San Diego Union-Tribune (Sunday)
SHOULD THE U.S. SUBSIDIZE CHIP MANUFACTURING?
San Diego Institute for Economic Research
San Diego State University
UC San Diego School of Global Policy and Strategy economist
NO
The federal government does not need to subsidize multibillion corporations earning massive profits. The U.S. could lessen trade barriers and domestic costs imposed on manufacturing production, but (there’s) little justification for incentivizing production of aging chipmaking technologies. Intel indicated the worst of the chip shortage was already in 2022 and will fade in 2023. The government has little foresight on emerging technologies or anticipating upcoming market demand while bearing little responsibility for making such decisions.
YES
Robust chip manufacturing activity in the U.S. has spillover effects that benefit other sectors. Having a dependable domestic source of chips will foster investment and innovation throughout the economy. National security interests are served by a strong domestic chip manufacturing sector. Government subsidies can be conditioned on companies making significant investments themselves. U.S. subsidies can also level the playing field to allow U.S. firms to compete with foreign rivals receiving government support.
NO
The U.S. has never done industrial policy well. Offering too little (chipmaking is very costly) too late (cycle is shifting from excess demand to excess supply) is not strategic. U.S. leads technologically because we source talent from the world, the best ideas find financing, and the overall investment climate is good. To maintain our lead, let’s steer scarce public funds to education, research and development without trying to pick winners.
YES
The U.S. share of global production has fallen from 37 percent in 1990 to 12 percent today. The Taiwanese have steadily been developing more and more effective chips over many years so they control 90 percent of the high-technology chip space today. The government’s $76 billion in subsidies may help, but no one should expect that the Taiwanese will lose their dominance any time soon.
Franklin Revere
Weave Growth
R.A. Rauch & Associates
Scripps Health
YES
The U.S. should subsidize chip making if there’s a strategic plan with identified metrics and an expected ROI to demonstrate success. The CHIPS and Science Act passed by policymakers last year provides over $52 billion in federal funding for semiconductor R&D, manufacturing and workforce development. If this federal funding can successfully reduce U.S. dependency on foreign chips, ease supply chain issues, bring manufacturing businesses and jobs back to the U.S., and protect U.S. national security, then it’s worth it.
YES
Semiconductors are vital components of both strategic and everyday items. Amid an unstable geopolitical landscape, 85 percent of leading-edge chips are made in Taiwan. Although companies are slowly diversifying their sourcing and manufacturers are investing in domestic production, these are costly and timeconsuming projects. We can bolster development and use the subsidy qualification requirements to align our security and economic interests with the private sector. The pace of progress in robotics, AI, etc. will only increase.
NO
While the most advanced chips are imported from Asia, Intel, TSMC and Samsung are planning future investments in production of advanced/legacy chips in the U.S., with or without subsidies. These companies don’t need taxpayer or government encouragement. Furthermore, subsidies won’t alleviate the current chip shortage. The economic and national security justifications for throwing taxpayer billions at domestic chip makers are weak; now we must question any expense as we have thrown trillions at this market.
YES
Given the importance of semiconductors in every technology from military, defense, medicine and even green technologies, we must become more self-reliant as a country. The economic incentives alone may not eliminate the United States’ reliance on chips manufactured in Taiwan and elsewhere, but doing nothing increases our country’s vulnerability to China’s growing aggressive posture toward Taiwan and their own investments in chip manufacturing capability.