America’s Semiconductor Industry Doesn’t Need $52 Billion in New Subsidies To Stay Ahead of China

“Rather than countering a perceived threat from China, lawmakers risk bogging down one of the most innovative and successful parts of the American economy with an industrial policy that will force chipmakers to care more about what makes Washington happy than what is best for their own businesses.”

“Companies that, by the way, admit they don’t need the cash to be competitive. Intel, one of the world’s biggest chipmaking companies, is in the process of building a $20 billion fabrication facility in Arizona. In March, CEO Pat Gelsinger said the project “would not depend on a penny of government support or state support.” (Though he immediately followed that comment by saying that “of course…we want incentives” and it appears that Congress is prepared to dutifully provide them.)”

“According to the Semiconductor Industry Association, a trade group, American-based firms control 47 percent of the global share of the semiconductor industry—a far cry from congressional concerns about the U.S. losing its competitive edge.”  

“The trick that lawmakers are trying to pull here is to focus on where semiconductors are made. But this doesn’t really matter. It’s true that a smaller share is manufactured in the U.S. today than 30 years ago, but that’s the result of natural shifts in the market, not evidence of a collapse in American technological prowess.

Indeed, American companies are still at the forefront of semiconductor development—earlier this month, American-based IBM announced a breakthrough in the development of the world’s first two-nanometer chip.”…
“It takes a long time to make semiconductors—up to 26 weeks, in some cases—and production is still ramping up again in the wake of last year’s disruptive pandemic. This isn’t a nationalist issue in which some evil foreigners are cutting off America’s share of semiconductors, but a market-based issue that will be resolved as chipmakers increase production capacity to catch up to increasing demand.

But what about China? Yes, the Chinese government is investing heavily in semiconductor-making technology, but it remains far behind America in terms of technological know-how. A recent Nikkei report shows that China mostly manufactures nothing smaller than 14-nanometer chips, which are several generations behind the most advanced chips being made elsewhere—remember, IBM just announced plans for a two-nanometer chip. Closing that gap will be difficult now that America has banned the sale of semiconductor-manufacturing equipment to China (and enforced that ban even when the sale involved other countries).

If there is one major worry for the global supply chain of semiconductors, it is the island of Taiwan. The majority of the world’s semiconductors are made in Taiwan, which is home to the Taiwan Semiconductor Manufacturing Company, by far the world’s largest chipmaker. There are obviously many complicated geopolitical issues involving Taiwan that America and the world’s semiconductor industry will have to navigate in the coming years—but it is downright foolish to believe that $52 billion in subsidies will make a meaningful impact in that complex situation, or in a global market that was worth $425 billion last year alone.”

“All it will do is shovel $52 billion of taxpayer money (some of it probably borrowed from China, ironically enough) to successful businesses flush with cash.”

https://reason.com/2021/05/27/americas-semiconductor-industry-doesnt-need-52-billion-in-new-subsidies-to-stay-ahead-of-china/

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