The False Promise of America’s CHIPS Act
Semiconductors are certainly essential to a modern economy, and it makes sense to diversify sources. But it is doubtful that large subsidies and government management will keep US chip makers on top, much less that the new law should be used as a model for similar support to other industries.
WASHINGTON, DC – The US Congress recently approved the CHIPS and Science Act, which allocates over $50 billion to strengthen the semiconductor industry in the hope of making the United States self-sufficient. And US Trade Representative Katherine Tai said that President Joe Biden’s administration should be “replicating” the CHIPS Act for other industries “as the key to American competitiveness.”
Semiconductors are certainly essential to a modern economy, and it makes sense to diversify sources. But it is doubtful that the CHIPS Act will achieve its stated goals, much less that it should be used as a model for similar support to other industries.
The law is flawed in many ways. Subsidies to support research and development account for only 21% of the planned expenditures, with the rest going to support physical plant construction. Yet the US comparative advantage internationally is unquestionably in R&D. Building manufacturing facilities will not accelerate chip development.