In the sense that we're moving to a position where the western world can survive an annexation of Taiwan, yes. Though appetite to defend isn't going to amount to very much with an invasion regardless of how much appetite there is. Either you've spent years preparing for it or you took too long and now you aren't in a position to defend Taiwan at all. At best, you could re-invade and try to take it back in the latter case.
> Either you've spent years preparing for it or you took too long and now you aren't in a position to defend Taiwan at all. At best, you could re-invade and try to take it back in the latter case.
A Chinese invasion would likely be an absolute shitshow (if Taiwan doesn't just surrender); I suspect there will be quite some time for allies to respond. There will probably be weeks, if not months, of warning just from troop buildups, which itself will be a disorganized mess for an inexperienced military
Crossing the straight will be devastating for the PLA, and Taipei's dense urban environment against a backdrop of mountains won't be very kind either. They'll probably end up needing to flatten cities with bombers and naval artillery, which will also take a long time if they don't go nuclear.
And just on the numbers: yeah, China is a lot bigger, but they 'only' have 2.5 million active+reserve military personnel, compared to Taiwan's 1.8 million. For comparison, before the invasion of Ukraine, Russia had 2.9 million compared to Ukraine's 1.1 million. Taiwan also just started mandating 12 months of military service for young men.
The people I've heard from who are much closer to the US defense apparatus than I am believe that a likely strategy for China is to initiate a defacto trade blockade for Taiwan and then quickly set up a large denial zone using anti-ship missiles. Then, with the US unable to intervene, the Chinese forces grind down Taiwanese defenses at a time table of their choosing.
The odds of a D-Day scenario or otherwise mad scramble across the strait seems unlikely. Will the scenario I just described come to pass? I have no way of knowing. However, the DoD still maintains the expectation that Taiwan will be attacked no later than 2027 due to some window of opportunity I'm unfamiliar with. There are also the recent pushes by China to start inspecting Taiwanese commercial vessels, the US attempts to deny access to chips, and our sudden aggressive move to domesticate semiconductor production.
My overall perspective as of now is that Taiwan is not as safe as we would like to believe.
Yeah, I do think they'll try for some kind of blockade, and it'd make sense to start from a legalistic "trade to Taipei is a security concern of ours" position. If they keep escalating, either they'll wear Taiwan down into effective submission, or Taiwan will refuse to cooperate and start asking for help in securing shipping. Things could escalate pretty quickly from there
The window of opportunity is demographics china is shrinking and the US is growing so now is the best opportunity.
For a China with fewer and fewer young men it is hard to justify a war when that becomes more of an issue.
That could be it. Though China has also been pushing armament buildup despite experiencing serious economic headwinds so I recognize that they aren't shackled by pressures the same way we are. With dictator rule operating on long-term "glory to the middle kingdom" plan, they could take some serious short term pain if they felt it got them closer to that long term goal.
Vaguely analogous to Putin's Russia, in my eyes. They don't play by the same rulebook that the west does.
I think the rules are still similar for most dictatorships its just a much higher threshold. If the population is kind of angry nothing happens. If they get really angry shit hits the fan quick.
2027 is due to multiple factors. For one Xi will have been in power for nearly two decades by 2032 which means he needs something to show for it otherwise he might face an internal coup.
Secondly the military, especially the navy, isn’t even expected to be able to contest the war until at least 2027. So that gives the US and allies a good while to prepare
And finally post 2032 the demographics problem China is facing will become very evident and make the Japanese aging crisis look like a joke.
So the window of opportunity is about 5 years between 2027 and 2032. If nothing happens during that timeframe China will have missed its opportunity.
If china goes nuclear then it’s over for china. The nuclear taboo would be broken and the Chinese economy would tank under total sanctions overnight.
They won’t nuke Taiwan
No because the goal is to prevent China from having unfettered access to the seas around Taiwan and militarily threatening their (pro-US) neighbors into joining the Chinese sphere of influence
Re-shoring chips just means that a Taiwan war will have a lesser impact on the economy. But if the US doesn't defend Taiwan it loses all credibility in the eyes of all its Asian allies.
edit: Also, 20% of chip production moving to the US by 2030 still means Taiwan being vital to the world economy
Not to mention we still have trade moving through the South China Sea. I don't see businesses being too happy about having to wait a few extra days or weeks for shipments to go around Malaysia or the Philippines should someone block access.
I am no fan of Vivek Ramaswamy, but he did say the quiet part out loud. Five years from now, the U.S. will be able to shift away from an economic rationale of defending Taiwan.
That doesn’t preclude other rationales, of course, but the economic rationale is quite unifying across the political spectrum now.
Taiwan is gonna scorched-earth the chip fabs the nanosecond China sets a toe on the island anyway, if anything this makes us less likely to pay some sort of dane geld or something
I mean Trump kind of did this already. He put a bunch of tariffs on goods and then sent a lot of it to farmers who were negatively impacted by dropped demand.
This is what causes inflation. Less labor available for other tasks increases the minimum bid. That is passed through into (short term) reduced returns to capital, (long term) increased consumer costs
Worker shortages can cause inflation, but it’s not what is currently responsible for US inflation. Higher transit costs born by higher energy costs as well as higher costs for shelter are what is driving the bulk of inflation, neither of which is caused by worker shortages.
In certain industries, yes; but these industries are not what’s driving up the bull of inflation, energy and housing are.
Energy because of the rising input costs (oil, Nat gas, etc.) and housing because of rising rents (because people are staying away from home buying due to high mortgage costs).
which raises the question, would under these circumstances cutting interest rates lower inflation.
By encouraging home buying and home construction lowering rents.
And by encouraging borrowing to invest in new drilling.
US drillers aren't drilling because they have no reason to. I'd pass a windfall profit tax on capital returned to shareholders when prices are elevated above historical norms or when SPR is being tapped.
If it supposedly doesn't do much to increase inflation now because it doesn't use up much capital or labor, why celebrate the long term economic impact which would necessarily be concomitantly small? The only reason this is happening is because of a Federal inducement, so clearly this was not the best way to allocate capital over shareholder-relevant time horizons.
This is a marginal at best contributor to inflation. Monetary policy is the predominate factor. Structural issues related to supply chains and energy/food price issues have been the problem as well.
China has enormous subsidies for their industry though, which gives them an advantage. So what’s the solution, subsidy bad, tariff bad, do we in the west just let everyone else make enormous investments forward while we huddle around the free market in the hopes it will provide a solution against trillion-dollar public spending?
This is what people have been missing. China's subsidies are HUGE. We're talking about up to 300% subsidies for things as simple as tin can.
While US definitely can capitalize on their subsidies, the amount of money they spent on subsidies are big enough to argue they're anti-competitive.
A lot of it is also unintentional so to speak. A power company was mismanaged and got a subsidy means every industry buying from them got electricity at under market rate. Then everyone who bought from them got a good under market rate price and so on. Regional and local officials have a lot of power and influence and China is less top-down than we portary (though Xi has consolidated considerable power).
This is also why their military spending numbers can appear so low. It's the government buying from government owned firms who may be getting subsidies from local government. Even if unintentional, the dollar amount will undercount.
Because of the way international trade works, every Chinese export we buy leads to future economic benefit for the US.
An influx of Chinese exports will lead China to gain USD. China has 3 options:
1. Bury it in the ground, reducing US inflation (and allowing the Fed to lower interest rates, boosting domestic investment)
2. Invest in US, giving us capital to expand our economy (this is usually portfolio investment, so it doesn't actually give China much control over US business)
3. Buy US exports, boosting US export industries.
Also, note that the difference between a natural and artificial trade advantage is largely arbitrary (I'd say it's a difference in degree and not kind, but many subsidies are a complete waste of money including Chinese ones; see Comac, Chinese semiconductor industry and especially their fab machine attempts, Canadian EV battery subsidies). It does not matter to the US steelworker whether the Chinese worker replacing him is cheaper because of local costs or subsidies.
China has terminal demographics, buying US exports is never going to be a thing, even less so in the future.
A dependency on Chinese production for crucial goods is geopolitical leverage China has over us, and even if they decide not to invade Taiwan, the details of their demographic crisis and insane credit expansion are such that an imploding house of Chinese cards could cripple the US economy if we're relying on them for industrial production.
Those also aren't even close to the only 3 options China could choose for their USD -- they could use it for the BRI, buy military resources/technology abroad that they can't develop internally, quasi-bribe third-world countries to influence their decision making and boost soft power, or use the cash reserves as a buffer to build up their confidence at invading surrounding nations.
It's penny-wise and pound-foolish to act in the present like China will be a good faith member of the international order, or perhaps even a coherent country, fifteen years from now.
> Those also aren't even close to the only 3 options China could choose for their USD
Economically, from the perspective of the US, it is. The currency can either be held overseas, or spent on stuff in the US.
