Throwing tax payer dollars at the situation is not going to fix anything. As usual the majority of free money is wasted.
That entirely depends on what strings are attached.
What we
do know is that the trend lines were all going in the wrong direction, with semiconductor manufacturing leaving the US and going mostly to Asia. Furthermore, the industry has positively reacted to the prospect of CHIPS funding. So, from what I can tell, it so far looks to be working. We'll have to see how this all plays out, to know for sure.
I worry that the CHIPS Act is going to attract a bunch of businesses that build up capacity, operate for a few years, and then idle. They'll demand more taxpayer money to retool and upgrade. We see this same behavior from sports teams, movie studios, network providers, real estate developers, and more. Privatize profits and shift costs to the public.
Some amount of that will be unavoidable, if you want to maintain capacity in the US. The analogy with agriculture is apt - you have to keep farmers solvent both when their crops are wiped out and when bumper harvests cause prices to crash to unprofitable levels.
With semiconductors, I think two key principles should be:
- The vast majority of funding should be private. Government funding should be used mainly to spur more risky investments and perhaps as loan-guarantees to de-risk private investment.
- Funding should be tied to specific deliverables which would not be economically viable without it, and will not continue to receive government funding if/when cancelled.
Still, there will likely come a point when the business cycle hits another trough and further injection of funding (i.e. CHIPS 2) is needed to avoid too much destruction of capacity.
Unfortunately, whenever government tries to help, they usually make the problem worse
That's an ideological narrative. Government
can do big things. We used to believe this, like in the decades after WWII (examples: Panama Canal, Hoover Dam, Nukes, Interstate Highway system, Apollo Program, world's largest fleet of supercarriers). And we need only look at some of the amazing things China's government has accomplished, to believe it's still true.
And wasn’t it their economic policies that drove the fabs away making them too expensive to operate in this country?
No, I think the "pull" factors were much stronger than the "push" factors. In other words, China & other Asian countries provided strong incentives for foreign fabs to locate there. It's not just US fabs, either. Japanese and South Korean companies also built fabs in China.
The bigger issue isn't US manufacturers building abroad, so much as that other countries with strong semiconductor sectors enjoy a lot of state support, whereas the US has provided virtual none until now. In other words, it's a lot more what the US
hasn't done that's caused the loss in competitiveness than what it
has done.
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