tv Company Execs Testify on Semiconductor Shortage Impact on Innovation CSPAN April 7, 2022 8:11am-9:31am EDT
>> come to order. we are here this morning to talk about developing next-generation technology for innovation. we are joined by distinguished panel of manufacturers, people who used this product is a cortical part of our supply chain and welcome all of them who are with us today. one witness joining us virtually, mr. preston faith and appreciate him joining us. we are also joined by one of our colleagues who wishes to make a statement and that will follow senator wicker and i. the semiconductor industry is a uniquely american story. it has shown the importance of
innovation and building in the united states. the first transistor was demonstrated in new jersey in 1947. in 1958, the missourian attended college on the g.i. bill and demonstrated the first integrated circuit. the semiconductor industry was the benefit a federal purchasing power, federal r&d helped us to get to the moon, to build our security leadership and launched the information age economy so i am pleased the united states has played such a leadership role but when it comes to manufacturing today in the united states we are falling behind. semiconductors underpin every aspect of our national and and economic security and yet we are short on the amount of advanced logic building at scale, that has to change. over 90% of the most advanced
chips come from one island in the pacific ocean, taiwan. i believe in global trade but i also believe chip security is as important as food security. that is why we need to demonstrate leadership to make investments in r&d as we seek a bill the committee work hard to get out last year. our overreliance on vulnerable global supply chains, without having an alternative ready to go, with economic security risks, a lesson we have already learned and we need to change direction. with the automotive sector thousands of americans have worked and endured layoffs and shortages, the global automotive industry suffered $200 million in losses and ford cut production at we ate plants in recent months. the cost of a used car, don't
know where you can show that, the cost of a used car has gone up 41% and new cars 12%. a lot of this is due to the semiconductor shortage. the cost of a used car has gone up, why would that be? used cars already have the electronics. if you want to buy a new car you probably have to wait because the car companies don't have enough semiconductors. people who can easily afford a new car and need one but can't get one due to the shortage are instead buying used cars and that's driving up the price. anyone knows that the people who can afford the extra 6 months are not the people really feeling the pain. it's the person whose radiator blue out last week and needs anything on four wheels to get them to their job. that is basic used car, the might have gone up $5000 in
cost, an additional 41%, and an extra $2000 is just a trip the family doesn't get to take or next month's rent that can't get paid. the impacts of this are really affecting american consumers. our national security front just reported counterfeiters are trying to exploit the semiconductor shortage by introducing fake chips into the market raising the chances the critical infrastructure and defense systems could be compromised. the shortage is also a setback in our efforts to remove foreign to look munication electronics that could be compromised by backdoors. according to the telecommunications industry, wait times for some networking equipment is now 50 weeks. the cost of the working equal and has raised 12% and price gaucher's are selling chips for 100 times their normal price. that's no way to handle it.
relying heavily on one country and largely one company creates a lot of targets for hackers. 18 months ago security researchers found hacking campaigns the compromise twee 7 taiwanese chip manufacturers to steal semiconductor chips designs. all of these are reasons we need to get this done and get to conference with our colleagues, these bills have a $2 billion investment specifically for our department of defense to secure microelectronics supply chain required for the national security mission. the shortages that we have today if we don't address them are going to continue well into the future because the world needs 1 trillion chips to be produced. that was in 2018. in 2021 we need 1.2 trillion
chips produced every year. in 2031, that will be 2 trillion chips per year. our current boundaries are already working overtime building new foundries has to be part of a long-term solution and we need to send that price signal today. if we do nothing these shortages are just an example of what is to come. i know we will hear from paccar who is going to tell us how every aspect of the freight is being affected even if it is not a high tech products. if you don't have trucks to move the products in our supply chain because you don't have enough trucks we are affecting every aspect of the supply chain so clearly we are here to talk about the next generation of chips and how the united states keeps its leadership and advanced manufacturing. that is why we are going to hear from tim archer on how important lithograph he is important for the united states
to stay ahead. we are happy to be joined by the witnesses today, 288 days since the senate passed the useca bill. it's time for us not to wait another day but to get this done and keep america's leadership going in the right direction. i turn to my ranking member, senator wicker. >> thank you, madam chair and good morning, today's hearing on semiconductors could not be more opportune and there is not a more important hearing on capitol hill this morning. the covid 19 pandemic exposed the fragility of the supply chains we depend on for public health, national security and economic prosperity so semiconductors are the lifeblood of modern industrial production, the chip shortage over the past two years has caused and made worse many of our supply chain disruptions. today's witnesses play key roles in the broader
semiconductor ecosystem which includes equipment manufacturers, chip producers and industries that consume large quantities of chips. i would like to extend a special welcome to preston feight, ceo of paccar, which was reported to senator cantwell and me. the associate in columbus, mississippi has produced hundreds thousands of world-class engines for heavy trucks and provided good paying jobs for talented and motivated workforce. i hope preston feight and other witnesses can give the committee a sense of the impacts posed by the chip shortage on their businesses, their workers and america's global competitiveness. the may conductors have become more important to global commerce, the united states has for decades neglected the industry.