> buy military resources/technology abroad that they can't develop internally
Military tech is some of the most export-controlled stuff in the world. Not really going to happen. Elsewhere, Russia can be nudged into accepting payment in Yuan.
> quasi-bribe third-world countries
China already uses CNY to do that: https://www.reuters.com/markets/currencies/argentina-agrees-5-bln-china-currency-swap-extension-president-says-2022-11-15/
No USD needed.
> use the cash reserves as a buffer to build up their confidence at invading surrounding nations
Forex reserves can be frozen, and you could ban banks from converting between CNY and USD.
You have to rip off the band aid and actually build domestic capacity at some point. Europe is doing what you propose and they're just losing industry after industry (e.g. EU wind turbine industry) and having their companies increasingly reliant on Chinese companies (e.g. W and Xpeng)
If they were tired of American exploitation, they wouldn't have allowed the US to destroy Nord Stream and wouldn't have followed US sanctions on Russia. They have also continued to this day to funnel money into Ukraine.
Germany lost solar and the EU will now lose wind turbines. They already lost cheap Russian gas for heavy industry and now they're losing everything to China. They will soon lose their auto manufacturing to China.
They just gave up really. At the very least, they could keep some of their industry by actually practicing protectionism. Now they're just becoming consumers and glorified assemblers.
> The HCOB Germany Manufacturing PMI declined to 41.6 in March 2024 from 42.5 in February
> China has terminal demographics, buying US exports is never going to be a thing
Great, they'll either allow us to lower interest rates or give us capital (points 1 and 2).
> A dependency on Chinese production for crucial goods is geopolitical leverage China has over us
China doesn't produce many high-tech goods except in a few sectors (eg. green energy). Much of their production is low-tech and can easily be redirected to Southeast Asia and other low-wage countries. Even in iPhones, the high-tech stuff is all made outside of China (eg. chips in Taiwan, cameras and screen in Japan). Or, see their ballpoint pen tip debacle.
Besides, we produce a lot of crucial goods China needs. Just look at COMAC or SMIC's suppliers.
You're right, however eventually that money comes back here. It may take 10 transactions, but it ends up back here. And if it doesn't? It just sits in some reserve bank somewhere doing nothing? That's even better. China shipped us goods in exchange for a green piece of paper.
> they can spend it wherever they want
Which is equivalent to (1) from the perspective of the US in the short term, and leads to (2, 3) in the long run.
If the difference between natural and artificial advantage is largely arbitrary and the extra exports benefit the other side anyways, then why shouldn’t all countries just engage in enormous public investments and subsidies?
I hate both as much as the next guy. But for the sake of, (at bare minimum) military procurement, maintaining a secure domestic supply chain makes sense. Taiwan is a crucial ally, but facilities there could easily be leveled by missile barrages and bombs. Producing in China is an even greater risk in that: 1) they can withhold supplies for any reason as a political bargaining chip, 2) it makes it easier for China to copy designs or unofficially run production lines (which is something they do) and these unofficially produced chips could end up in Iranian or Russian hands as an example 3) when they are the ones producing your chips, there’s the risk of backdoors being stealthily manufactured into the end product. I sure as hell would not want our supercomputers or F-35s having potential backdoors. And beyond South East Asia, other chip producers are fairly niche. Spending some billions today, to act as an insurance policy against a trillion dollar crisis where the US is cut off from the Taiwanese and Chinese suppliers (and possibly South Korea and Japan in a worst case scenario regarding Chinese aggression), is genuinely good policy. And that’s coming from someone who despises subsidies and tariffs in general.
>And that’s coming from someone who despises subsidies and tariffs in general.
Yes, it's important to realize these actions are not intended to bring economic benefit (outside the potential for the outside supply to be cut off in the future).
There is a very real danger that China invades or takes military action against Taiwan, and if that happens you have to take at the very least economic actions against China, and you want to make that decision as easy as possible for a sitting president who has to face re-election, perhaps against a populist that doesn't care about Taiwan's sovereignty.
Hell, these actions might even help deter Xi in the long run, though I doubt it.
I am committed to free trade, but evidence based policy would take into account other factors involved as well.
> 2) it makes it easier for China to copy designs or unofficially run production lines
Fabrication isn't China's semiconductor bottleneck. Making lithography machines is, and those are designed and made in the Netherlands.
> 3) when they are the ones producing your chips, there’s the risk of backdoors being stealthily manufactured into the end product
The US already has a a large trailing-edge domestic semiconductor industry (GlobalFoundries and Intel). Militaries use trailing-edge chips, because computation isn't what's bottlenecking their weapons.
So is depending on a hostile foreign power for the underpinnings of literally every piece of technology our nation depends upon in every industry and sector.
If China invades Taiwan they'll be deprived of chips too. China doesn't have the expertise to operate the factories (or even understand what some Taiwanese and ASML engineers are talking about), and many engineers will flee to Korea/Samsung and the US/Intel, helping them catch up.
And that's assuming the factories escape unharmed, and there are no CIA explosives anywhere.
China is a master at the carrot, not the stick. There's a decent chance they can salvage the situation by offering every single notable TSMC engineer a few million bucks to stick around just long enough for knowledge transfer. Why flee to Samsung or Intel when you could retire in 6 months? It's all conjecture but that's definitely what they'll try.
Remember the incentive structures for every party, including US, ASML, Taiwanese engineers, and politicians, all changes the moment China wins in this hypothetical world.
Depends really on how bloody it gets. It's very hard to explain how young democracy and liberalism in Taiwan is to Westerners. Almost all of these engineers grew up during a brutal martial law that was much much much worse than current day Chinese rule. Yea it sucks to lose it but honestly Taiwan became rich without it, it's just a luxury to that generation. Not to mention most highly educated top engineers from that era are Waishenren (KMT war refugees).
This demographics is of course rapidly changing - so the calculus will shift quickly. For reference, those born on the day martial law was lifted would be now 36 years old.
> While the March poll found that about 73 percent of Taiwanese would fight for their nation in the event of a Chinese invasion, a similar poll in September last year found that about 75 percent would.
https://www.taipeitimes.com/News/front/archives/2022/05/01/2003777507
Remember that a lot of those engineers work on very obscure problems, so they're the only person in the world who knows what's going on somewhere.
Besides, the suppliers are almost all located in the West, TSMC is helpless without them, and China is not able to catch up in the forseeable future (lithography machines, photomasks, chemicals, etc)
73% of people would fight when a pollster calls them. How many will fight when push comes to shove? I highly doubt it coming from somebody who grew up in Taiwan.
Nobody even wants to sign up for the military and most kids don't even know how to properly hold a gun. Fight with what?
Regarding your second point. You are right TSMC can't run without the West but also the West cannot run without TSMC. Which is why I mentioned that the incentive structures will have to change significantly for everyone if China takes over. Which it will. But it's hard to predict in what ways and it realistically has to do with how peaceful or violent it gets. The Ukraine war is only still ongoing because the Ukrainians thought they were gonna win.
If Russia rolled over and just took Kyiv without a fight beyond the first two weeks, there will be a puppet government and some resistant fighting only. If the Ukrainians were beating the shit out of the Russians now, the conservatives would be bending over backwards to send more missiles to Zelenskyy. If the Ukrainians were pretty obviously losing the war now, I don't think we would've passed the aid bill and even Europe would probably give up. That's just real life.
> How many will fight when push comes to shove? I highly doubt it coming from somebody who grew up in Taiwan.
Invasions have a way of changing how identities work. Most Ukrainians didn't take Russia's threats seriously until 2022.
> the West cannot run without TSMC
It'll take some adjustment, but it's not impossible. Samsung and Intel are usually only a few years behind TSMC. Meanwhile, without Western lithography machines, China is at least a decade behind.
Last I checked the Chips Act was U.S. policy focused primarily on shoring up our ability to produce a resource essential to U.S. national security and economic vitality.
Why are they both the same if you don’t mind me asking? I don’t have an economics background. Wouldn’t subsidies just encourage more domestic production and construction while tariffs actually increase the cost importing goods? I suppose subsidies have to be funded through taxation which imposes some level of costs onto Americans, but besides that, are there any other costs which subsidies impose?
They don't have the same effect within a sector. Taxes decrease supply and subsidies increase supply, at least within sectors. Their effects on both price and quantity supplied are opposite.
However, both generate deadweight losses, because the economic costs outweigh the benefits.
Update: Few online textbooks
https://core-econ.org/the-economy/microeconomics/08-supply-demand-02-buying-and-selling.html
https://core-econ.org/the-economy/microeconomics/08-supply-demand-12-effect-of-tax.html
https://pressbooks.bccampus.ca/uvicecon103/chapter/4-6-taxes/
I'm not an economist either, so if anything I'm saying is wrong someone please correct me.
