The CHIPS Act: Urgent need or massive giveaway?
Intel and other chipmakers think they have a solution to the global chip shortage, said Robert Reich in The Guardian: “shake down” the U.S. government for $52 billion. And somehow, they may be succeeding in this. The Senate this week advanced a bill, frequently dubbed the CHIPS Act, filled with subsidies for the semiconductor industry. The U.S. isn’t alone in this. Countries around the world are racing to outdo each other in incentives for new chip-making factories. “China has extended tax and tariff exemptions aimed at upgrading chip design and production there,” and Europe is “finalizing its own chips act with $30 billion to $50 billion in chip subsidies.” This is being sold as a question of national security, but what’s really happening here is global corporations “playing nations off each other.” Nothing in this bill stops Intel from continuing to “design, assemble, and test its chips in China” or elsewhere. Yet it claims to need a handout to level an unfair playing field. This is “pure extortion.”
Dismissing this as just a corporate welfare is shortsighted, said Gillian Tett in the Financial Times. In the 21st century, chips— a necessity for “almost every modern industrial sector”—will have nearly as much geopolitical importance as oil. “Hence the growing alarm in Congress—and America’s C-suite—about the fact that almost all advanced chip production is currently located in Taiwan, which is being threatened by a newly assertive China.” While $52 billion sounds like a big number, “China is estimated to be giving three times that—or more—in support of its own sector.” In the 1990s, the U.S. accounted for nearly 40 percent of the chip market, said Ian King in Bloomberg. “Silicon Valley is literally named after the stuff that semiconductors are made of.” But today, only about 12 percent of chips are made domestically, and the U.S. “lacks the ability to produce the most advanced components at scale.”
The main impetus for the CHIPS bill was a semiconductor shortage that disrupted global supply chains, said The Wall Street Journal in an editorial. “But the shortage is easing as global demand and the economy slow.” Micron Technology alerted investors to this last month when it said it would begin to slow production. Taxpayers should know they’re subsidizing “companies that don’t need the help.” The $52 billion chips bill—which included another $24 billion in tax credits—looks wasteful enough, but as it travels through Congress and adds years of nebulous research funding, it’s morphing into a $250 billion “bipartisan spendorama.” Unfortunately, history is filled with examples of how “easy government money can undermine competitiveness.”