america's share of manufacturing has fallen 40% in 19902 about 12% today. foreign governments including china seized on the lack of us leadership in this area and as a result we are now entirely dependent on foreign production of the most cutting edge chip technology. chip production, innovation and high-paying jobs all went overseas, leaving us dangerously exposed. the committee would benefit from our witnesses perspectives on how we got to this situation, specifically why other countries have displaced the united states as the center of gravity in semiconductors. the good news is congress has an opportunity to restore american leadership in semiconductors in the short and long run. i'm hopeful the house and senate leaders will come together in conference committee to reconcile the differences between us
innovation and competition, useca and the house passed america competes act. both improve the chips act which would provide tens of billions of dollars to incentivize thomistic chip manufacturing to stabilize the supply chain and make long-term investments in r&d. for our part, senator cantwell and i helped shepherd useca to passage in the senate by a 68-32 vote. we are ready to go as the chair indicated. i'm confident a fair conference process will produce landmark legislation to keep america ahead in r&d. . i also ask our witnesses to comment on the importance of the chips act, and what it would mean for their businesses. vladimir putin's illegal war on
ukraine has shown what can happen when we rely on dictators to maintain economic stability. russia's criminal war of aggression has exposed long-term dependencies, sent prices for gas, wheat and industrial metals soaring. unfortunately russia is not the only strategic competitor with designs on other countries. china has demonstrated aggressive behavior toward taiwan and stated its intent to challenge taiwan's sovereignty and independence and taiwan accounts for 92% of the world's most advanced semiconductor manufacturing. think of the consequences if china were to invade our taiwanese partner. let us keep that scenario in mind as congress continues its critical work on restoring american leadership in this vital industry. thank you, senator cantwell. >> thank you, i also agree with your statement so you and i on
the same page and hopefully. will get our colleagues on the same page, we've been joined by the chairman of the finance committee who played a leadership role in chip legislation and is here to introduce one of our witnesses. welcome to the commerce committee, a committee you served on for quite some time but still keep very close tabs on you when you keep close tabs on us particularly when it comes to privacy legislation so thank you for being here. >> thank you, chair cantwell and ranking member wicker for your important remarks and for the chance to be able to introduce the ceo of intel, pat gelsinger. i am a proud alum of the commerce committee and senator wicker, i recall the brevity for the cause. it has been nearly 50 years since intel's first investment
in my home state of oregon. the company pat gelsinger leads is my home state, largest private employer, upwards of 20,000 oregonians work at intel. these colleagues, good paying jobs, not only add to our state's economic vibrancy but they helped to keep oregon and our country at the forefront of tech leadership around the world. a little over a year ago pat returned to intel where he spent three decades earlier in his career. he and i have had many discussions about what chip manufacturing needs to oregon and the entire country. from the time the typical american gets up in the morning to when they go to bed at night, and sometimes even while they are sleeping they interact with thousands of
semiconductors. congress is finally waking up to the fact that computer chips are the beating heart of the 21st-century economy. the semiconductor supply chains made it very clear how essential chips are to the health of our economy and our everyday lives. without understanding there's a big bipartisan interest in supporting a domestic vibrant domestic chip manufacturing sector. under pat's leadership intel is stepping up, intel has committed to continued investment in oregon and committed to putting billions of dollars of their money to build new manufacturing capacity in the united states. as you both have noted congress has got to step up and do its part to launch america's chip manufacturing revival. there's a big opportunity ahead
of us to build a more resilient economy and create many thousands of high skill high wage jobs in our country. pat and his team at intel are going to be at the forefront of the effort. let me close with this. of congress fails to do its part you both have made clear our country is going to pay dearly, that's why failure here is unacceptable and it is important to recognize this is the beginning of a much larger effort. everybody here has a busy schedule so thank you for giving me the chance to introduce pat gelsinger, ceo of oregon's largest private employer and i appreciate the chance that he will have to describe what his company's work is all about and why it is so critical to my home state of oregon and our country's economic future. >> we know how busy everybody is, we appreciate it.