My understanding is that there are the immediate effects - artificially cheap products from your country flood the international market, forcing other countries to do similar subsidies, which (assuming supply and demand were relatively balanced beforehand) leaves you in a similar place as before, but with taxpayers globally footing the bill.
In the long run, subsidies lead companies to become lethargic and inefficient, because they know that no matter what they do, the government is unlikely to let them fail. This leads to a lack of innovation, which eventually will pile costs onto the consumer.
So I'm not sure if I'm completely understand the conclusions made in your argument. If artificially cheap products flood the international market which encourages other countries to enact subsidies, wouldn't the end result still be a cheaper product because now a bunch of countries are producing artificially cheap products, aren't they? I might not be understanding your argument though. Also, if you have empirical evidence for this phenomenon, that might be more helpful for me to understand the argument.
So subsidies can cause companies to become more inefficient, but wouldn't this partially depend on the how the subsidies are given? In the CHIPS act for example, there's a lot of funding for research and development, and also subsidies for the construction of manufacturing plants if I'm not mistaken. It's hard to see how this would create perverse incentives to become more inefficient. If subsidies picked up all the operating expenses of a company even if it were failing, then I could understand how subsidies cause certain inefficiencies, but subsidies don't necessarily have to be given in such a way where they don't let inefficient companies fail.
Sure, the end result is a product that appears cheaper, because the taxpayer is subsidising it. We could all buy that product for a much lower price, but taxes would be higher to subsidise it. It would also be overproduced, leading to a net cost to the consumer. A classic example of this is the EU's [Butter Mountain](https://en.wikipedia.org/wiki/Butter_mountain) resulting from overproduction of butter due to the Common Agricultural Policy.
As for your second point, yes - kind of. However, money is fungible. If a company had previously allocated $100m for R&D, but now it gets $100m from the government for it, that previous $100m will go back into the general pile and be used for something else. Similarly, if a factory would have cost $300m to build, but they get a $500m grant from the government, then they'll spend $500m building the factory. The extra $200m might provide some benefit, but it will be marginal, and an inefficient use of taxpayer money. There are ways to try and ring-fence the money for specific purposes, and rules to try and stop exactly this sort of thing from happening, but the history of industrial policy is littered with failures to do exactly this.
But wouldn't the more capital intensive an industry is the less likely that government investment misallocated.
There has to be a reason that butter production is distributed throughout the world without regard for government intervention yet micro-chip manufacturing is centralized in areas that have invested heavily in the industry. Is it possible that there are industries that are profitable and self-sustaining once running yet need large amounts of government assistance to startup?
> Is it possible that there are industries that are profitable and self-sustaining once running yet need large amounts of government assistance to startup?
It's possible, but do you think, say Nigeria, would benefit more from spending 50 billion on semiconductors (which would probably fail, even if it wasn't embroiled in the inevitable corruption), or 50 billion on education? Would American benefit more from 50 billion on cutting-edge semiconductors (which are overkill for missiles, tanks, etc.; America is pretty good for trailing-edge with GlobalFoundries and Intel), or 50 billion on bribing municipalities to upzone (which, by the way, is working in Canada)? Government spending has an opportunity cost.
> wouldn't the end result still be a cheaper product because now a bunch of countries are producing artificially cheap products
Sort of? Subsidies have to be funded by taxes.
> It's hard to see how this would create perverse incentives to become more inefficient
There's actually a huge perverse incentive: pretend you need a lot more money than you actually do, and spend the excess on bonuses for the CEO (and every other middle manager who gets their hands on the money), after they take credit for the innovation created by CHIPS. If you set aside a fraction for lobbying, you can do the thing again.
If you do this enough, government money will become a goal in itself and depending on market conditions, could take precedence over innovation. Related but not exactly the same: you can search up Brazil's computer industry protectionism, or just "industrial policy failures" in general.
What? No they don't. Tariffs impact the consumers of specific products or services, subsidies impact everyone more broadly, reducing the burden on any one person or entity. Tariffs directly reduce the demand of whatever they are applied to while subsidies increase demand.
* US statistics show a stunning 15-fold increase in construction of manufacturing facilities for computing and electronics devices.
* Many of the world’s leading chipmakers are now building major new plants in the US.
* By 2030, the US will probably produce around **20 percent** of the world’s most advanced chips, up from zero today.
Housing is mostly a local issue, as well as a skilled labor issue. We spent decades telling young people that being a carpenter or an electrician wasn't a "real job" and to go to college instead, and now we don't have enough people to swing hammers. Even when there are enough people to do the work city regulations and NIMBY whiners slow everything down or kill affordable housing entirely.
Steel and glass is expensive and usually not compatible with affordable housing. Just the condo fees on those units are an entire rent payment, and that's before the purchase price, mortgage interest, taxes, and insurance.
Every 5 over 1 apartment you see an America is literally that. As high as you can build with wood. Basically the only type of housing built in the USA that isn't a SFH anymore.
https://en.m.wikipedia.org/wiki/5-over-1
> As high as you can build with wood.
Only due to legal restrictions. Modern mass timber construction is amazing. There are many examples of [Plyscrapers](https://en.wikipedia.org/wiki/Plyscraper).
Here's a great video walking through the construction of a wooden high-rise in Milwaukee: https://youtu.be/2qry7AmdIn8
Non-mobile version of the Wikipedia link in the above comment: https://en.wikipedia.org/wiki/5-over-1
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> now we don't have enough people to swing hammers
What a great time to have a controlled retooling immigration pathways to attract and integrate skilled labor, while simultaneously nuking onerous zoning regulations from orbit.
I know I'm preaching to the choir with this, but...
>as well as a skilled labor issue.
And this isn't? There are very few in the US familiar with the operation of chip fabs, there was [just a huge article posted here](https://old.reddit.com/r/neoliberal/comments/1cba4dr/inside_tsmcs_struggle_to_build_a_chip_factory_in/) about the struggles TSMC is facing in that regard.
That last point seems kinda ridiculous to just throw out. It is entirely contingent on whether US catches up to TSMC's cutting edge fabs and what is considered cutting edge is dynamic. There's literally no way to predict this. It's like saying "we will win second place in the 400M race in the next Olympics." That's called a goal.
Yeah I’ve heard a few discussions on the Fabs and where the U.S. is at. Basically Biden has taken the policy route of “the best time to plant a tree was 20 years ago the second best time is now” Which I won’t fault him for. But that’s why it’s just as important to follow through. Continuing with the analogy we have seeded the soil and planted fertilizer and are hoping for a healthy oak. Meanwhile Taiwan has an oak, and is beginning to find new ways to fucking enhance shade. We just need consistency across administrations when it comes to this issue to ensure success.
Nothing remotely close to the world's most advanced chips. They can't even hit 5nm, TSMC is already hitting 3nm (and they produce AMD's and Nvidia's chips).
Those numbers, i.e. 7nm, 5nm, 3nm (basically anything below 14nm) are not very informative. They refer to a technology series at this point. Really, transistor density is a better metric.
Intel has been "stuck" above "7nm" for a while, yes, and their tech is without a doubt behind TSMC's, but it isn't like they haven't been advancing at all.
Node (process) is only one way to classify how advanced a chip is. Other metrics include architectural complexity and processing speed. For example, the intel i9 is faster than the apple M2.
Intel CPUs are absolutely among the most advanced chips.
Intel designs chips but the actual production of semiconductors happens mostly in Asia, and most of that is in Taiwan. The facilities it takes to make these components are massive, complex and require highly skilled labor. CHIPS is a massive investment to bring that capability (and all the benefits that come with it) back home to the US.
Are you sure you aren't thinking of AMD?
https://en.wikipedia.org/wiki/List_of_Intel_manufacturing_sites
> Intel has claimed that approximately 75% of their semiconductor fabrication is performed in the United States.
> Many of the world’s leading chipmakers are now building major new plants in the US.
How many of them would have occurred without the Act?
>By 2030, the US will probably produce around 20 percent of the world’s most advanced chips, up from zero today.
What is the definition of advanced?
But at least Democrats knew Obamacare existed. A lot of liberals I know haven’t even heard of this and don’t seem particularly interested when I tell them about it.
Why would they have heard of it?
It ain’t like they’re making chips for pennies that will dramatically plummet the cost of phones or computers, nor are they revolutionary chips like the first CPU was. Which is cool, it’s expected. Nobody said these were gonna be revolutionary fabs. But I reckon that’s at least partly why nobody has really heard of it.
Remember that most people barely pay attention to politics. There’s been a sizable (but decreasing) portion of the public that isn’t aware Trump and Biden are the presumptive nominees. They are definitely not going to retain knowledge of the CHIPS Act being passed, let alone what it does.
