Uncle Sam Joins Chip Rake as India Pushes
Semiconductor PLI
To stay competitive against China,
should the United States become a little more like it?
In practice, the U.S. government
subsidizes or props up industries all the time. But the idea of a government helping
its favorite industries is something that the United States typically mocks as a
perversion of the free markets. It’s what China does, or what European governments
do with their leading airplane maker.
That makes what’s happening with
computer chips just the beginning of a thorny policy debate: Should the government
intervene more to create American winners, particularly in technology and other
key areas? And if so, how?
What’s happening: Computer
chips are like the tiny brains or memory in everything from jet fighters and satellites
to refrigerators and cars, as my colleagues Ana Swanson and Don Clark have written. Silicon
Valley was named for a material in computer chips — and Intel was an industry pioneer
and star. Not anymore.
Taiwanese firms including Taiwan
Semiconductor Manufacturing Company and South Korea’s Samsung have leapt ahead in
advanced designs, and they’re kings of manufacturing now. The vast majority of the
world’s chips are made outside the United States, in part because of government
subsidies abroad.
The pandemic caused chip shortages
that slowed U.S. car factories, leading
to more urgency among the U.S. military and American corporations to have a safe
and uninterrupted supply of chips closer at hand.
So last year, Intel and federal
government agencies proposed financial help
for American chip manufacturing. The result was an authorization
of taxpayer money to subsidize U.S. chip factories and chip research in the military
policy bill finalized a month ago.
The bigger picture: The backdrop
of all this is China. One fear is that perennial tensions between
China and Taiwan could at some point disrupt the chip industry
on the island and affect the rest of the world.
The Chinese government also has
been spending
gobs of money to develop its own chip industry and rely less
on imported chips and equipment.
In the political, military and
economic competition between the United States and China, chips are one of the leading
fronts.
What’s next: It’s
an odd sight in Washington: Republican politicians who tend to prefer less government
intervention are siding with politicians on the left to support more government
backing of private companies. That’s true for computer chips and in some other areas,
including artificial intelligence, robotics and advanced manufacturing.
One question is how to support
industries without wasting taxpayer money. Advocates for government help have backed
more generous tax credits for companies’ spending on research and development, government
backing for basic scientific research, and taxpayer-funded investment funds in strategic
industries like chips, batteries and cars. America has done this before, particularly in the 1980s
and ’90s when Japan was a rising economic power.
This debate is about much more
than one policy. It’s about figuring out the appropriate role of government in the
economy, and what America should do when other countries plow endless cash into
their national champion companies.
North American companies were
once the kings of another essential industry: the gear that telephone companies
need to route the world’s communications. But for complicated reasons, American
titans including Lucent — a successor to the old Bell Labs — were sold to foreign
companies or died.
Today, the world’s leading telecom
equipment company is China’s Huawei, and the United States is freaking out about
it.
So I wondered whether Huawei
was a cautionary tale of America’s missed opportunity. If the U.S. government had
thrown taxpayer money behind the country’s telecom sector in the 1990s, as it’s
doing now with chips, would Lucent have thrived and not Huawei?
A research group that gets funding
from telecom and tech companies including Intel.
Dr. Atkinson’s organization supports
more
U.S. government investment in essential industries including
chips. And like others who back those policies, Dr. Atkinson said America also needed
to condition its trade and diplomacy with China on that country’s slowing its heavy
backing of homegrown industries.