so please start us off, pat gelsinger. >> good morning, thank you for that most kind introduction and to the members of the committee thank you for the opportunity to speak with you today and your support for funding the chips for america act. every aspect of human existence is becoming digital and everything digital runs from semiconductors. we provide examples of show and tell, the most advanced high-performance computing components. the latest generation of 7 nm server and client products and the first-ever samples of our four nanometer next-generation client product as well. this is what we are talking about. the most advanced components on earth. semiconductors are the foundation for technologies including artificial intelligence, 5g autonomous vehicles and iot, our economic
and national security are dependent on semiconductors. digital transformation has led to unprecedented demand for chips made more acute by the covid pandemic and disruptions in the global supply chain. the chip shortage cost the us economy $240 billion last year. we expect the shortage will continue into at least 2,024. america showed leadership when congress passed the chips act but the situation has grown more serious since then and the supply chain shortage is truly global. that you needed began its work on their chips act a year later than congress, i expect you but he did funding will be made available for this year. other governments are aggressively offering significant incentives to semiconductor companies like ours to build on their shores. we must look beyond short-term capacity and recognize what us chip leadership entails with four areas of focus, incentivized manufacturing on us soil, supercharged research
and develop and, third, address the skills gap and forth, enhance our national defense. when it comes to manufacturing, the world needs geographically balanced resilient supply chains. in 1990, 80% of semiconductors were built in the us and europe. today 80%, with only 12% in the us and half of that in intel. asian countries moved aggressively to attract this industry was strong incentive policies. as a result the operating cost to manufacture in east asia's 30% % to 50% cheaper compared to the us. this is particularly significant for investment of this scale, a modern advanced semiconductor fab cost $10 billion to build and equip. focus on semiconductor demand will double by the end of the decade to $1 trillion. currently only the united states, south korea and taiwan manufacture the leading chips the power everything from your computer to the joint strike fighter. for our entire 53 year history
of the company we have performed the majority of our r&d and manufacturing in the us. we have put our chips on the table to help the us regain process technology and manufacturing leadership. in the last year alone intel has announced $43 billion of us manufacturing investments with expansions in new mexico to arizona and ohio. our initial hub, our initial hub in ohio will establish the first advanced semiconductor in the midwest from the company that helped create silicon valley, we are now creating the silicon heartland. i assume we receive support from the chips act, total investment could grow to one hundred billion dollars over the next decade. we thrown our factory doors open wide to provide capacity for us and global founder companies, we seek to rebuild the entire supply chain on us soil. intel is one of the world's top
r&d spenders. in 2021 we invested $15 billion in r&d until creating the support of the national semiconductor technology center and national advanced packaging manufacturing program for the chips act. i also implore congress to restore the ability to conduct r&d expenses, policy that has been in place for decades. these research partnerships and restored deduction will drive the lab to fab pipeline. our workforce consists of well-paying jobs across construction, skill manufacturing and research, increasing access to stem education is essential for building a talented, diverse pipeline, intel detailed plans to invest $100 million over the next decade with community colleges and universities and the us and nsf, building up of us commercial capacity is
essential for defense and national security. we seek vibrant world leading commercial capacity leveraged with the additional requirements of defense and intelligence. further we encourage a strong increase in partnership with you but he did to meet our mutual global needs. almost all the critical technologies and semiconductor comment and manufacturing are in the us or the dirksen senate office building. i want to thank you for the opportunity to testify for committee support of the chips act, we are slated to break ground in ohio this year. i challenge congress to find a path forward in chips act funding before then. i want to go bigger and faster. thank you very much, look forward to your questions. >> thank you for that testimony and hopefully we will get to the questions we drilled on on technology and why it is so important in its application.
we appreciate that micron's specific business even though you are located in 7 different states. mehrotra has been ceo since 2017 and award winner of the ieee awards for contributions to your technology so thank you for being here. >> i'm honored to appear before you to talk about the semiconductor industry and it is important in helping the united states to maintain global -- let me start over again. members of the committee which i'm honored to appear before you to discuss the semiconductor industry and its importance in helping the united states maintain global competitiveness and secure a leadership role in semiconductor manufacturing and critical innovation in future technology. i commend this committee for its leadership on these important issues.
with your permission i submit my statement for the record. escalating geopolitical risks have highlighted the ability to reconcile and pass an innovation and competition build includes full funding for the chips act and investment tax credit, part of the bipartisan act. these incentives together would invigorate domestic manufacturing in the semiconductor industry and allow companies to invest with confidence for the future. together these developments will kickstart investment and workforce development, r&d, innovation and expansion of manufacturing in the near term. the leading edge of semiconductor manufacturing technology in micron is leading the world in this technology which we are proud of the almost 50,000 patents we hold. nhs can be found anywhere data is processed, cell phones, automobiles, computers, defense systems, truly foundational for
all future technological innovation and development. micron is the only company developing storage technology in the us with operations in 9 different states. we are headquartered in boise, idaho with 43,000 team members worldwide, nearly 10,000 employees are us-based. and we had a design center in atlanta, georgia, first location in the southeast giving access to diverse talent. i leave you with one key take away today. the us government means to level the playing field and create incentives to support investment in domestic semiconductor manufacturing facilities. nearly every other country that has a significant share of semiconductor manufacturing offers major government incentives including grants and tax based. the federal government does not. funding under the chips act and
refundable investment tax credit are both needed to ensure department and continued ability of a scaled up industrial base to guarantee domestic supply of semiconductors, both leading-edge and legacy chips into the future. i want to emphasize the chips legislation is necessary but not sufficient. the refundable investment tax credit is equally important to enable confident long-term investment in significant manufacturing infrastructure. micron has announced plans to invest one hundred $50 billion globally over the next decade in leading-edge memory manufacturing and research and development. we continue to explore plans to build new plants in the united states. our expansion plans would constitute one of the largest single semiconductor investment in the history of the united states, require close coordination with federal and
state partners to ensure economic viability of operations in a global competitive marketplace. however, to be commercially viable over the long term, we must produce at high volume consistently. multiple facilities required to achieve this case, each costing tens of billions of dollars fully equipped. technological advancements are extensive. our competitors abroad have benefited from 35 to 45% lower operating costs due in part to investments of other governments. this is an opportunity to change the trajectory and put the us on competitive ground for the future. i urge all parties to help the chips act into law. chip funding and the refundable investment tax credit is set the stage for a chance to transform investment in large-scale leading-edge in the
united states, and ensure the united states does not lose out to its competitors abroad. thank you again, members of the committee, for the opportunity to testify today and i look forward to your questions. >> thank you for your testimony, appreciate you being here. we are now going to go to mr. preston feight who is joining us from europe. paccar is located in the state of washington and we appreciate them as a manufacturer of heavy-duty trucks. i know he wanted to be here in person but it is so important to get his viewpoint on how this shortage affects the supply chain and the transition to where paccar would like to go. very much appreciate you joining us, thank you, we will go to you. >> thank you.
