Froma Harrop: Washington puts its chips on chips

Froma Harrop

Sshould Washington push an “industrial policy”? That is, should the US government get involved in promoting certain domestic industries?

Damn straight it should be. And that’s doubly true when it comes to semiconductors. Computer chips are the little brains that power appliances, airplanes, cell phones and cars. Without them there is no modern economy.

We’ve seen what happens when key manufacturing activities are offshored. During the supply chain crisis caused by COVID, Western manufacturers couldn’t get their hands on the chips they needed to meet demand for their products. Some have had to close or slow down production.

American automakers in particular were handcuffed. General Motors blamed chip shortages for a 15% year-over-year decline in its U.S. new vehicle shipments in the second quarter.

And so it’s hard to overstate how good it is for this country to bring chip manufacturing to this country. Not only would it create many thousands of American jobs; it would ensure that other US manufacturers would not have to beg Asians for semiconductors.

To that end, we should applaud the Chips and Science Act that the Biden administration is pushing for. It was amazing that 187 members of the Republican House of Representatives voted against the bill, when happily 24 did.

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The GOP leadership had joined Chinese lobbyists to oppose it. Never mind that chip independence had the full support of several former Trump officials, most notably former National Security Advisor HR McMaster. For partisan robots, the national interest rarely trumps the joys of political warfare.

Commerce Secretary Gina Raimondo rightly called the $52 billion in new semiconductor funds “rocket fuel for our global competitiveness.”

Asia dominates the production of semiconductors. Taiwan produces 65% of the world’s semiconductors and accounts for nearly 90% of advanced chips. And if China were to attack and take over Taiwan, an adversary would have a stranglehold on America – and global – manufacturing.

In the meantime, the Chinese government has pumped hundreds of billions of dollars into its own semiconductor industry. The Europeans too, by the way.

This is part of a bigger picture in which the US has reversed decades of “outsourcing” factory jobs to low-wage countries. Almost 350,000 jobs will be “relocated” this year – in addition to the approximately 265,000 that will be added in 2021. The chips law and the anti-inflation law drive many of the moves with tax breaks and other economic stimulus.

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“Globalization is on the retreat,” Barclays economists told clients.

Supply chains have become a 21st century economic battlefield. In one staggering example, Europe faces an energy crisis because it has become dependent on Russia for gas and oil.

Raimondo, a former venture capitalist, has been wonderfully aggressive on this front. When Taiwan’s GlobalWafers abandoned a plan to spend $5 billion on a factory in Germany, it called the CEO and snapped up the Texas factory. 1,500 jobs will be added here.

Citing the chip bill, US semiconductor companies say they are planning billions in investments and their jobs are paying very well.

President Joe Biden spruced up at the recent groundbreaking ceremony for a new $20 billion plant that Intel is building near Columbus, Ohio. Standing beside him were two fine Republicans from Ohio, Governor Mike DeWine and Senator Rob Portman.

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The Chinese government has been pouring money into other hot tech fields like artificial intelligence and robotics. These are areas where the United States used to have a secure lead.

“We need America to dominate in certain areas of technology,” Raimondo said. “Critical minerals, electric vehicle batteries, semiconductors, artificial intelligence.” Of course, that goes beyond Jobs. It’s about national security.

Well, will America compete or not? Washington just put chip on chip. That seems like a smart bet.

Froma Harrop, a syndicated columnist, writes for the Providence (Rhode Island) Journal. Her email address is [email protected]

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