The Intel logo is displayed outside of the tech giant's headquarters in Santa Clara, California. Photo: Getty Images via AFP / Justin Sullivan

It was against the backdrop of a looming global food crisis triggered by the Russo-Ukrainian war and the return of hard lockdowns in China that US President Joe Biden gave his first State of the Union address. Unlike most of those delivered by his living predecessors, Biden’s inaugural State of the Union could be argued to have marked a genuinely historic turning point.

What was most astonishing was the level of attention the news networks did not give to one of the most significant policy statements from an American president in almost 40 years:“We’ll buy American, to make sure that everything from the deck of an aircraft carrier to the steel on highway guardrails is made in America from beginning to end. All of it.” 

The president made specific mention of a stretch of empty land outside Columbus, Ohio, where Intel, an engine of Silicon Valley, is to build a mega-site of eight semiconductor factories at a cost of US$22 billion. The facility will be the largest of its kind in the world and forms only part of an investment drive by the tech giant to pour between $60 billion and $120 billion into domestic manufacturing. 

Last week, Intel followed up when it signaled investments of $88 billion in new semiconductor plants in Germany. The first of these “mega-sites” alone will cost $19 billion and be situated in Magdeburg.

As if to illustrate the size of the move, this European hub is not set to begin production until 2027, a testament to the level of investment both the American tech giant and the European Union are putting into reducing reliance on supply chains centered in East Asia.   

By no means is Intel an outlier among large corporations that have engaged in a wholesale restructuring of their global operations. South Korea’s largest company Samsung, also a titan of the electronics world, is shifting its manufacturing base to the US mainland as well, building out its hub in Taylor, Texas. 

This gathering stream of global companies moving their manufacturing to North America and Europe may turn out to be the most significant economic shift since the beginning of large-scale offshoring in the 1980s. It raises fundamental questions about the structure of the global economy and the role of the “developing world” within it.

Not only will the Chinese system be fundamentally threatened by this trend, so will the high-tech export-driven economies of South Korea and Japan.   

China’s economic model has for four decades capitalized on its massive, low-cost workforce to lure Western corporations seeking to minimize their manufacturing costs. Already before the Covid-19 pandemic emerged in late 2019, the cost of Chinese labor had risen in relation to its neighboring competition, Vietnam, the Philippines, Bangladesh, India and Indonesia.

Now, with much of the world beginning to move into the endemic phase of Covid, Beijing is still imposing massive and sweeping restrictions wherever the virus is detected. This means shutting down many of the largest ports in the world at a time of surging demand for exactly the goods which China has built its economic reputation on servicing to the world.

The continuing gridlock will hit supply chains for electronics especially hard, given their extremely complex and international scope. A disruption at any point in the supply chain is guaranteed to throw the entire operation into chaos, as experience from the last two years has shown. 

Electronics is just one among many globe-spanning industries whose commodity chains are collapsing. The looming threat of a full oil and gas embargo against Russia has upended not just energy markets but all of its derivative products as well, especially agricultural products such as pesticide, fertilizers and fungicides.

Of these, Russia is also the world’s largest producer. Fertilizer is a primary derivative of natural gas, of which the US is incidentally the top producer worldwide.

Perversely, the war in Ukraine may be an enormous boon to American industries, agricultural, petrochemical and electronic, which will benefit from an even greater market share, lower costs of production and far more simplified supply chains. 

 As inflationary pressures continue to spiral, President Biden could yet take the step of an energy export ban. This would dramatically lower fuel costs domestically but would wreak further havoc at the global level by removing US oil and gas from the market at the same time as that of Russia. 

Even cheap labor is now more accessible to US corporations than previously. Costs in Mexico already outcompete those in the Indo-Pacific region. Crucially, Mexico is already well down the road of integration with the rest of North America thanks to the North American Free Trade Agreement (NAFTA) and its revisions under US president Donald Trump’s administration. 

The mass re-shoring of production to North America and Europe does not necessarily portend an era of isolationism. It could in fact herald a far more predatory era of “free trade imperialism” whereby the advanced industries of even Washington’s closest allies, Japan, South Korea and Germany, will become competitors.

How the trading architecture of the Indo-Pacific region evolves in the short term will provide a clearer picture of what this future holds. We shall see if the Americans truly do retreat behind their oceanic moats, or if they expect the world, developed and developing, to provide a passive market for manufactured goods in which Washington will soon have an unassailable advantage. 

In the short term, the most crucial test case for this de-globalizing world order will be the response of the Chinese. Beijing had best spend the impending wave of lockdowns rethinking its economic role in the world, for by the time it emerges from its Covid-induced paralysis, it could find its niche entirely obsolete. 

Samuel Geddes

Samuel Geddes is an Australia-based journalist and contributor to Al Mayadeen English. Follow him on Twitter @SamuelGeddes.