another distant list member of the committee, thanks for inviting me to testify today. we manufacture trucks, our truck brands represent 30% of the marketing us and canada, 16 in europe. paccar was a manufacturer of heavy trucks, 1/3 in washington state and people operate in new york factories, trucks in washington state and ohio, in texas as noted earlier in mississippi. paccar has innovation centers in washington state, texas, california that is where we develop technology leading 0 emissions autonomous and connected vehicles. thanks for your bipartisan work to discuss semiconductor supply shortages. the chip shortage has limited reduction of commercial parts for a year leading to a
shortage of trucks throughout the country, distribute in supply chains across numerous industries, raised prices for consumers and delayed access to could hold goods and services to businesses and communities. 70% transported on a truck. over 80% of us communities depend exclusively on trucks to deliver food and agricultural products, fuel and medicine, manufacturing, business supplies and consumer goods from groceries to automobiles. we all experience the importance of the trucking industry during the pandemic and more trucks are needed now to build new housing, highways, bridges, clean energy infrastructure and communications networks. basically america's economy moves on trucks, and truck manufacturers and suppliers need adequate and affordable supplies of semiconductors to build and keep trucks on the road.
instead we continue to face shortages. today throughout the industry thousands of unfinished trucks are parked across the country waiting for chip enabled components and additional trucks are out of service waiting for repair parts. this is disturbing considering the entire trucking market requires an estimated 13 million semiconductors compared to a total semiconductor industry output of 1 trillion chips. just one of every 86,000 semiconductors needed to keep america and supply chains moving. a year ago during the pandemic there was a legitimate event like covid related plant shutdowns, ice storm in texas and a fire in japan that led to chip delays. to mitigate the issues associated with those events truck manufacturers spend a lot of money in medium and long-term engineering redesigns to impact chip constraints and engaged to align on best
practices. still shortages remain and premium prices purchase chips on the market and it is not possible to purchase chips directly from industry suppliers to chip manufacturers. these prices are often 20 to 30 times higher than contract prices. furthermore, manufacturers see lack of clarity on semiconductor delivery schedules and experience cancellations from our suppliers often with inadequate visibly provided. semiconductors are critical for necessary production of trucks, this creates turmoil for all manufacturers who must manage immediate production changes or be forced to shut down plans. something put the fabric of america is adversely impacted when truck factories are forced to shut down or curtail production due to these shortages. to address the costly impact on america's trucking industry and broader economy we suggest companies requesting chips act
funding be required to meet the needs of american critical businesses including truck manufacturers before they receive us taxpayer dollars. this could be accomplished using the critical infrastructure workforce guidance developed by dhs, cybersecurity and infrastructure security agency which was used throughout the pandemic to ensure continued operations. we are concerned without upfront conditions on the use of chips act funding the supply constraints and allocations which limit trucks to deliver essential goods and services for communities, to ensure accountability of public funding and provide near-term relief to america's trucking industry and supply chains we recommend applicants for chips act funding be required to sue but a plan to the commerce department detailing how their existing semiconductor allocation strategy and investment decisions are currently and will in the future prioritize production of
semiconductors to support critical infrastructure industries and related jobs in the united states. thank you again for the opportunity to share our perspective . . . . . . . . . . . . . . . . . . i'm glad our panelists are ceos and engineers, gives us a chance to dig deep on some of the science we are trying to get right which is part of the mission of useca. particularly the translational side. to translate the science faster. so tim archer, your company
can't just build fast, we need the equipment and tools that do the work that help us keep our cutting edge, to bring together physics, you are a physicist, and other fields but we need to be leading-edge in the united states manufacturing so we look forward to hearing your view on this part of the infrastructure that we need. thank you for being here. >> thank you for the opportunity to appear before you today. i am tim archer, we are one of the world's largest semiconductor equipment manufacturers. the research makes the machines that make the chips. in california, we have 16,000 employees worldwide. we are a world leader developing state-of-the-art manufacturing equip and that brings together the first disciplines like plasma
physics, materials science, advanced robotics and artificial intelligence to create nanoscale semiconductor fabrications. complex machines enable companies like intel and micron to produce sophisticated integrated chips in high-volume. i would like to thank you and others in congress for the vision you have shown towards addressing challenges and opportunities facing the semiconductor industry. recent events like the chip shortage have put a spotlight on the challenges but i would like to stress us leadership in semiconductor manufacturing technology is strong. competitiveness is rooted in innovation, drive and resourcefulness of american companies. i'm proud of the role our employees have played for four decades in setting the pace for innovation and maintaining leadership in the global market. semiconductors form the
foundation of smarter, faster and more connected digital world. it is vital to create a secure was so -- resilient supply of semiconductors and accelerating an ovation ahead of the rapidly evolving technological complexity. congress recognizes supply and innovation is taking bold steps to strengthen semiconductor through the chips act which will fortify our supply chain the workforce, domestic resource development. this partnership with industry and government will contribute to us leadership in semiconductor technology well into the future. as you continue to work on these efforts we will highlight three areas that benefit your continued consideration. first, and all ecosystem approach, the chip shortage we are experiencing highlights complex and interdependent nature of semiconductor ecosystem and the need for
sustained investments throughout the supply chain. this is increased our workforce in the united states, 45% in the past two years adding 3,500 jobs including high-paying engineering and advanced manufacturing facilities in california, oregon and ohio. we also rely on hundreds of american suppliers many of whom are struggling to keep up with the rapid pace while lingering on the final effects of the pandemic and a tight labor market. we are grateful policymakers recognize these challenges and will support the industry comprehensively for the commerce department's grant program to establish the chips act and important r&d programs like investment tax credit. we urge congress to act quickly to pass these measures.
