition to win the 21st century, and the starting gun has gone off. As other countries continue to invest in their own research and development, we cannot risk falling behind. America must maintain its position as the most innovative and productive nation on Earth. I look forward to working with the House of Representatives on this important bipartisan legislation, and I look forward to signing it into law as soon as possible.”
This comes on the tail of a recent executive order that bans Americans from investing in certain Chinese companies that have ties to that country’s defense and surveillance technology sectors.
China has demanded a withdrawal of the order, but the line has already been drawn.
With increased global competition, both economically and militarily, along with a rise in cyberattacks against critical U.S. infrastructure, the United States is finally getting serious about safeguarding its interests.
And with this new bill passing and future initiatives sure to follow, companies that protect U.S. interests first and foremost are set to thrive.
Whether they provide components for consumer electronics, military technology, or critical infrastructure...
They will be profiting ahead of the rest in the coming years.
Keep your eyes open,
Ryan Stancil
Editor, Daily Profit Cycle
Ryan Stancil is an editor and regular contributor to Daily Profit Cycle. He’s been active in the financial publishing industry for more than half a decade, offering insights and commentary on technology and geopolitics to help readers make sense of the constantly changing landscape and how it affects their investments. His readers appreciate his "tell it as it is" writing style, where he always offers a fresh new perspective on what's happening in the market and leaves nothing unsaid.