Semiconductors and Canadian National Security: Causes, Consequences, and Considerations

Table of Contents Introduction Semiconductors and the World Economy Chips and Defence Consequences for Canada Conclusion About the Authors Canadian Global Affairs Institute Introduction In his March 2022 State of the Union address, U.S. President Joe Biden told a packed House of Representatives that the path to rebuilding America’s economy was to reduce its reliance on foreign supply chains: “Economists call it ‘increasing the productive capacity of our economy.’ I call it building a better America.” The president’s speech was just one of many public appeals for the United States to curb its dependence on others, while simultaneously increasing its production of critical goods. The post-pandemic economy has presented the U.S. with several unforeseen supply chain disruptions that are further contributing to inflation, especially in key manufacturing and technology sectors. Russia’s aggression against Ukraine, simmering conflict between North Korea and American allies South Korea and Japan, plus rising tensions (and the perception of it) with China over Taiwan and Hong Kong, continue to upend the Pacific and European regions. This instability has exposed vulnerabilities in the U.S. aerospace and defence sectors with respect to the flow, sourcing and importing of a wide range of critical materials and advanced components. To curb some of these challenges, in August 2022 the U.S. Congress passed The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, which earmarked $280 billion towards boosting the research, production and manufacturing of semiconductors in the United States. Semiconductors are a critical component needed to make microelectronics (MEs). Also known as chips or microchips, MEs are comprised of microprocessors, transistors and sensors. These small pieces of technology power just about every modern device, ranging from smartphones to automobiles, to airplanes, to dishwashers, to national defence systems. If state-level funding and private investments are included, more than $1 trillion will likely be allocated towards this effort over the next 10 to 15 years