The CHIPS Act was enacted in August 2022, with the objective of enhancing semiconductor production in the United States. This recent instance of industrial policy is driven in part by the desire to decrease U.S. dependence on Asian semiconductor manufacturing, and in particular from Taiwan. So here we are with dozens of billions of dollars going to large and wealthy corporations to subsidize what these corporations are already in the business of doing.
According to Bloomberg, Samsung is on track to obtain $6 billion in federal support, and TSMC is expected to receive more than $5 billion. Meanwhile, Intel will get up to $20 billion ($8.5 billion in grants, $11 billion in loans) and “it plans to tap investment tax credits from the Treasury Department that could cover as much as 25% of capital expenditures, according to the Commerce Department.”
I have said it before, but it is worth repeating: Protecting the U.S. supply chains against the possibility of a Chinese invasion of Taiwan doesn’t require onshoring production in the U.S. There are many friendly countries around the world with lower labor costs than here and, more importantly, lighter regulatory burdens. The regulatory burden in the U.S. is one of the many reasons that most of the fab constructions are facing enormous delays and costly overruns.
Onshoring becomes imperative only because politicians inevitably use industrial policy to pursue political goals such as pleasing unions friends, imposing requirements about childcare, or engineering the composition of the labor force in ways that are unobtainable though the regular legislative processes. Oh, and of course, to also get more votes.
Politico is quite transparent about the getting-votes part:
President Joe Biden traveled to Arizona Wednesday to announce that chipmaking giant Intel would be getting billions of dollars as part of a landmark industrial policy that he’s hoping will help pave the way for his reelection.
But while the visit to the company’s campus outside Phoenix reflected the central political bet Biden is making — that domestic spending and jobs promises will capture more voters — it also underscored how difficult it’s been to pull it off.
And if you believe that the politicization of industrial policy will only afflict the leftist industrial policy, I have a subsidized bridge to sell you.