Some For Semiconductors, All To Enhance Washington’s Control

After a long period of frustration, Washington has advanced quite a bit of legislation. One notable piece is the so-called Creating Helpful Incentives to Produce Semiconductors for America Act – the CHIPS for America Act, for short. (Washington always amazes with its facility with acronyms.)

The legislation aims to secure the nation’s supply of semiconductor chips. Congress has marshalled $280 billions to spend over five years for the project, a sizable sum even by the standards of modern Washington. Only some $52 billion, less than 25% of the total, aims at increasing domestic production of these important products, largely from grants, loan guarantees, and a 25 percent tax credit for domestic chip manufacturing operations. The balance of the funds would go, in a manner typical of federal practice, to a wide range of activities near and dear to the hearts of senators and congresspeople. At base, the legislation will increase Washington’s control over research and technological directions.

Despite the giveaway, some within the semiconductor industry are not entirely happy with the legislation. Their problem is not with the amount but rather that the money is too narrowly focused. According to the industry’s assessment, as much as $20 billion, almost 40% of the industry’s take, will go to one company, Intel. The bulk of the rest will go to two other companies, Texas Instruments and Micron Technology. It is not so much favoritism (not that is not unheard of in Washington) but rather that these companies do most of their manufacturing domestically, while others, such as Advanced Micro Devices (AMD), Qualcomm, and Nvidia Corp. tap foreign partners to fabricate their chips. Management at AMD has argued that the law should be written more broadly to give these companies credit for the research and design work they do domestically. Though AMD’s point has merit, the legislation was after all done to secure the supply of chips, and that would seem to demand domestic manufacturing, wherever the research and design is done.

Meanwhile more than four-fifths of the allocated funds would go to activities other than chip making. Some $100 billion, almost twice the share allotted to the chip makers, would go to the National Science Foundation to set up technology hubs in regions of the country that have seen little business in technology. Funds would also go to the Energy Department for green energy initiatives. It may be a bit of a stretch to link green energy to chip security, but there it is in the legislation. Monies would also go to the establishment of a Directorate for Technology, Innovation and Partnership with what appears to be a broad mandate to provide support for all sorts of technologies.

The National Aeronautics and Space Administration (NASA) would receive substantial funds for its explorations toward Mars. Other monies would go for research on blockchain, low-emissions steel manufacturing, and the production of more efficient, quieter airplanes. Throughout the legislation is an emphasis on Stem (science, technology, engineering, and mathematics) education at all levels from high school through post-graduate work. This way, perhaps, the effort can produce the staffing for the new technology hubs without the need for a great migration from existing hubs to new ones.

As with all Washington spending bills, this one includes a long list of conditions before any entity can receive funding. Much of this focuses on the by now familiar issues of inclusion and diversity. More than 30 percent of the bill’s language concerns itself with diversity and sexual harassment issues, while fully 60 percent of the bill’s language dwells on requirements generally, including how products should be shipped.

The worth of all this is, of course, debatable. It is not even clear that the effort will domuch to create more domestic manufacturing of chips. After all, Intel was already planning new facilities. Now it might just substitute government for private funding. On all the many, many initiatives that make up the bulk of the bill and the spending, the detail is so great that even the government scorers have refrained from drawing conclusions. What is sure is that Congress has just put the American taxpayer on the hook for an additional $280 billion.