Month: July 2022

The United States and Japan launched a new high-level economic dialogue Friday aimed at pushing back against China and countering the disruption caused by Russia’s invasion of Ukraine.

The two longtime allies agreed to establish a new joint research center for next-generation semiconductors during the so-called economic “two-plus-two” ministerial meeting in Washington, Japanese Trade Minister Koichi Hagiuda said.

U.S. Secretary of State Antony Blinken, U.S. Commerce Secretary Gina Raimondo, Japanese Foreign Minister Yoshimasa Hayashi and Hagiuda also discussed energy and food security, the officials said in a news briefing.

“As the world’s first- and third-largest economies, it is critical that we work together to defend the rules-based economic order, one in which all countries can participate, compete and prosper,” Blinken told the opening session.

Hagiuda said “Japan will quickly move to action” on next-generation semiconductor research and said Washington and Tokyo had agreed to launch a “new R&D organization” to establish a secure source of the vital components.

The research hub would be open for other “like-minded” countries to participate in, he said.

The two countries did not immediately release additional details of the plan, but Japan’s Nikkei Shimbun newspaper earlier said it would be set up in Japan by the end of this year to research 2-nanometer semiconductor chips. It will include a prototype production line and should begin producing semiconductors by 2025, the newspaper said.

“As we discussed today, semiconductors are the linchpin of our economic and national security,” said Raimondo, adding that the officials had discussed collaboration on semiconductors, “especially with respect to advanced semiconductors.”

Taiwan now makes the vast majority of semiconductors under 10 nanometers, which are used in products such as smart phones, and there is concern about the stability of supply should trouble arise involving Taiwan and China, which views the island as part of its territory.

The United States and Japan said in a joint statement they would work together “to foster supply chain resilience in strategic sectors, including, in particular, semiconductors, batteries, and critical minerals.” They vowed to “build a strong battery supply chain to lead collaboration between like-minded countries.”

On ties with Russia, Hagiuda said he gained U.S. understanding about Japan’s intention to keep its stake in the Sakhalin-2 oil and gas project despite sanctions against Moscow by Washington, Tokyo and others following the Ukraine invasion.

“There are voices calling for withdrawal. But it would mean our stake goes to a third country and Russia earns an enormous profit. We explained how keeping our stake is in line with sanctions, and I believe we gained U.S. understanding,” he said.

Japanese trading houses Mitsui & Co and Mitsubishi Corp hold a combined 22.5% stake in the project.
…

The House on Thursday passed a $280 billion package to boost the semiconductor industry and scientific research in a bid to create more high-tech jobs in the United States and help it better compete with international rivals, namely China. 

The House approved the bill by a solid margin of 243-187, sending the measure to President Joe Biden to be signed into law and providing the White House with a major domestic policy victory. Twenty-four Republicans voted for the legislation. The Senate passed the bill Wednesday, 64-33.

“Today, the House passed a bill that will make cars cheaper, appliances cheaper and computers cheaper,” Biden said. “It will lower the costs of everyday goods. And it will create high-paying manufacturing jobs across the country and strengthen U.S. leadership in the industries of the future at the same time.” 

As the vote was taking place, Biden was discussing the economy with CEOs at the White House. During the event, he was handed a note informing him it was clear the bill would pass — a development that produced a round of applause before the tally was final. 

Most Republicans argued that the government should not spend billions to subsidize the semiconductor industry. GOP leadership in the House recommended a vote against the bill, telling members the plan would provide enormous subsidies and tax credits “to a specific industry that does not need additional government handouts.” 

 

Taxes, regulations

Representative Guy Reschenthaler, a Pennsylvania Republican, said the way to help the industry would be through tax cuts and easing federal regulations, “not by picking winners and losers” with subsidies — an approach that Representative Joseph Morelle, a New York Democrat, said was too narrow. 

“This affects every industry in the United States,” Morelle said. “Take, for example, General Motors announcing they have 95,000 automobiles awaiting chips. So, you want to increase the supply of goods to people and help bring down inflation? This is about increasing the supply of goods all over the United States in every single industry.” 

Some Republicans viewed passing the legislation as important for national security. 