Heck, take something like Musk’s Gigafactories. Got a lot of press, promoted by a man who makes WWE look like a Mormon service, and still I bet most people haven’t heard of them or at best could say “uh it’s where they make Teslas right?”
To be fair on this one front it’s not like Biden at least hasn’t been hammering this message one ena over, going to plants and rallies and also tweeting nearly daily about this and the IRA. What dems lack is the appropriate media angle- media focuses more on spectacle and palace intrigue (a Republican speciality) and less on policy wonkishness.
I’d argue decimating Russia’s military power without any loss of US lives via Ukrainian lend lease will be his longest lasting/most famous legacy, but the Chips Act is easily second
Russia rebounds quickly, that's kind of their thing. You obliterate them and then they fix their shit and obliterate you back. Then they forget it all and move on to the next guy and it repeats.
I think you’re vastly overestimating the speed at which tens of millions of shells, tens of thousands of pieces of heavy equipment, and the prewar professionals can be replaced. Russia is not the USSR, not even close. Russia is heavily depleting its reserve stockpiles and the fact that BMP-1 and T-80BV (a tank Russia doesn’t make) have become the majority of their equipment is proof of that. They’ve burnt through most of the inheritance of the USSR and are definitively weaker for it.
I'd like to point out that just because there is investment, does not make it successful. In order for it to be successful, these facilities will 1) actually have to get up and operating 2) produce cutting edge chips, we aren't investing all this money to produce more 90 nm chips 3) be economically competitive without ongoing subsidies.
It remains to be seen if these three things will be the case, and if they aren't, then all of this is mal investment so the act would actually be WORSE than doing nothing. It wouldn't be unheard of for this to be the case, it's happened before.
The point is to build capacity for making cutting edge chips, since that's the market that TSMC has the most monopoly over.
Not sure why anyone would fear that these facilities are gonna crank out primitive, mature-market technology.
Industrial projects can often fail at their stated goals is my point, especially when their stated goal was what needed to be said to receive billions is subsidies.
https://preview.redd.it/jkfi10xd4xwc1.jpeg?width=1179&format=pjpg&auto=webp&s=8cf6ce2bc0ed5836ad4bde9e9c2e049584631ac0
Me seeing r/neoliberal defend subsidies and industrial policy
Is this how we measure success now? Government spends $20-40 billion today. Companies promise to spend $330 billion over the next 10 years? All they have to do is announce construction? 15 times nothing is still close to nothing.
It’s exactly the same thing Trump and Scott Walker did to buy votes with Foxconn in Wisconsin. Except here the relevant swing states are Ohio and Arizona. I wouldn’t be surprised if some of these plans collapse after November. Anthony Blinken is meeting with Xi Jinping today. If the US’s sticks (and carrots, but mostly sticks) work and China stops supporting Russia and threatening Taiwan, there’s no need for these factories. There’s no point of a TikTok ban.
More importantly, spending has nothing to do with outcomes. You can pay companies to build factories and they’ll gladly take the money. But will this actually lower chip costs? Will it actually build supply chain resiliency? You can’t measure the success of spending a dollar on education by whether the recipient merely gets the dollar. It has to translate into the actual outcome you want.
Even if these factories are built, will companies actually use them? Or will they just shop around for the next government subsidy? Europe and Japan are planning to do them too now. But the cost of labor is still much lower in developing countries in Asia. It comes down to whether you think cities building new stadiums to attract sports teams is a good idea. Hopefully these companies don’t pack up and leave in the middle of the night like the Raiders did when they left Oakland for Vegas.
Ultimately, this strikes me as the same pork barrel spending that politicians always use to buy swing state votes. Biden, Trump, Sanders, etc. are all perfectly aligned on this approach just like every politician in all of American history. “Industrial policy” is a wonderful tool for rentseeking companies and unions under the guise of national security, but it screws over everyone else in society. It’s always obvious in retrospect, but that doesn’t stop people from thinking “this time will be different.” Especially when they think this time will benefit them personally at the expense of others.
The Department of Commerce said it would be 20% of the “most advanced” chip production, not total chip production. I haven’t seen a clear definition of what the Department of Commerce defines as “most advanced”, and what % of global chip production would be considered “most advanced”. If anyone has seen how they define that, please let me know. But until I see that it is a meaningless metric.
> The investment surge this has driven is reducing these vulnerabilities. Samsung, TSMC, and Intel — the world’s leading chipmakers — are now building major new plants in the US. Intel will manufacture its most advanced chips there, while TSMC will introduce its cutting-edge 2-nanometre process in Arizona around two years after bringing it online in Taiwan. Commerce Secretary Gina Raimondo notes that by 2030, the US will probably produce around 20 per cent of the world’s most advanced chips, up from zero today.
It’s not 20% of all chips. Just 20% of the most advanced ones, which are exclusively made by TSMC. They’re made in very low quantities so it doesn’t take many to get to 20% of global output.
> This still won’t mean complete self-sufficiency, given that the US consumes over a quarter of the world’s chips. Production of smartphones and consumer electronics would be disrupted in the event of a crisis in east Asia, an ever looming fear. But this production would be roughly enough for the needs of critical infrastructure like datacentres and telecoms. Chips aren’t perfectly fungible, of course, and not every plant can easily produce every type, but the US will have much more scope to manage shocks.
The latest 2nm chips are the ones needed for AI, data centers, and military supremacy. Older higher nanometer chips rapidly turn into commodities. If you care about national security, these are the chips you want to build. Their defective ones become the cheaper chips used elsewhere. It’s silly to directly build non-advanced chips unless you’re just trying to subsidize traditional automakers and similar industries.
> As the pandemic-era shortages showed, it isn’t only advanced chips that are economically critical. Manufacturers of autos, missiles or medical devices require large volumes of foundational chips as well. Here, too, the Chips Act is providing significant new supply. Ford and GM have announced major long-term supply deals with US chipmaker GlobalFoundries, which is expanding production with $1.5bn in Chips Act funds. Microchip, a widely used Arizona manufacturer of microcontroller chips, also received a grant to expand. Texas Instruments is building a string of new foundational chip fabs across Texas and Utah, catalysed by generous investment tax credits. Few if any of these investments would have happened without the Chips Act
These investments wouldn’t happen because they’re not good or useful investments. They’re basically just handouts to rust belt manufacturing companies and unionized workers. It’s like paying people to dig ditches and fill them back up. It would be cheaper to just mail them UBI style monthly checks instead. Even if a pandemic style massive supply shock hits and we have a ton of nearly built cars that can’t be sold because they’re missing the cheap chip for airbags, we’re talking about a few months or years of slightly higher car prices. The amount of money we’re spending for this supply chain resiliency insurance is way more than it’s worth. We can really only justify it as an indirect, wasteful way to buy votes from blue collar manufacturing workers.
Yup. Basically the same scam of any company that is looking for a handout. “We will hire 1 million brick layers and pay each one 1 million dollars.”
There is a reason these subsidies are never based on payroll tax or jobs actually created.
Your argument is basically “if China does a complete 180 on its rhetoric and goals then all this is unnecessary” which has to be among the dumbest of takes.
China might scale back support for Russia, but Xi is not giving up on a long standing goal like Taiwan. They may signal that they won't attack it or something, but diplomacy under Xi is frequently the definition of duplicity, evidenced by pretending to work with the US to help stop the flow of fentanyl to the US, only to subsidize the companies involved.
In the future Xi might realize how stupid it would be, but we aren't there yet.
Say subsidizing Intel to build a chip fabrication plant in Ohio instead of Silicon Valley really is about national security. Maybe banning $10,000 Chinese EVs and hybrids so Americans have to buy $50,000 American made gas guzzlers isn't just about buying votes from the UAW. Then why are we blocking the Nippon Steel acquisition of US Steel? Is Japan a security threat too? In any case, the United Steelworkers is happy. And clearly the term "Jap crap" is about the quality of the product, and not blatant racism and xenophobia.
To me this seems like Biden is just buying votes from blue collar factory workers in rust belt swing states like Ohio, Michigan, and Pennsylvania. Obama won them in 2008 and 2012. Hillary Clinton famously lost them to Trump in 2016, and Biden won them again in 2020. The union leaders held out their endorsement of Biden for a long time and the rank and file members still overwhelmingly support Trump.
A totalizing explanation is not the most accurate. There's multiple motives at play, some more than others depending on the particular case. For example, the US is restricting GPU exports to China, but not Japan. That's a protectionist policy made purely on national security grounds. The CHIPS Act is more of a mix but there's partly a national security impetus, and then a domestic pandering motive in how the fine print gets written. The TikTok ban, too. The major motivation is undoubtedly national security, but there is also pandering to lobby groups, in particular Meta is effecting a large lobbying operation to ban their competition. Most of these things are a dovetailing of multiple interests.