leveraging these, partnerships with academia and national labs, critical to any collaborative innovation strategy. plasma research is key in the future of semiconductor developments. legislative proposals like microelectronics, research, energy innovation act, a move forward, and deploy federal resources including national labs to sustain these partnerships. there is an outstanding opportunity, with industry, government, academia and national labs in centralized and collaborative space. the establishment of the national semiconductor center provides a new pathway to
sustaining us technology leadership by creating opportunities to explore new ideas and quickly transition breakthrough technologies, in closing we believe it is vital to prioritize competitiveness, collaboration and supply chain and us leadership with global industry. >> thank you for that. i love the collaboration. collaboration is the next form of innovation. you collaborate to get it implemented, you don't have it. around here we have to be more collaborative. the first round of questions for colleagues who might be joining us, then to jump in later with my questions. >> feel free to jump in.
and semi conductors in asian locations? >> two affects. they pursue this industry with strong policies and high incentives. >> provided by governments. >> what do they do in taiwan and china? >> incentives could be as much as 70% for some of the capital incentives in china so strong capital incentives available, those countries recently announced major expansions, korea announced $100 billion capital incentive programs for their semiconductor industry. >> that is one factor, government incentives. >> many lower end supply chains were in asia. at the consolidation of the
supply chain so it is a more efficient overall supply chain. >> for example? >> power supplies. around the supply chain, the more efficient supply chains focus on cost. not on resilience. we believe we need a globally balanced resilient supply chain, what we are suggesting in the chips act is rebalancing 50% gap we spoke about. allowing it to be competitive to compete for the global market. labor costs are a factor but it is primarily capital cost, the largest portion of depreciation of capital cost dominates the overall cost, labor costs on those areas of the supply chain.
>> you want to add anything to this line of questioning? >> i would just add, 2%, 98% of semiconductor manufacturing, for the very reason over the last 20 years they supported semiconductor industry on shore in countries outlined earlier as well and they are being produced by micron, and leading-edge, 35 to 45% cost difference that exists for
manufacturing in asia to build the leading edge fair, that gap is overcome through investment tax credits to bring more manufacturing on shore. long-term resilient operations and memory to present six -- 60% of the correction and semiconductors. along with the rest of the semiconductor ecosystem advancement. with economic prosperity and national security. >> it is fair to say governments in these locations made the decision to spend government funds to incentivize the production of chips in their jurisdictions.
>> if we are going to get them back, with grants loans and tax incentives to incentivize them in the united states. >> what we've seen recently the world recognizing the criticality of the semi conductor industry. very recently for further incentivize these industries on their source the car criticality and urgency denied before us. >> to take some leeway to ask
preston feight, are we ready in the united states with a workforce trained well enough to get the global percentage back from 12% to wear it ought to be and what we need to do in that regard. >> our experience, we have an amazing workforce, great people in all our a location that have high skills in silicon valley offices in mississippi so we have great workforce but training is needed, specific skills for these industries. >> i believe there is a partnership with east mississippi community college and mississippi state university that is helpful at your columbus facility.
>> very correct. >> that is very correct. we have had such wonderful experiences with our universities and schools around the area to develop people and put them into great careers and jobs. you are absolutely correct. >> thank you very much. more questions later. senator johnson, you are recognized. >> thank you, mr. chairman. again, these are interesting statistics. 12% of chip manufacturing here in the u.s., primarily because other countries have provided industrial policy basically, and they provided financial incentives to move overseas. did the u.s. chip industry -- did you consider as you were moving all this manufacturing overseas, just the risk to your own industry, not to mention national security? >> i'm very proud to say that
intel has remained primarily on u.s. soil over this period of time. the vast majority of our investments are in u.s. and european soil, with a very small amount in asia. really what's happening is the rest of the industry has moved dramatically over this period of time, largely responding to these incentives that we have described of our investments, well over half land on u.s. soil with approximately a third in europe. we have been one of the few companies that have remained highly dedicated to u.s. r & d and manufacturing investment over the entirety of our 53-year history. the trends have affected the rest of the industry in a dramatic way. >> of the 12%, what percentage is intel? >> about half. >> obviously, this would be considered unfair trade
practices, correct? when you have got different countries subsidizing the industry, putting it at a competitive advantage. i guess there's two ways to approach that. slap tariffs on that. or you can, i guess, try to start your own industrial policy here in the united states, which is apparently the path we are taking. does that pretty well sum things up? >> we would also emphasize, without such actions, we see that foreign countries, as we have already indicated in the testimony, are taking very aggressive steps. they view and understand the criticality of semiconductors underlaying every aspect of the digital future. that's why we speak with such urgency and passion on this topic to be restored on american soil. this is foundational to every other industry and every other aspect forward. thus, we believe it's justified to take such steps as the chips act. now, we would say that this
industry, one that was born in the united states -- this is our industry that underscores every aspect of looking forward. now is the time for action. >> i think my concern is when government starts attempting to allocate capital, it just screws things up. it doesn't do it very efficiently or effectively. i'm concerned, as opposed to pushing the unfair track practice route, going that route, to just, let's join in. let's engage in the same type of activity. >> given what we've seen worldwide a 30 year trend is dramatic. these are not overnight actions taken by foreign nations, there are concerns on how it was out located, without such steps our industry will be further undermined, we will lose credit en masse in the future and never have the opportunity to restore this industry on
american soil. >> give me the macro numbers. how many dollars of capital are provided in unfair trade practices by overseas competitors kick you how many hundreds of billions of dollars? >> in the last year we've seen european suggest $40 billion, the koreans suggest one hundred billion dollars, the chinese suggest one hundred billion dollars, these are stiff investments. what we are seeking is to unleash public, leveraged investments where these investments would unleash $3 to $4 for every dollar put into as well as research investments are long-term, industry was born out of these investments decades ago, near-term reversal in the manufacturing footprint that is most critical to the world. >> there's 20 of capital available.
