President Biden on Tuesday 9th August 2022 signed legislation providing $52 billion in subsidies to the semiconductor industry, kicking off what will be one of the largest industrial development programs the US federal government has ever administered.
The long-pursued bipartisan legislation looks set to spur construction of more than a half-dozen big semiconductor manufacturing facilities in the United States, providing more secure supplies of the tiny components that are so important to modern electronics that they are viewed as essential to national security.
The bill also authorizes tens of billions of dollars to support federal research and development and regional tech start-ups, which the administration hopes will lead to commercial breakthroughs in new fields such as quantum computing and artificial intelligence. Congress must still appropriate those funds, however.
“Today is a day for builders. Today, America is delivering,” Biden said just before signing the legislation in a White House ceremony. “I honest to God believe that 50, 75, 100 years from now, people will look back on this week, they’ll know that we met this moment.”
The funds appropriated for subsidies come amid acute global shortages of computer chips, caused by soaring demand and a lack of investors willing to build the multibillion factories needed to make the components. The lack of supply has hobbled automakers and other manufacturers that use chips, forcing them to cut production.
The federal funds won’t solve those shortages in the short term but will incentivize big construction projects by Intel, Taiwan Semiconductor Manufacturing Company (TSMC), Micron, GlobalFoundries and others that aim to build chip factories in the coming years.
The United States today depends heavily on Asia and particularly Taiwan for its chips manufacturing, a reliance that has worried U.S. officials as the self-governing island’s tensions with China rise.
The Commerce Department will be responsible for overseeing the subsidies program and is in the process of hiring new staff that could include a few dozen people, according to people familiar with the matter who spoke on the condition of anonymity to discuss preliminary plans.
The United States isn’t completely new to industrial policy, through which the government intervenes in the economy to support sectors it believes are critical to national security and growth. Heavy federal research and development spending in the post-war era, for instance, helped the United States invent the semiconductor industry. But industrial policy fell out of fashion in recent decades, often criticized by conservatives as a wasteful form of picking winners and losers.
Mounting technology competition with China, however, has forced many U.S. lawmakers, including Republicans, to embrace more government intervention. Republican senators including Todd C. Young (Ind.) and John Cornyn (Tex.) joined Democratic proponents including Senate Majority Leader Charles E. Schumer (N.Y.) and Sens. Maria Cantwell (Wash.) and Mark R. Warner (Va.) in backing the legislation.
“The adoption of the Chips and Science Act is a watershed in U.S. economic policy,” said Scott Kennedy, an expert on U.S.-China competition at the Center for Strategic and International Studies. “It feels … as if a new era is beginning in which government support to strengthen the competitiveness of industries — for reasons of business, national security, public health and the environment — will be seen as more necessary and normal than in the past.”
Dani Rodrik, a professor of international political economy at Harvard University, called the law historically significant “because it is a sign that we have moved well beyond market fundamentalism and because it shows there is now bipartisan support for industrial policies.”
Source: The Washington Post
