Loss of chip making risky, senator says

JUNE 3–WASHINGTON — Sen. Joseph Lieberman, warning of “grave national security implications,” is urging the Bush administration to slow the flight of semiconductor manufacturing to Asian countries.

The Connecticut Democrat and presidential candidate warned of “long-term damage” not only to the U.S. economy but also to the national defense, as America increasingly relies on computer chips made overseas, especially in China.

Lieberman said advanced defense and intelligence equipment, including unmanned vehicles, electronic warfare and high-speed data processing, will require a new generation of semiconductors and integrated circuits.

But relying on suppliers in China, Taiwan or Singapore “is not an acceptable national security option,” according to Texas newspaper the Austin American-Stateman.

In recent years, only Intel Corp., IBM Corp. and Texas Instruments Inc. have built cutting-edge semiconductor factories in the United States. Other companies are relying on suppliers, many of them in Asia, to make an increasing share of their chips.

Chip factories can cost more than $2 billion, and many U.S. companies, caught in the technology slump, aren’t willing to absorb those costs by themselves.

As a result, more U.S. companies are shutting their older factories and shifting production overseas. In Austin, Motorola Inc. and Advanced Micro Devices Inc., have closed five older factories employing more than 2,000 workers in the past four years.

Charles Wessner, who directed a recent study on the industry for the National Academy of Sciences, said his team was shocked at the speed of the movement overseas.

China is offering large subsidies that have spurred plans for 19 semiconductor plants, Wessner said.

“There are now about 16 in the United States,” he said. “And a number are just for research and development.”

Wessner, who advised Lieberman on his paper, compared the U.S. industry to an airplane that is “short on fuel and losing altitude.”

Lieberman’s report cited a Semiconductor Industry Association prediction that the United States, now the world’s largest supplier of high-end computer chips, will supply only 20 percent by 2005 as Asian production increases to 65 percent.

He called for an investigation into whether China’s subsidies to the industry violate international trade rules. Another cause of the increased competition, he said, was that U.S. universities are training foreign students, who then take their expertise back home.

Lieberman said the Bush administration should offer tax incentives to U.S. firms to manufacture semiconductors here, step up engineering and physical science training for U.S. students, and encourage more joint operations by U.S. companies.


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