>> it is not like we are short capital. it is just that there is unfair trade practices engaged by other countries. >> others have seen the criticality of this industry and invested for so many other aspects of the technology industry. that is why they have chosen to take such practices aggressively and we see such action needs to be taken in the us to restore this industry. now is the time to act. >> it is almost mutually assured destruction, a race to the bottom. i am a badge free trader. i don't like tariffs but almost hate making our location capital worse. >> as we think about tariffs and other export policies, they are further hurting american industry because other countries are not putting such limitations and practices in place in their industry. to say it is not helping our industry but hurting it
instead, this very odd logic. we need to take steps to restore american competitiveness, to improve trading and export practices globally and to do that, partnering with our friends globally is critical as well. the industry may never be back on american shores. >> i am aware tariffs heard american consumers but i'm concerned about engaging this race to the bottom in terms of governments across the world doing the capital investment. that long-term is not a good solution. >> i will go next to senator wicker to make a quick comment. >> in response to a question to senator johnson, when was the significant darpa investment
early on and to what extent do governments supply funds to get it started? >> many of the original elements of the semi conductor industry date back to the earliest days of darpa. that was 50 or 60 years ago that produce many technologies that the internet, semi conductors, ai runs on today. these are long-term research investments. that's why we see things like the and ftc portion of the chips act, a cortical aspect, not just worried about the next decade of this industry but decades of this industry into the future. >> this will be the last. do you know if transpacific partnership would have addressed these problems? >> i'm a big believer in the tpp. that would be key be good policy to work closely with our european allies and our asian allies, these are countries
that want to work with us and as i mentioned in my oral testimony many of these countries together represent almost all the semiconductor technology and equipment in the world aligning with partners in tpp and the technology trade collaboration that has been initiated in the us and europe. we view these policies as positive ones we fully support. >> maybe the witness could supplement specifically about the tpp addressed subsidy of other governments in answer to the inquiry of senator johnson. >> i will take my route and we have other members who are waiting and hopefully we will get to them and if people want to second round, as long as people want to be, i want to say we had the same debate when
talking about what happened with covid and the airlines and issue a report the government made and made quickly is going to pay for the government back into the investment so the covid pandemic and we have to make decisions about whether to keep the workforce running and the us approach to that worked. so here, all of you have touched on it in so many ways, it is about future investment. that's why this is about the advancement of next generation chips. it is about how does the united states keep its leadership? as you noted we've gone from 36% down to 12 and the question remains if we do nothing, where are we going to go? i believe in ecosystems, the
manufacturing supply chains that exist for automotive and aviation, i want the manufacturing supply chain and ecosystem to exist on something as essential as chip technology given the information that you could say is the ultimate supply chain if you will. on this graph, the amount of us leadership continue to fall off as we go to the next generation chips. it is not just how many chips are produced, whether you can produce chips that were the last generation of chips, it is about producing the next generation of chips with higher intelligence. that is why i like pat gelsinger's detailed testimony about all the advancements intel is making. the partnership with european company asm l and mr. archer talking about this as relates to plasma.
you are the ultimate story of translational science that we are trying to capture. we are trying to tell our friends and people in america that we've done a lot of basic research and advanced research but china is spending 80% of their dollars on commercialization so this is about whether we take the next generation of technology to deploy faster and remain on the leading edge and if we don't, all that manufacturing is going to go somewhere else, not in the united states and as we see, americans woke up and understand intuitively what supply chain is about. they don't get their products. if you tell him that the ultimate product of the supply chain chips is all now leading
edge in taiwan, basically sitting here with a big vulnerability of the united states. what is it that we need to keep doing. and all these advancements, and talking about more translation. and what it means, what it means to the products, can you give us what kind of -- what are we talking about as far as advancements of chip capability. ..
