Semiconductors: US CHIPS Act for Expanding Domestic Chip Production

On July 19th, the Senate voted 64-34 for bipartisan support of the US CHIPS act, a bill designed to pump $54 billion into the US semiconductor development. Competition from China is a major driver for support of the package. The worry is that chip production in the US has dropped to 12 percent of the global total while 70 percent of the production has moved to Asia. After recent chip shortages there is worry that excessive dependency on Asian manufacturers, especially Taiwan, could be a problem.

But, does the US really need this bill? Some see it as biased towards just a few companies like Intel and Texas Instruments. Reuters quotes a US semiconductor insider saying “you have Intel that might get $20 billion with the CHIPS Act plus $5 billion or $10 billion under the FABS Act. $30 billion goes to your direct competitor, and you don’t get a penny? That’s going to cause problems in the market.”

Conservative thinkers at the Wall Street Journal also have a problem with the bill.

Allysia Finley, member of the Wall Street Journal editorial board, commented that “this is just a huge handout for the semiconductor industry that has really been very successful in lobbying Congress and using its customers, the tech giants, as well to convince the Congress members that we need to do this so we don’t fall behind China, or we need to do this to help US manufacturers compete when there’s no evidence that this will actually do so. It’ll just probably make the companies less efficient. And then it’ll just create more cronyism in Washington.”

Kimberley Strassel, member of the Wall Street Journal editorial board, agreed saying that “this is why this bill makes no sense… This is the United States government instead of getting out of the way in a free market and letting different businesses innovate… instead says, ‘We, the United States government have determined that we are going to be a global leader in this particular industry, and we will force that to happen by means of spending extraordinary sums of money.’… We’re getting to the point in Washington where people are throwing around billions as though they’re peanuts, and they’re not… So this is misguided, not just in terms of a supply and demand situation, it’s very misguided in terms of overall government thinking and the idea that we are adopting this kind of industrial approach.”