Congress will soon put the finishing touches on the Chips Act, which will provide more than $ 52 billion to companies that design and manufacture semiconductor chips.
Subsidies are being demanded by the largest chip manufacturers as a condition for making more chips in America.
The world’s largest chip maker (in terms of sales) is already an American corporation – based in Santa Clara, California.
Intel barely needs the money. Its revenue rose to $ 79 billion last year. Its CEO, Pat Gelsinger, received a $ 179 million compensation package (which was 1,711 times higher than Intel’s average employee).
Intel designs, assembles and tests its chips in China, Israel, Ireland, Malaysia, Costa Rica and Vietnam, as well as the United States.
The problem in the US is that Intel is not helping it cope with the current shortage of chips, giving priority to U.S. producers. And it doesn’t keep America at the forefront of new chip technologies.
Of course, Intel would like to throw Congress $ 52 billion into the semiconductor chip industry. But why should Intel make money?
Other potential beneficiaries of the Chips Act will be GlobalFoundries, which currently makes chips in New York and Vermont, but also in many other parts of the world.
GlobalFoundries is not an American corporation either. It is a majority subsidiary of Mubadala Investment Co, the sovereign wealth fund of the United Arab Emirates.
The nation where a chip maker (or any other global high-tech corporation) is headquartered has less and less to do with where it designs and makes things.
This explains why perhaps it can be considered “critical” that all industries require subsidies, tax cuts and regulatory exemptions from governments in exchange for designing and making things in that country.
It’s a huge global shake-up.
India, Japan and South Korea have approved $ 10 billion in tax credits, subsidies and other incentives for the semiconductor industry. The European Union is finalizing its chip report with between $ 30 billion and $ 50 billion in grants.
China has also introduced tax and tariff exemptions and other measures to improve the design and production of chips there.
“Other countries around the world … are making huge investments in innovation and chip production,” says Senate Majority Leader Chuck Schumer. “If we don’t act fast, we could lose tens of thousands of jobs for Europe.”
John Neuffer, CEO of the Semiconductor Industry Association (Washington’s semiconductor industry lobby group) has warned that chip-making facilities are often 25% to 50% cheaper to build in foreign countries than in the US.
Why is that? He acknowledged that this is largely due to the incentives offered by foreign countries.
As capital becomes more global and free, it is easy for global corporations to act against each other in nations. Then the US CEO of ExxonMobil said without shame, “I’m not a US company and I don’t make decisions based on what’s good for the US.”
People, on the other hand, are rooted in nations, which gives them less bargaining power.
This asymmetry helps explain why Congress is willing to give $ 52 billion to a profitable industry around the world, but it can’t even get $ 22.5 billion The Biden administration says is necessary to tackle Covid’s ongoing public health crisis.
If they are in the public domain, corporations must be loyal to shareholders by maximizing the value of the shares. But more than 40% of the value of U.S. company shareholders is owned by non-Americans.
Moreover, there is no reason to assume that American owners of a company will be happy that the return on investment will be sacrificed for the good of the nation.
The real question is what conditions the United States (or any other nation that provides subsidies to chip makers) must place when receiving subsidies.
It may not be enough for chip makers to agree to produce more chips in the nation where they provide subsidies, because chip makers sell chips to the largest suppliers around the world no matter what chips are produced.
If the U.S. were to provide subsidies, it would have to ask chip makers to give the highest priority to U.S. customers who use chips.
And Congress should demand that the U.S. produce the highest value-added chips (design, design engineering, and high-precision manufacturing) for Americans to achieve that technological experience.
What will happen if each nation that subsidizes chip manufacturers demands it for itself?
The chip makers will then have to choose. The extortion will then end.
This article was amended on June 27, 2022. The majority is owned by GlobalFoundries Mubadala Investment Co., and is not fully owned as stated in the previous version.
Robert Reich is a former U.S. Secretary of Labor who is a professor of public policy at the University of California, Berkeley and author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, has now been released. The Guardian is a U.S. columnist. His newsletter is available at robertreich.substack.com
Will the chip shortage end?
Although industry experts predicted that the shortage would end in 2024, there is no definite end to it, prompting manufacturers and businesses to adopt a strategy accordingly. Some companies, such as Tesla, have resorted to alternative chips and software-based solutions to cope with the shortage.
Is there an end to chip shortages? In the potential “tunnel end light” news, a report by Counterpoint Research (which opens in a new tab) suggests that the global shortage of semiconductors could be alleviated as demand and supply gaps narrowed in the second half of 2022. To see also : $ 450 Million New US Aid to Ukraine – US State Department.
How long will chip shortages last?
Semiconductor companies are in a unique situation, with limited supply, not demand. The COVID-19 pandemic has been a catalyst, but structural factors are also at stake. The long-term outlook is still positive for the auto sector and supply should start to improve in 2022.
What companies will benefit from the CHIPS Act?
8 best semiconductor shares to buy among the shortage of chips: Read also : Why is the United States still buying oil?.
- Intel Corp. (INTC)
- Micron Technology Inc. (MU)
- Texas Instruments Inc. (TXN)
- Qualcomm Inc. (QCOM)
- Wolfspeed Inc. (WOLF)
- Ambarella Inc. (AMBA)
- Applied Materials Inc. (AMAT)
- NXP Semiconductors NV (NXPI)
What will the CHIPS Act do? The bipartisan CHIPS Act for America introduced in the Bipartisan Infrastructure Act will provide more than $ 50 billion in incentives to accelerate and catalyze domestic semiconductor production.
Which companies will benefit from semiconductor bill?
The bill would also give a boost to technology companies like Advanced Micro Devices (AMD), Samsung and Intel, all of which spent money on the problems facing the semiconductor chip industry last year. AMD began lobbying for the CHIPS for America Act in 2020, when it spent a total of $ 1. On the same subject : Following other big money in sports.7 million on lobbying.
Which industries need semiconductors?
Semiconductors are key components of electronic devices that enable advances in communication, computing, healthcare, military systems, transportation, clean energy, and many other applications.
Is the microchip shortage over?
Wait for the shortage to continue for Auto Buyers, the news means the shortage will continue throughout 2022. It may be relieved from last year’s extremes.
Will the microchip shortage end soon? When will it finally end? Unless there is a sudden drop in demand, the chip shortage will not end soon, analysts said. Most industry executives have warned that the shortage is unlikely to ease until the second half of 2022, as some products continue to lag behind in 2023 due to chip shortages.
How long will the car microchip shortage last?
The global shortage of computer chips, which is declining vehicle production, is expected to last until 2023, two car executives have said in recent days.
What is the status of the microchip shortage?
Wait for the shortage to continue for Auto Buyers, the news means the shortage will continue throughout 2022. It may be relieved from last year’s extremes. GM said last week that it has “seen better consistency in semiconductor supply in the first quarter compared to last year.”