“The Biden administration’s rush to engage in more centrally planned industrial policy, particularly when it comes to the production of semiconductor chips and other high-tech manufacturing, has always been framed as an attempt to counter China.”
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“To defeat China, the argument goes, the U.S. must adopt the tactics of the Chinese Communist Party, at least when it comes to high-end manufacturing.
How’s that going on the far side of the Pacific? Not so great, actually.”China is pausing massive investments aimed at building a chip industry to compete with the U.S.,” Bloomberg reported last week. “Top officials are discussing ways to move away from costly subsidies that have so far borne little fruit and encouraged both graft and American sanctions, people familiar with the matter said.””
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“China might be relatively new to this game, but industrial policy has a long, mostly ugly history in other parts of the world—including right here in the U.S.—and there’s little reason to think that this time will be different.
China’s shift away from industrial policy seems to be driven, according to Bloomberg, by the strain that COVID-19 has put on the country’s economy and fiscal policies rather than by any sudden rediscovery of the benefits of free markets. Even so, there’s a certain irony to the Chinese government changing course just months after U.S. policy makers decided that we had to copy China in order to compete with it.”
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“The Bloomberg report says Xi is becoming frustrated about how tens of billions of dollars dumped into the semiconductor industry in recent years haven’t produced major breakthroughs that allow the country’s domestic chipmakers, like the Semiconductor Manufacturing International Corporation, to compete with the world’s top producers.
America’s foray into high-tech industrial policy seems to be on the same trajectory. The New York Times, for example, reported last week that “new chip factories would take years to build and might not be able to offer the industry’s most advanced manufacturing technology when they begin operations.” Meanwhile, everything from federal permitting requirements to America’s broken immigration system is creating huge hurdles for the semiconductor manufacturers that are planning to expand their capacity in the United States.”