introduced in 1989, and this chip at 1.2 million transistors on it, the most advanced server chip i just put into your hands here samples is on intel seven, which is your chart is now out of date. we are in production of our seven-nanometer projects. this is just mind-boggling the progress that's been made. as we think about application usages like an autonomous vehicles, the most advanced ai applications, vision detection and being predictive on management of driving, the most advanced mrna sequencing capabilities, speech recognition
capabilities, the ai applications across numerous industries, five and 60 connectivity. all of these depend on the most advanced technologies available. they need the highest high-perfe computing at the lowest power capabilities to process these most advanced algorithms. we predict that by the end of the decade we will have our first trillion transistor chip, right, and those kind of capabilities are for many of the immersive experiences of the future that will define the future competitors of industries globally. >> mr. feith, what do you need from them? what do you need them to keep doing as relates to next-generation technology for your trucks and inefficiencies? >> sure. i think he spoke well on the high technology and of some of the needs we have for vehicles that are fully electric or zero emissions using hydrogen fuel cells are a torrent of visual
graphics are so important, machine learning so important but we also, the agriculture, the automotive, the truck industries need some kind of our call it more standard chips that keep affordability at the right level of performance at the right level to make all the cars trucks and tractors we need in this country. they shouldn't be left behind in the thinking, can't have a life cycle of two to three years, otherwise the cost of products will go up incredibly to redesign cars trucks medical equipment that quickly. so it's kind of both. >> my time is expired but i think, if mr. thune, if senator thune is available that i think it is senator moran. >> thank you, chairman thank you ranking member and are witnesses today for joining us. according to a report issued by the semiconductor industry association, less than 5% of of the global manufacturing share for packaging, assembly and testing is done onshore, onshore
of the united states. we have companies in kansas and across the united states that are well-positioned, i know are well-positioned to increase the capacity alongside chip fabricators like intel and micron to address shortage issues for the automotive and other industries. i would ask all three of you, can you comment on importance of having the chip at investment address post-fabrication or downstream part of the semiconductor supply chain to reduce the supply chain and security vulnerabilities? >> overall, the indications are exactly as you say. the package assembly test which is generally more dependent on low labor cost, has even drifted more aggressively to asia. we believe it's critical to restore the integrity of the entire supply chain including advanced packaging assembly test on america or at a minimum in north america.
pieces of the chips act specifically are designed in this area of advanced packaging capabilities. our objective would be an entire reshoring of the complete supply chain natalie including package assembly test but also many of the subcomponents key minerals et cetera all being brought back to u.s. soil. we believe we need a geographically balanced resilient supply chain for the future starting with the most important thing but it must also comprehend the entire supply chain. >> anyone have anything to add to that? >> yes, i would add that of course leading-edge investment, investment in leading edge technology are the most important, tremendously important to innovate and differentiate and to really open up new applications. of course these should be a leading edge of vehicle manufacturing as part of chips act as well as investment tax credit both are essential to ensure america's leadership in
semiconductor r&d and manufacturing but certainly aspects of advanced packaging should also be emphasized as part of the overall developer. i want to highlight here that why he investment in leading edge technology is so important. if you go back to the earlier question regarding importance of addressing technology, let me take you back to early 1990s when technology was taken from the lab into high commercial production. since then the cost has come down of technology, advancement of technology by more than 10 million times. this is what is unleashed tremendous innovation that memory is being used in data centers, to smart phones, pcs, to consumer devices, two electric vehicles in future and to continue to unleash innovation come to continue to provide what technology is has delivered and how it has become the backbone leading-edge
technology is really, really important. and as part of that leading-edge memory which is what micron as the only company in the u.s. developing and manufacturing semiconductor memory here in u.s., it's really important to emphasize this piece as we go forward to bring more leading-edge memory technology onshore. these investments with the support from the government and chips and investment acts not only support the companies and bringing manufacturing onshore, they create tens of thousands of jobs, hundreds of thousands of jobs over a a predetermined s. >> achy. i'm going to try to get a second question in. i heard before had to leave a moment, i heard the importance of research. what is, where is the funding sources, federal funding sources that seem to be either available or missing? what the natural kind of opportunity we have to support research in the united states to keep the technology in its
latest advancements? >> generally, the research efforts are across our academic communities, largely national science foundation and darpa have been two sources assisting government partnerships. we've seen the role of governments funding research to drop dramatically, right? into the semiconductor industry over the last several decades, and really that was the seed corn per my earlier testimony, that's enable this industry to emerge. so we believe that those research of dollars need to e those long-term material science chemistry creating the future done largely to the academic institutions, , the establishmet of the national semiconductor technology center in the chips act as well as the advanced packaging technologies are just great venues to reestablish the kind of focus for the future. something that's well-established in foreign efforts, we see those in europe,
in asia, and we lost the focus in his. >> mr. gelsinger i met appropriate for darpa, and appropriate or for nsf, lead republican. these issues matter to me and just an opportunity for you and others and we've increased the funding for research where is being spent is not necessary determined by us but by those agencies but it is opportunities i can be of help that her subcommittee can be of help to attract the attention necessary to the importance of research in this field, please reach out to me. >> i would cherish the opportunity to spend more time with you on the topic. >> thank you. >> senator markey. >> thank you, madam chair. as we consider the $52 billion in taxpayers money to subsidize the chip manufacturers, we can't ignore the environmental impact of this manufacturing. we need to obviously have a plan in order to deal with all of