Representative Michael McCaul of Texas, the top Republican on the House Foreign Affairs Committee, said it was critical to protect semiconductor capacity in the U.S. and that the country was too reliant on Taiwan for the most advanced chips. That could prove to be a major vulnerability should China try to take over the self-governing island that Beijing views as a breakaway province 

“I’ve got a unique insight in this. I get the classified briefing. Not all these members do,” McCaul said. “This is vitally important for our national security.” 

The bill provides more than $52 billion in grants and other incentives for the semiconductor industry as well as a 25% tax credit for those companies that invest in chip plants in the U.S. It calls for increased spending on various research programs that would total about $200 billion over 10 years, according to the Congressional Budget Office. 

The CBO also projected that the bill would increase deficits by about $79 billion over the coming decade. 

Senate health, climate package

A late development in the Senate — progress announced Wednesday night by Democrats on a $739 billion health and climate change package — threatened to make it harder for supporters to get the semiconductor bill over the finish line, based on concerns about government spending that GOP lawmakers said would fuel inflation. 

Representative Frank Lucas, an Oklahoma Republican, said he was “disgusted” by the turn of events. 

Despite bipartisan support for the research initiatives, “regrettably, and it’s more regrettably than you can possibly imagine, I will not be casting my vote for the CHIPS and Science Act today,” Lucas said. 

Representative Kevin McCarthy, the Republican leader in the House, likened the bill’s spending to “corporate welfare to be handed out to whoever President Biden wants.” 

Leading into the vote, it was unclear whether any House Democrats would join with Senator Bernie Sanders, a Vermont independent, in voting against the bill; in the end, none did. 

Democrats urged to step up

Commerce Secretary Gina Raimondo talked to several of the most progressive members of the Democratic caucus in a meeting before the vote, emphasizing that the proposal was a critical part of the president’s agenda and that Democrats needed to step up for him at this important moment. 

Some Republicans criticized the bill as not tough enough on China, and GOP leaders emphasized that point in recommending a “no” vote. Their guidance acknowledged the threat China poses to supply chains in the U.S. but said the package “will not effectively address that important challenge.” 

But, as McCaul pointed out, China opposed the measure and worked against it. The bill includes a provision that prohibits any semiconductor company receiving financial help through the bill from supporting the manufacture of advanced chips in China. 

Zhao Lijian, a Chinese Foreign Ministry spokesman, commenting before the House vote, said the U.S. “should not put in place obstacles for normal science, technology and people-to-people exchanges and cooperation” and “still less should it take away or undermine China’s legitimate rights to development.”
…

The U.S. Justice Department is investigating a cyber breach involving the federal court records management system, the department’s top national security attorney told lawmakers Thursday.

Matt Olsen, head of the Justice Department’s National Security Division, alluded to the threat of cyberattacks by foreign nations as he told the U.S. House of Representative Judiciary Committee that the incident was a “significant concern.”

Olsen made the remarks in response to questions from Representative Jerrold Nadler, the panel’s Democratic chairman, who said that “three hostile foreign actors” had attacked the courts’ document filing system.

Nadler said the committee learned only in March of the “startling breadth and scope” of the breach. Olsen said the Justice Department was working closely with the federal judiciary around the country to address the issue.

“While I can’t speak directly to the nature of the ongoing investigation of the type of threats that you’ve mentioned regarding the effort to compromise public judicial dockets, this is of course a significant concern for us given the nature of the information that’s often held by the courts,” Olsen said.

Olsen did not comment on who was behind the attack, but he noted that his division was focused generally on the risk of cyberattacks by foreign nations including China, Russia, Iran and North Korea.

The Administrative Office of the U.S. Courts in January 2021 said it was adding new security procedures to protect confidential or sealed records following an apparent compromise of its electronic case management and filing system.

The Administrative Office, the judiciary’s administrative arm, in a statement on Thursday called cybersecurity a high priority and said it has been taking “significant actions to protect our systems and the sensitive information they contain.”

Further details could not be immediately determined. A Justice Department spokesman said the department as a general policy does not confirm or deny the existence of specific investigations.

The federal judiciary has been working to modernize its electronic case management and filing system and the related online portal known as PACER, which is used to access records, citing the risk of cyberattacks on the aging electronic system.

“We are vulnerable,” U.S. Circuit Judge Amy St. Eve testified at a House committee hearing in May on the judiciary’s budget request. 
…