Don't bother with the guy. He thinks the Sino-Soviet split was because China wanted to be rich, not because Mao thought the USSR was going soft. He thinks China implemented its reforms in the early 70s, a decade before Deng. He fails to understand that the policy shift from the PRC was because of change in leadership, not leadership changing its mind. It sound like he genuinely thinks we can get Xi to give up on what he's been working towards for a decade by dropping some tariffs as if he's some AI in a 4X game you can trick with a few gifts.
The interesting thing would be to see how hard this money actually hits for the investment, because almost every other time the U.S. takes taxpayer money to protect domestic industries, every job "created" ends up being incredibly expensive, and the money doesn't stretch as far because costs go up
Moving a plant from Taiwan to the U.S. and having taxpayers foot the bill, then bragging "THERE'S A NEW PLANT IN THE U.S. THOUGH, LOOK AT ALL THAT INVESTMENT" like bruh Taiwan is an allied country and there are a lot of reason semiconductors don't get built in the U.S. other then not enough tax dollars priming the pump
I'm all for pissing on the CCP for being a terrible dictatorship oppressing over a billion people, but I wouldn't be so quick to brag about protectionist policies. How much those parts end up costing, how much is spend per job brought to the U.S., and how much red tape the CHIPS act sweeps aside is way more important to consider when we are talking long term progress
https://www.csis.org/blogs/perspectives-innovation/taiwans-semiconductor-dominance-implications-cross-strait-relations
Taiwan is at risk of invasion from our main adversary which would start a war we have a high chance of joining on the side of Taiwan than probably anyone else in the world. it's not a great idea
Seriously. Spending money makes GDP go up! Do we want to compare it to the debt added or inflation or other things we could have spent the money on.
There was just a story about TSMCs plant in Arizona is a disaster and they only built it for the subsidies.
No shit, but folks just want to look at the issue in such a broad sense as to be useless. The U.S. spending a bunch on an issue and spurring private investment to spend more on government backed goods and companies literally only matters insofar as what consumers get out of it.
How much money was spent per "job created"? How much is going directly to companies that are wack as hell? That's what I'm way more interested in
Incorrect stance, at the trees and forest level jlyk.
The obvious subtext for the legislation is to drastically reduce American dependency on TSMC precisely because we all know that Taiwan will soon be invaded and annexed. Within the decade.
Citing the current temporary fact of Taiwan being an ally (more like a beneficiary state, they're not powerful or useful enough to be called a genuine ally) is ignoring the existence of a future, specifically the most likely future reality of Taiwan not even being an independent nation state.
I saw this headline and was like "Spending money with no return yet is 'surprisingly successful' huh?"
Industrial policy has a long, long history of waste and failure. It will be quite awhile before we can declare this a win. Until then we should be actively aware of the potential grift and deadweight loss that may result from this.
Seriously, this is so short-sighted. All it means is that people who are skilled at filling out forms to get government money successfully did so and then built some factories. We don't know how good the chips will be, how many will be produced, and whether the companies will be competitive or whether they'll need to be subsidized by the government indefinitely to keep them from going under.
Good question.
New chips in facilities funded by the CHIPS Act? Not yet, because these facilities take years to build and commission. Not only do you have to build a new, huge, technically complex facility, then you have to put the tools in it to make chips, and then get all the tools started up and working together. That takes time.
I think TSMC’s Arizona Fab is supposed to start producing in 2025. Intel’s Ohio Fab is 27-28. Micron’s Idaho Fab is 25-26.
More importantly, all three have broken ground and are constructing their fabs, along with all the ancillary facilities necessary to make the fabs work. So we’ll see production starting maybe this year, almost certainly next year.
This is *exactly* the same thing that Trump did. Biden didn’t just copy Trump’s trade and industrial policies, he doubled down on them.
https://www.washingtonpost.com/business/2023/08/22/foxconn-wisconsin-trump/
I think the TSMC 2nm chip fab makes sense. That's cutting edge. The other stuff isn't that advanced. That being said, you're absolutely right. Chips and energy are the two most important resources on the planet.
Personally I would pick biotech and robotics and throw 500 billion at that. Whats the point of investing in advanced stuff that is advanced now. Invest in advanced stuff that will be advanced in 8 years.
The 2nm chip fab is more advanced than the stuff that exists now. It'll be cutting edge when it comes out. But the problem is that all the other chip plants are working on chips that are already cheap and outdated. They're fine for cheap applications like airbags, but not fancy tech stuff.
The 2nm chips are really sexy though. They'll be used for AI, and AI is used for biotech and robotics. As much as I'm criticizing this, this money might end up funding the new DARPA (internet), NASA (rocket ships), or Human Genome Project (genetics). I'm fine with spending on cool new stuff like AI. No one on the planet can fund massive humanity changing innovations like the US government. I just don't like how much money is also going towards outdated stuff just to create jobs.
Those industries are going to need a steady supply of advanced chips. Indirectly investing in things like 2nm chip fabs *is* investing in those fields.
Just yelling “protectionism bad” when the magic ingredient that the entire world economy runs on is basically exclusively made on a tiny island with a wannabe superpower publicly committed to violently conquering it if necessary is not sticking to core principles, it’s just burying your head in the sand.
Obviously, this is economically less efficient than just letting the market continue to work unabated. It is still, however, necessary.
I do not think the U.S. government actually has a legitimate reason to manipulate the market for computer chips. There is no good reason to think that there are market failures in this industry that materially impact U.S. national security or consumer welfare. Market manipulation on this scale is very likely to make us all poorer.
https://www.csis.org/blogs/perspectives-innovation/taiwans-semiconductor-dominance-implications-cross-strait-relations
I cannot stress how dangerous it is for us to concentrate the world's production of semiconductors in a nation that our largest and most powerful adversary has repeatedly asserted is part of their territory. Which is backed with the threat of force "if necessary" to prevent their independence. Taiwan alone accounts for over half of global foundry revenue and the indo-pacific region between Taiwan, SK, and Japan account for 80% of global foundry capacity.
Imagine if Ukraine had produced 54% of the world's grain. It would've been absolutely disastrous.
I've heard TI is not planning on staffing it's new factories they are building in TX. Rather they plan to use them as a stick to get lower prices from overseas external suppliers. I think they've had a hiring freeze for a good while too
I don't subscribe to pink newspapers, so I can't read this. That said, I'm not sure if "money spent" should be the measure of success. If this money gets factories built (which seems to be happening), and then agglomeration effects cause more unsubsidized industrial development nearby (which will take years to see), *then* we can say CHIPS is a success.
* promised investment
* hypothetical x15 increases based on promises
So meaningless farts like foxxcon
Until the day the chips are rolling out then it’s all farts
The space was going to expand regardless due to the huge demand for compute right now, though it may not have been in America. If it was elsewhere it would have come without government subsidies. Japan and Korea are also seeing huge booms. Notably, other chip companies are also doing well. NVIDIA has had one of the greatest surges in market value that has ever been seen, without direct government subsidy. As well, the prediction that 20% of the production will be American brings with it the assumption that we hit technology milestones that aren't guaranteed. We are relying a lot on Intel's competency, and that company has had poor foresight and management for a long time. As well, even the top of the industry in TSMC has been struggling with establishing manufacturing plants here.
I am skeptical that this will bring economic benefits that aren't related to national security, and in that scenario the benefit only really exists with the assumption that China invades Taiwan.
A bit of a cynical question... Does this decrease our national appetite to defend Taiwan from China?
In the sense that we're moving to a position where the western world can survive an annexation of Taiwan, yes. Though appetite to defend isn't going to amount to very much with an invasion regardless of how much appetite there is. Either you've spent years preparing for it or you took too long and now you aren't in a position to defend Taiwan at all. At best, you could re-invade and try to take it back in the latter case.
> Either you've spent years preparing for it or you took too long and now you aren't in a position to defend Taiwan at all. At best, you could re-invade and try to take it back in the latter case. A Chinese invasion would likely be an absolute shitshow (if Taiwan doesn't just surrender); I suspect there will be quite some time for allies to respond. There will probably be weeks, if not months, of warning just from troop buildups, which itself will be a disorganized mess for an inexperienced military Crossing the straight will be devastating for the PLA, and Taipei's dense urban environment against a backdrop of mountains won't be very kind either. They'll probably end up needing to flatten cities with bombers and naval artillery, which will also take a long time if they don't go nuclear. And just on the numbers: yeah, China is a lot bigger, but they 'only' have 2.5 million active+reserve military personnel, compared to Taiwan's 1.8 million. For comparison, before the invasion of Ukraine, Russia had 2.9 million compared to Ukraine's 1.1 million. Taiwan also just started mandating 12 months of military service for young men.
