One of the most frustrating aspects of the attitude of people who see more government as the solution to every problem we have today (whether it be the high cost of raising children, protecting the semiconductor supply chain, or workers’ attachment to the workforce) is that they aren’t willing to do the hard work of cleaning up the mess the government made in the first place before calling for more government actions.
Case in point: The Biden administration is spending billions of dollars on semiconductor subsidies while fab construction in the US is one of the slowest in the world thanks to regulations, according to this.
The CSET study looked at fab construction between 1990 and 2020 and concluded that for the roughly 635 fabs built in that timeframe, the average time between the start of construction and production was 682 days. Three countries beat that benchmark: Taiwan at 654 days on average, Korea at 620, and Japan at a staggeringly fast 584 days. Meanwhile, Europe and the Middle East were about on par at 690 days, as was China at 701 days.
However, the U.S. clocked in at 736 days, well above the worldwide average and second only to Southeast Asia at 781.
And it is getting worse:
In the 90s and 2000s, the U.S. was pretty fast and saw average construction times of about 675 days. In the 10s, that number dramatically increased to 918 days. Meanwhile, China and Taiwan were going at a much faster pace that decade, with an average completion time of 675 and 642 days, respectively.
The culprit:
The vital issue for fab construction in the U.S. is regulation, according to the report, which notes it is “beneficial to the general public but present tradeoffs for semiconductor manufacturers” and describes it as “arcane.” The study doesn’t recommend scrapping regulation entirely, but instead suggests removing redundant rules and carving out exceptions for the semiconductor industry.
Regulation in the U.S. can be incredibly complicated thanks to its federal structure, which has created a hierarchy of one national government, 50 state governments, and countless local governments. Fab construction needs to comply with three rulebooks, which is significantly more complicated than the situation in countries like Taiwan. Solving these regulatory issues is likely to be challenging at best.
America’s environmental protection policies have also hindered fab construction. Three government bodies at the federal level alone have their own policies, with the Environmental Protection Agency (EPA) being the largest, and then state- or local-level agencies like the Texas Commission on Environmental Quality. The study details instances where the review process from these organizations caused significant delays and recommends the creation of a fast track to expedite construction projects for the semiconductor industry.
This is not new; many scholars have been saying this for a long time on this issue and others.
At the end of the day, those in favor of industrial policy must make a choice: Will they first eliminate the regulatory obstacles erected by the government and then assess what might productively be done, or will they instead plow forward with further government interventions — interventions destined to fail? I know the answer, and it worries me. With deregulation, there is less opportunity than there is with further regulation to exercise power.
Meanwhile, let’s give another $10 billion to Intel on top of the other handouts it already received:
Poor Intel. Last year was pretty rough for the 55-year-old semiconductor firm, as it accrued just $54.2 billion in revenue, 14% less than the year before. After paying all its bills for manufacturing, research and development, and biscuits, there was just $1.7 billion left over in net income. Poor Intel.
So when the US administration announced the CHIPS and Science Act in 2022, with a total of $280 billion up for grabs, Intel jumped right in to get some of that golden booty. Only now it’s asking for a further $10 billion, at the very least, to ensure Intel’s US developments can continue.
But not to worry, our friends on the New Right assure us that they will pick better winners and better industrial policy goals when they are in power.