those issues so that we are in shoring that we reduce greenhouse gases, that we reduce carbon in the atmosphere. so my question would be, i know that lam research has committed to carbon neutrality by 2050. that's an important step, but it's not enough. you must get to net zero across all greenhouse gas emissions. and to the other witnesses, will you commit that your companies will reach net zero by 2050? mr. gelsinger. >> we will be shortly describing a a detailed plan to accomplish net zero by 2040 and we are laying at a more aggressive plan to be our 100 100 in 2030, o
by 2040. we've also been widely reckon a -- >> is that all greenhouse gases? >> yes. and we've also been widely recognized company for leadership work in areas like water reclamation, minimizing hazardous gas and chemicals as well as our overall efforts in sustainability. something we received numerous awards for in a in a yearlo for many decades. >> great. next. >> micron has a strong program and emphasis -- >> will you make that commitment? what you make a commitment to reduce data zero greenhouse gas emissions by -- >> in the long-term we actually -- >> the long-term is what you're. >> as . >> was with a program in place regarding investment -- >> which year? >> we will soon be announcing that. we have not yet laid out the year but we're making strong progress with respect to greenhouse gas reduction, waste management, water recycling as
well as renewable energy uses. >> which is admirable but we need dates. we need commitments, and if speed is we absolutely -- >> we expect you to make the same promises. i want to say that you and we will hold you to and you will hear from us if you don't do that. we can do both at the same time. we can compete on the one hand, and also show the rest of the world that you can reduce greenhouse gases. >> senator markey i just want them to produce enough chips we can electrify all our transportation sector right now is what i would hope but i do agree, have goals added. >> they should be the model. we can't expect the rest of the economy to be efficient if the industry that provides the technology to make us sufficient cannot do it. they should be able to square that up in terms of their own corporate agenda. and on to water usage, the production of semiconductors requires millions of gallons of water per day.
semiconductor companies water usage is skyrocketing. intel and micron both use approximately 14,000,000,000 gallons of water in 2020. chip manufacturers must work to restore water to their local water systems so they are replacing the water they use with an equal amount of clean water. i want to acknowledge intel for pledging to be net positive on water usage by 2030. mr. mehrotra, can you make the same commitment? >> we actually in boise, idaho, have program in place with 75% reduction in water improvement. that's 75%. and we have absolute programs in place. and i wanted to also highlight to you that we've made commitment to be investing over $1 billion over five five n years and programs related to sustainable operations.
again, related to all aspects including water. water recycling -- >> and you commit to being net positive on water usage by 2030? >> so we again have timelines outlined in our report that we publish on an annual basis, and with absolutely continue to make improvements in these areas. >> well, there's an old saying to those, too much is given, much is expected. a lot is going to be given to the industry by the congress and we have high expectations for you to be the model so we'll be looking very closely at the commitments that you're making because it is critical that we solve the supply chain problems that are increasing prices and harming consumers but we have to do it simultaneously while solving the climate crisis and ensuring that the environment is not collateral damage or just something that's an afterthought. that's historically been the case so we just want to let you know that -- >> senator, and want to highlight this is a priority for us. we publish a sustainability
report on an annual basis here are milestones and goals are outlined there and you will hear more about this in terms of big goals coming from us and higher ambitious targets in this regard soon. >> the sooner the better and the higher the better. so we look -- >> we are aligned on his go. >> thank you senator markey. senator scott. >> for so want to thank chair candle for hosting this abortive. aborted. i want to thank each of you for being here. my background is i ran copies, i start a company from scratch so i learn pretty early if you do get a return on investment you didn't do very well. also as a businessperson you try to look at what's going on around the world and one thing i would be focus on today if i did business in common with china is look at what's happening in russia right now with the american public is furious with what's going on with ukraine. we are expected american companies to stop doing business with russia. so if i'm doing business with communist china today i would be
concern the same thing will happen with communist china decides to invade taiwan. so first mr. gelsinger i want to talk about intel. the company is clearly doing well one of the top ten most profitable companies in america. the world's second-largest semiconductor producer and last year you made $20 billion in income with the 25% profit margin. everybody in business in the world would be proud of that. those are great numbers. you invested $25 billion across from your company last year including some chipmaking expansion. thank you for your expansion. we should've been in florida put your expansion in arizona and ohio so on a business guide, i like the the fact people are investing. when speaking about billions of intel's new investments last year you said quote, it does not depend on a penny of government support or state support or any other investments to make it successful. we're making this commitments without any commitments e governments to assimilate them,
unquote. you've completely change your tune recently. you are also quoted as saying let's not waste this crisis in regards to receiving taxpayer handouts. which should scare all of us. this is on top of your company apologizing to communist china for the sanctions on the xinjiang region where the chinese, is committing genocide on the weaker people. look, i'm a business guy. i've heard countless pages for capital. here's my question for you. number one, i feel like we are fiduciaries for the american taxpayer. they give us the dollars, the want to make sure those dollars are spent well. so tell me how, if we put this all the money in and my understanding is your company will get $4 billion, we put this all come all this money in. how does the american tax to get a a return? on top of this why wouldn't you as a ceo of a company to a significant business in china be scared to death of what's going on now with whether it's the
uighurs, stealing the basic rights of hong kong citizens, harvesting organs of prisoners, then you watch what's happened in russia point and american public is going to be serious with a company that still does business with communist china if they continue to do those atrocities and then invest we're going to take you live in capitol hill where lloyd austin and general mark milley will testify on the president's 2023 budget request before the senate armed services committee. you are watching live coverage on c-span3.