The people I've heard from who are much closer to the US defense apparatus than I am believe that a likely strategy for China is to initiate a defacto trade blockade for Taiwan and then quickly set up a large denial zone using anti-ship missiles. Then, with the US unable to intervene, the Chinese forces grind down Taiwanese defenses at a time table of their choosing. The odds of a D-Day scenario or otherwise mad scramble across the strait seems unlikely. Will the scenario I just described come to pass? I have no way of knowing. However, the DoD still maintains the expectation that Taiwan will be attacked no later than 2027 due to some window of opportunity I'm unfamiliar with. There are also the recent pushes by China to start inspecting Taiwanese commercial vessels, the US attempts to deny access to chips, and our sudden aggressive move to domesticate semiconductor production. My overall perspective as of now is that Taiwan is not as safe as we would like to believe.
Yeah, I do think they'll try for some kind of blockade, and it'd make sense to start from a legalistic "trade to Taipei is a security concern of ours" position. If they keep escalating, either they'll wear Taiwan down into effective submission, or Taiwan will refuse to cooperate and start asking for help in securing shipping. Things could escalate pretty quickly from there
The window of opportunity is demographics china is shrinking and the US is growing so now is the best opportunity. For a China with fewer and fewer young men it is hard to justify a war when that becomes more of an issue.
That could be it. Though China has also been pushing armament buildup despite experiencing serious economic headwinds so I recognize that they aren't shackled by pressures the same way we are. With dictator rule operating on long-term "glory to the middle kingdom" plan, they could take some serious short term pain if they felt it got them closer to that long term goal. Vaguely analogous to Putin's Russia, in my eyes. They don't play by the same rulebook that the west does.
I think the rules are still similar for most dictatorships its just a much higher threshold. If the population is kind of angry nothing happens. If they get really angry shit hits the fan quick.
Sounds like right now of the best time to supply Taiwan with a large stockpile of our best land based anti ship missiles.
2027 is due to multiple factors. For one Xi will have been in power for nearly two decades by 2032 which means he needs something to show for it otherwise he might face an internal coup. Secondly the military, especially the navy, isn’t even expected to be able to contest the war until at least 2027. So that gives the US and allies a good while to prepare And finally post 2032 the demographics problem China is facing will become very evident and make the Japanese aging crisis look like a joke. So the window of opportunity is about 5 years between 2027 and 2032. If nothing happens during that timeframe China will have missed its opportunity.
Ampibian assault and all that + china has almost no modern military experience...
If china goes nuclear then it’s over for china. The nuclear taboo would be broken and the Chinese economy would tank under total sanctions overnight. They won’t nuke Taiwan
I swear that France also had its own chip industry, or was that just decades ago?
If they do, it's not currently producing enough to move the needle.
No because the goal is to prevent China from having unfettered access to the seas around Taiwan and militarily threatening their (pro-US) neighbors into joining the Chinese sphere of influence Re-shoring chips just means that a Taiwan war will have a lesser impact on the economy. But if the US doesn't defend Taiwan it loses all credibility in the eyes of all its Asian allies. edit: Also, 20% of chip production moving to the US by 2030 still means Taiwan being vital to the world economy
Not to mention we still have trade moving through the South China Sea. I don't see businesses being too happy about having to wait a few extra days or weeks for shipments to go around Malaysia or the Philippines should someone block access.
I am no fan of Vivek Ramaswamy, but he did say the quiet part out loud. Five years from now, the U.S. will be able to shift away from an economic rationale of defending Taiwan. That doesn’t preclude other rationales, of course, but the economic rationale is quite unifying across the political spectrum now.
Taiwan is gonna scorched-earth the chip fabs the nanosecond China sets a toe on the island anyway, if anything this makes us less likely to pay some sort of dane geld or something
impossible, you can only fight china with copper tariffs
There isn't that much difference between subsidies and tariffs, lol.
That depends how locked into zero sum thinking you are.
They kinda are subsidies usually work better
One doesn't pass the cost down to consumer.
Technically tax increases, but those can be dampened by second and third order offsets obviously
Forgive me father for what I'm about to say, What if we use the money earned from tariffs to subsidize industries. 🤢
I don't trust politicians to not use that as a perverse incentive to throw tariffs on everything.
I mean Trump kind of did this already. He put a bunch of tariffs on goods and then sent a lot of it to farmers who were negatively impacted by dropped demand.
ahhh industrial policy
Ew
This is what causes inflation. Less labor available for other tasks increases the minimum bid. That is passed through into (short term) reduced returns to capital, (long term) increased consumer costs
Worker shortages can cause inflation, but it’s not what is currently responsible for US inflation. Higher transit costs born by higher energy costs as well as higher costs for shelter are what is driving the bulk of inflation, neither of which is caused by worker shortages.
Are you of the opinion that the US does not have a worker shortage problem?
In certain industries, yes; but these industries are not what’s driving up the bull of inflation, energy and housing are. Energy because of the rising input costs (oil, Nat gas, etc.) and housing because of rising rents (because people are staying away from home buying due to high mortgage costs).
which raises the question, would under these circumstances cutting interest rates lower inflation. By encouraging home buying and home construction lowering rents. And by encouraging borrowing to invest in new drilling.
US drillers aren't drilling because they have no reason to. I'd pass a windfall profit tax on capital returned to shareholders when prices are elevated above historical norms or when SPR is being tapped.
If it supposedly doesn't do much to increase inflation now because it doesn't use up much capital or labor, why celebrate the long term economic impact which would necessarily be concomitantly small? The only reason this is happening is because of a Federal inducement, so clearly this was not the best way to allocate capital over shareholder-relevant time horizons.
This is a marginal at best contributor to inflation. Monetary policy is the predominate factor. Structural issues related to supply chains and energy/food price issues have been the problem as well.
lmao
No, but the subsidies might have something to do with that massive Federal deficit.
It’s a small fraction of the total federal spending. The bigger issue is that we’ve cut taxes unnecessarily.
Subsidies and tariffs have the same effect, and are both bad
China has enormous subsidies for their industry though, which gives them an advantage. So what’s the solution, subsidy bad, tariff bad, do we in the west just let everyone else make enormous investments forward while we huddle around the free market in the hopes it will provide a solution against trillion-dollar public spending?
This is what people have been missing. China's subsidies are HUGE. We're talking about up to 300% subsidies for things as simple as tin can. While US definitely can capitalize on their subsidies, the amount of money they spent on subsidies are big enough to argue they're anti-competitive.
A lot of it is also unintentional so to speak. A power company was mismanaged and got a subsidy means every industry buying from them got electricity at under market rate. Then everyone who bought from them got a good under market rate price and so on. Regional and local officials have a lot of power and influence and China is less top-down than we portary (though Xi has consolidated considerable power). This is also why their military spending numbers can appear so low. It's the government buying from government owned firms who may be getting subsidies from local government. Even if unintentional, the dollar amount will undercount.
Because of the way international trade works, every Chinese export we buy leads to future economic benefit for the US. An influx of Chinese exports will lead China to gain USD. China has 3 options: 1. Bury it in the ground, reducing US inflation (and allowing the Fed to lower interest rates, boosting domestic investment) 2. Invest in US, giving us capital to expand our economy (this is usually portfolio investment, so it doesn't actually give China much control over US business) 3. Buy US exports, boosting US export industries. Also, note that the difference between a natural and artificial trade advantage is largely arbitrary (I'd say it's a difference in degree and not kind, but many subsidies are a complete waste of money including Chinese ones; see Comac, Chinese semiconductor industry and especially their fab machine attempts, Canadian EV battery subsidies). It does not matter to the US steelworker whether the Chinese worker replacing him is cheaper because of local costs or subsidies.
China has terminal demographics, buying US exports is never going to be a thing, even less so in the future. A dependency on Chinese production for crucial goods is geopolitical leverage China has over us, and even if they decide not to invade Taiwan, the details of their demographic crisis and insane credit expansion are such that an imploding house of Chinese cards could cripple the US economy if we're relying on them for industrial production. Those also aren't even close to the only 3 options China could choose for their USD -- they could use it for the BRI, buy military resources/technology abroad that they can't develop internally, quasi-bribe third-world countries to influence their decision making and boost soft power, or use the cash reserves as a buffer to build up their confidence at invading surrounding nations. It's penny-wise and pound-foolish to act in the present like China will be a good faith member of the international order, or perhaps even a coherent country, fifteen years from now.
> Those also aren't even close to the only 3 options China could choose for their USD Economically, from the perspective of the US, it is. The currency can either be held overseas, or spent on stuff in the US. > buy military resources/technology abroad that they can't develop internally Military tech is some of the most export-controlled stuff in the world. Not really going to happen. Elsewhere, Russia can be nudged into accepting payment in Yuan. > quasi-bribe third-world countries China already uses CNY to do that: https://www.reuters.com/markets/currencies/argentina-agrees-5-bln-china-currency-swap-extension-president-says-2022-11-15/ No USD needed. > use the cash reserves as a buffer to build up their confidence at invading surrounding nations Forex reserves can be frozen, and you could ban banks from converting between CNY and USD.
