As I See It: Pass The Chips
July 18, 2022 Victor Rozek
Decades ago, I was sent to Taiwan and met a colleague there to install a computer system in a silicon wafer manufacturing facility and provide necessary training to the staff. I took a cab from the airport to my hotel in Taipei and recall marveling at the extraordinarily generous freeways that served surprisingly light traffic flows. In many places, six to eight lanes stretched for miles in both directions supporting traffic that could have been accommodated by no more than two.
I became curious and finally asked my driver if he knew why the roadways were so incongruously wide? It was, he explained, a precaution against a preemptive Chinese invasion. “If they bomb our military airfields,” he explained, “our pilots will have somewhere to land.”
Which is to say that Taiwan has lived under threat of invasion for generations. Small wonder their industries have looked to expand internationally: if they’re coming for your country, it’s best to keep at least some assets out of immediate reach.
Of Taiwan’s many industrial successes, perhaps the most timely is its rapid ascension in the computer chip manufacturing sector. Recent shortages have impacted the global production of a wide variety of products from cell phones to automobiles. A single modestly priced vehicle can require over 1000 chips; a luxury car may demand over 3000.
But while the global need for microchips has exploded, the US share of that market has steadily shrunk. We currently produce no more than 10 percent to 12 percent of the world’s supply, down from about 40 percent just a few decades ago.
That fact has not escaped the sharp minds of the US Congress. It bolted into action, passing a $52 billion package called the CHIPS Act designed, in the words of David Ignatius of The Washington Post, “to supercharge the US semiconductor industry and preserve America’s technological edge against China.”
CHIPS is a clever acronym for “Creating Helpful Incentives to Produce Semiconductors.” And it’s hard to argue that $52 billion is not a helpful incentive. Except for one small problem: The clever Congress neglected to authorize the funding. In typical can’t-do fashion, Democrats sat on it for over a year.
However, just the promise of such a potential windfall activated corporate greed glands which started salivating both here and abroad. According to Eamon Barrett of Fortune, “In 2020, Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chip manufacturer, announced plans for a $12 billion plant in Phoenix to produce its most advanced chips.” Arizona even spent a couple hundred million on infrastructure to prepare for the great migration. But, there was just one small caveat: It would only happen if the federal government could “make up TSMC’s running costs difference between the United States and Taiwan.” In other words: we’ll drive over to your house, if you pay for the gas.
Likewise, another Taiwanese success story GlobalWafers, now the world’s third-largest maker of semiconductor wafers, announced its intention to build a $5 billion facility in Texas. With typical efficiency, the first wafers were predicted to roll out as early as 2025. But, you guessed it, not without first receiving some corporate welfare.
Not to be outdone by foreign corporations, Intel initially said it would expand a planned $20 billion fabricating plant in Ohio to $100 billion but, ah, only if it too could get a generous slice of corporate welfare. And just to prove it wasn’t kidding, Intel put a freeze on any construction and petulantly postponed its photo-op groundbreaking ceremony indefinitely – or until Congress funds the CHIPS Act. And with this glacial Congress, “indefinitely” may come first.
It’s the classic corporate strategy: Privatizing profits, while socializing costs. But you have to wonder why, if we’re competing with China, are we dangling taxpayer money to attract their industries? For several reasons. Originally, the CHIPS Act was meant to support only domestic producers, but industry trade groups lobbied to include foreign investment. China boasts some of the most advanced semiconductor technology and the thinking was that it would be more advantageous to have it close at hand rather than potentially inaccessible.
Additionally, India and the European Union are investing heavily in microchip technology. They are, and have been, making progress and chipping away at market share while our production capacity remains somewhat stagnant.
Finally, a Chinese diplomat recently warned that “reunification” with Taiwan is near. And he didn’t mean a voluntary one. That, you would think, would ramp up the urgency level, but not for our dysfunctional Congress.
Senate Republicans announced that after a year of dithering, they are pulling out of the House/Senate negotiations finalizing what was originally bipartisan legislation, designed to help the US compete with China in the rapidly evolving semiconductor industry.
Was there something horrifically wrong with the bill? Not really. It was an investment in a critical high-tech industry. But their objections had nothing to do with the CHIPS Act. In fact, an unheard of 19 Republican senators had actually voted for the Senate’s version of the bill.
Regardless, they objected, writes Dana Milbank, “to a second, unrelated bill Democrats are working on to lower prescription drug prices.” They want to stop Democrats… “from using a process known as ‘reconciliation’ which would allow them to pass the prescription drug bill by a simple majority vote, immune from any GOP filibuster.”
Imagine, in just one twisted, petulant move they can prevent Americans from getting cheaper prescriptions (I mean, why would an aging population need affordable medication?); undermine the American semiconductor industry, while helping mainland China achieve its strategic goals! How’s that for governance?
And we wonder why the country is failing.
The CHIPS fiasco is but a symptom of a country which appears to be increasingly in free fall. It leads me to ponder if anyone bothered to pack a parachute.
The cabbie who drove me to Taipei told me a story about a fellow cabbie who was returning home late one night when he heard a very loud roaring sound which, in an instant, got terrifyingly louder. He glanced in the rearview mirror and saw a jet fighter closing fast and made the wise decision to pull over as fast and far as he could, as the plane screamed by at just under 200 mph. Apparently, the pilot experienced some sort of emergency and decided to bring the plane down while still able to control it. Highways wide enough to land a jet fighter. Unlike us, at least the Taiwanese were planning ahead.