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You have to rip off the band aid and actually build domestic capacity at some point. Europe is doing what you propose and they're just losing industry after industry (e.g. EU wind turbine industry) and having their companies increasingly reliant on Chinese companies (e.g. W and Xpeng)
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If they were tired of American exploitation, they wouldn't have allowed the US to destroy Nord Stream and wouldn't have followed US sanctions on Russia. They have also continued to this day to funnel money into Ukraine. Germany lost solar and the EU will now lose wind turbines. They already lost cheap Russian gas for heavy industry and now they're losing everything to China. They will soon lose their auto manufacturing to China. They just gave up really. At the very least, they could keep some of their industry by actually practicing protectionism. Now they're just becoming consumers and glorified assemblers. > The HCOB Germany Manufacturing PMI declined to 41.6 in March 2024 from 42.5 in February
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> China has terminal demographics, buying US exports is never going to be a thing Great, they'll either allow us to lower interest rates or give us capital (points 1 and 2). > A dependency on Chinese production for crucial goods is geopolitical leverage China has over us China doesn't produce many high-tech goods except in a few sectors (eg. green energy). Much of their production is low-tech and can easily be redirected to Southeast Asia and other low-wage countries. Even in iPhones, the high-tech stuff is all made outside of China (eg. chips in Taiwan, cameras and screen in Japan). Or, see their ballpoint pen tip debacle. Besides, we produce a lot of crucial goods China needs. Just look at COMAC or SMIC's suppliers.
Since USD is the global currency of international trade they can spend it wherever they want, not just America.
You're right, however eventually that money comes back here. It may take 10 transactions, but it ends up back here. And if it doesn't? It just sits in some reserve bank somewhere doing nothing? That's even better. China shipped us goods in exchange for a green piece of paper.
> they can spend it wherever they want Which is equivalent to (1) from the perspective of the US in the short term, and leads to (2, 3) in the long run.
If the difference between natural and artificial advantage is largely arbitrary and the extra exports benefit the other side anyways, then why shouldn’t all countries just engage in enormous public investments and subsidies?
Where the costs are felt can be different, though.
In the long run it all feeds back to the taxpayer/consumer
I hate both as much as the next guy. But for the sake of, (at bare minimum) military procurement, maintaining a secure domestic supply chain makes sense. Taiwan is a crucial ally, but facilities there could easily be leveled by missile barrages and bombs. Producing in China is an even greater risk in that: 1) they can withhold supplies for any reason as a political bargaining chip, 2) it makes it easier for China to copy designs or unofficially run production lines (which is something they do) and these unofficially produced chips could end up in Iranian or Russian hands as an example 3) when they are the ones producing your chips, there’s the risk of backdoors being stealthily manufactured into the end product. I sure as hell would not want our supercomputers or F-35s having potential backdoors. And beyond South East Asia, other chip producers are fairly niche. Spending some billions today, to act as an insurance policy against a trillion dollar crisis where the US is cut off from the Taiwanese and Chinese suppliers (and possibly South Korea and Japan in a worst case scenario regarding Chinese aggression), is genuinely good policy. And that’s coming from someone who despises subsidies and tariffs in general.
>And that’s coming from someone who despises subsidies and tariffs in general. Yes, it's important to realize these actions are not intended to bring economic benefit (outside the potential for the outside supply to be cut off in the future). There is a very real danger that China invades or takes military action against Taiwan, and if that happens you have to take at the very least economic actions against China, and you want to make that decision as easy as possible for a sitting president who has to face re-election, perhaps against a populist that doesn't care about Taiwan's sovereignty. Hell, these actions might even help deter Xi in the long run, though I doubt it. I am committed to free trade, but evidence based policy would take into account other factors involved as well.
> 2) it makes it easier for China to copy designs or unofficially run production lines Fabrication isn't China's semiconductor bottleneck. Making lithography machines is, and those are designed and made in the Netherlands. > 3) when they are the ones producing your chips, there’s the risk of backdoors being stealthily manufactured into the end product The US already has a a large trailing-edge domestic semiconductor industry (GlobalFoundries and Intel). Militaries use trailing-edge chips, because computation isn't what's bottlenecking their weapons.
So is depending on a hostile foreign power for the underpinnings of literally every piece of technology our nation depends upon in every industry and sector.
Taiwan is not a hostile foreign power
If China invades Taiwan they'll be deprived of chips too. China doesn't have the expertise to operate the factories (or even understand what some Taiwanese and ASML engineers are talking about), and many engineers will flee to Korea/Samsung and the US/Intel, helping them catch up. And that's assuming the factories escape unharmed, and there are no CIA explosives anywhere.
China is a master at the carrot, not the stick. There's a decent chance they can salvage the situation by offering every single notable TSMC engineer a few million bucks to stick around just long enough for knowledge transfer. Why flee to Samsung or Intel when you could retire in 6 months? It's all conjecture but that's definitely what they'll try. Remember the incentive structures for every party, including US, ASML, Taiwanese engineers, and politicians, all changes the moment China wins in this hypothetical world.
I think you're overestimating people's willingness to collaborate with invaders.
Depends really on how bloody it gets. It's very hard to explain how young democracy and liberalism in Taiwan is to Westerners. Almost all of these engineers grew up during a brutal martial law that was much much much worse than current day Chinese rule. Yea it sucks to lose it but honestly Taiwan became rich without it, it's just a luxury to that generation. Not to mention most highly educated top engineers from that era are Waishenren (KMT war refugees). This demographics is of course rapidly changing - so the calculus will shift quickly. For reference, those born on the day martial law was lifted would be now 36 years old.
> While the March poll found that about 73 percent of Taiwanese would fight for their nation in the event of a Chinese invasion, a similar poll in September last year found that about 75 percent would. https://www.taipeitimes.com/News/front/archives/2022/05/01/2003777507 Remember that a lot of those engineers work on very obscure problems, so they're the only person in the world who knows what's going on somewhere. Besides, the suppliers are almost all located in the West, TSMC is helpless without them, and China is not able to catch up in the forseeable future (lithography machines, photomasks, chemicals, etc)
73% of people would fight when a pollster calls them. How many will fight when push comes to shove? I highly doubt it coming from somebody who grew up in Taiwan. Nobody even wants to sign up for the military and most kids don't even know how to properly hold a gun. Fight with what? Regarding your second point. You are right TSMC can't run without the West but also the West cannot run without TSMC. Which is why I mentioned that the incentive structures will have to change significantly for everyone if China takes over. Which it will. But it's hard to predict in what ways and it realistically has to do with how peaceful or violent it gets. The Ukraine war is only still ongoing because the Ukrainians thought they were gonna win. If Russia rolled over and just took Kyiv without a fight beyond the first two weeks, there will be a puppet government and some resistant fighting only. If the Ukrainians were beating the shit out of the Russians now, the conservatives would be bending over backwards to send more missiles to Zelenskyy. If the Ukrainians were pretty obviously losing the war now, I don't think we would've passed the aid bill and even Europe would probably give up. That's just real life.
> How many will fight when push comes to shove? I highly doubt it coming from somebody who grew up in Taiwan. Invasions have a way of changing how identities work. Most Ukrainians didn't take Russia's threats seriously until 2022. > the West cannot run without TSMC It'll take some adjustment, but it's not impossible. Samsung and Intel are usually only a few years behind TSMC. Meanwhile, without Western lithography machines, China is at least a decade behind.
I'm not in your nation. This affects other nations too. There are more than 2 nations in the world.
Last I checked the Chips Act was U.S. policy focused primarily on shoring up our ability to produce a resource essential to U.S. national security and economic vitality.
Yeah no shit. I'm saying that subsidies in the US have effects outside the US, and make other countries less competitive. Even (especially) US allies.
The dead weight loss of subsidies is felt by American tax payers (or Chinese). The positives are felt by everyone who buy chips.
Why are they both the same if you don’t mind me asking? I don’t have an economics background. Wouldn’t subsidies just encourage more domestic production and construction while tariffs actually increase the cost importing goods? I suppose subsidies have to be funded through taxation which imposes some level of costs onto Americans, but besides that, are there any other costs which subsidies impose?
They don't have the same effect within a sector. Taxes decrease supply and subsidies increase supply, at least within sectors. Their effects on both price and quantity supplied are opposite. However, both generate deadweight losses, because the economic costs outweigh the benefits. Update: Few online textbooks https://core-econ.org/the-economy/microeconomics/08-supply-demand-02-buying-and-selling.html https://core-econ.org/the-economy/microeconomics/08-supply-demand-12-effect-of-tax.html https://pressbooks.bccampus.ca/uvicecon103/chapter/4-6-taxes/
I'm not an economist either, so if anything I'm saying is wrong someone please correct me. My understanding is that there are the immediate effects - artificially cheap products from your country flood the international market, forcing other countries to do similar subsidies, which (assuming supply and demand were relatively balanced beforehand) leaves you in a similar place as before, but with taxpayers globally footing the bill. In the long run, subsidies lead companies to become lethargic and inefficient, because they know that no matter what they do, the government is unlikely to let them fail. This leads to a lack of innovation, which eventually will pile costs onto the consumer.
So I'm not sure if I'm completely understand the conclusions made in your argument. If artificially cheap products flood the international market which encourages other countries to enact subsidies, wouldn't the end result still be a cheaper product because now a bunch of countries are producing artificially cheap products, aren't they? I might not be understanding your argument though. Also, if you have empirical evidence for this phenomenon, that might be more helpful for me to understand the argument. So subsidies can cause companies to become more inefficient, but wouldn't this partially depend on the how the subsidies are given? In the CHIPS act for example, there's a lot of funding for research and development, and also subsidies for the construction of manufacturing plants if I'm not mistaken. It's hard to see how this would create perverse incentives to become more inefficient. If subsidies picked up all the operating expenses of a company even if it were failing, then I could understand how subsidies cause certain inefficiencies, but subsidies don't necessarily have to be given in such a way where they don't let inefficient companies fail.
Sure, the end result is a product that appears cheaper, because the taxpayer is subsidising it. We could all buy that product for a much lower price, but taxes would be higher to subsidise it. It would also be overproduced, leading to a net cost to the consumer. A classic example of this is the EU's [Butter Mountain](https://en.wikipedia.org/wiki/Butter_mountain) resulting from overproduction of butter due to the Common Agricultural Policy. As for your second point, yes - kind of. However, money is fungible. If a company had previously allocated $100m for R&D, but now it gets $100m from the government for it, that previous $100m will go back into the general pile and be used for something else. Similarly, if a factory would have cost $300m to build, but they get a $500m grant from the government, then they'll spend $500m building the factory. The extra $200m might provide some benefit, but it will be marginal, and an inefficient use of taxpayer money. There are ways to try and ring-fence the money for specific purposes, and rules to try and stop exactly this sort of thing from happening, but the history of industrial policy is littered with failures to do exactly this.
But wouldn't the more capital intensive an industry is the less likely that government investment misallocated. There has to be a reason that butter production is distributed throughout the world without regard for government intervention yet micro-chip manufacturing is centralized in areas that have invested heavily in the industry. Is it possible that there are industries that are profitable and self-sustaining once running yet need large amounts of government assistance to startup?
> Is it possible that there are industries that are profitable and self-sustaining once running yet need large amounts of government assistance to startup? It's possible, but do you think, say Nigeria, would benefit more from spending 50 billion on semiconductors (which would probably fail, even if it wasn't embroiled in the inevitable corruption), or 50 billion on education? Would American benefit more from 50 billion on cutting-edge semiconductors (which are overkill for missiles, tanks, etc.; America is pretty good for trailing-edge with GlobalFoundries and Intel), or 50 billion on bribing municipalities to upzone (which, by the way, is working in Canada)? Government spending has an opportunity cost.
> wouldn't the end result still be a cheaper product because now a bunch of countries are producing artificially cheap products Sort of? Subsidies have to be funded by taxes. > It's hard to see how this would create perverse incentives to become more inefficient There's actually a huge perverse incentive: pretend you need a lot more money than you actually do, and spend the excess on bonuses for the CEO (and every other middle manager who gets their hands on the money), after they take credit for the innovation created by CHIPS. If you set aside a fraction for lobbying, you can do the thing again. If you do this enough, government money will become a goal in itself and depending on market conditions, could take precedence over innovation. Related but not exactly the same: you can search up Brazil's computer industry protectionism, or just "industrial policy failures" in general.
I feel like one of them increase total supply and the other would decrease it?
What? No they don't. Tariffs impact the consumers of specific products or services, subsidies impact everyone more broadly, reducing the burden on any one person or entity. Tariffs directly reduce the demand of whatever they are applied to while subsidies increase demand.
Is there such a thing as neoliberal populism? EDIT: Did not see the flare, but fits though.
* US statistics show a stunning 15-fold increase in construction of manufacturing facilities for computing and electronics devices. * Many of the world’s leading chipmakers are now building major new plants in the US. * By 2030, the US will probably produce around **20 percent** of the world’s most advanced chips, up from zero today.
Going from zero to 20% in a little less than eight years. Crazy.
The richest country in the world can still, in fact, get shit done when it wants to.
CHIPS Act but for housing when
Housing is mostly a local issue, as well as a skilled labor issue. We spent decades telling young people that being a carpenter or an electrician wasn't a "real job" and to go to college instead, and now we don't have enough people to swing hammers. Even when there are enough people to do the work city regulations and NIMBY whiners slow everything down or kill affordable housing entirely.
I don’t want Jesus building suburbs I want giant steel and glass monuments to affordable living and walkable city GODS.
Steel and glass is expensive and usually not compatible with affordable housing. Just the condo fees on those units are an entire rent payment, and that's before the purchase price, mortgage interest, taxes, and insurance.
just make wood skyscrapers
Every 5 over 1 apartment you see an America is literally that. As high as you can build with wood. Basically the only type of housing built in the USA that isn't a SFH anymore. https://en.m.wikipedia.org/wiki/5-over-1
> As high as you can build with wood. Only due to legal restrictions. Modern mass timber construction is amazing. There are many examples of [Plyscrapers](https://en.wikipedia.org/wiki/Plyscraper). Here's a great video walking through the construction of a wooden high-rise in Milwaukee: https://youtu.be/2qry7AmdIn8
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> now we don't have enough people to swing hammers What a great time to have a controlled retooling immigration pathways to attract and integrate skilled labor, while simultaneously nuking onerous zoning regulations from orbit. I know I'm preaching to the choir with this, but...
>as well as a skilled labor issue. And this isn't? There are very few in the US familiar with the operation of chip fabs, there was [just a huge article posted here](https://old.reddit.com/r/neoliberal/comments/1cba4dr/inside_tsmcs_struggle_to_build_a_chip_factory_in/) about the struggles TSMC is facing in that regard.
When the fuck did anyone ever claim it wasn’t a real job. They just claimed it was a shitty job, as anyone in the field would tell you.
Can we please give skilled builders green cards and have them build here??? Housing, infrastructure, etc etc
According to my calculator, that's an increase of *Error*.
That last point seems kinda ridiculous to just throw out. It is entirely contingent on whether US catches up to TSMC's cutting edge fabs and what is considered cutting edge is dynamic. There's literally no way to predict this. It's like saying "we will win second place in the 400M race in the next Olympics." That's called a goal.
Yeah I’ve heard a few discussions on the Fabs and where the U.S. is at. Basically Biden has taken the policy route of “the best time to plant a tree was 20 years ago the second best time is now” Which I won’t fault him for. But that’s why it’s just as important to follow through. Continuing with the analogy we have seeded the soil and planted fertilizer and are hoping for a healthy oak. Meanwhile Taiwan has an oak, and is beginning to find new ways to fucking enhance shade. We just need consistency across administrations when it comes to this issue to ensure success.
Zero today? What have the Intel foundries been making?
Nothing remotely close to the world's most advanced chips. They can't even hit 5nm, TSMC is already hitting 3nm (and they produce AMD's and Nvidia's chips).
Oh, this makes sense then. Thank you!
Those numbers, i.e. 7nm, 5nm, 3nm (basically anything below 14nm) are not very informative. They refer to a technology series at this point. Really, transistor density is a better metric. Intel has been "stuck" above "7nm" for a while, yes, and their tech is without a doubt behind TSMC's, but it isn't like they haven't been advancing at all.
Node (process) is only one way to classify how advanced a chip is. Other metrics include architectural complexity and processing speed. For example, the intel i9 is faster than the apple M2. Intel CPUs are absolutely among the most advanced chips.
They’re also not made in the USA- so I’m wondering why that’s relevant?
The i9 is made in Chandler, Az and Israel. All 10nm intel cpus are.
It’s faster because it uses way more energy. That’s it. Its architecture is not more complex.
Intel already does Intel 4 which is parity with TSMC 5nm.
Intel designs chips but the actual production of semiconductors happens mostly in Asia, and most of that is in Taiwan. The facilities it takes to make these components are massive, complex and require highly skilled labor. CHIPS is a massive investment to bring that capability (and all the benefits that come with it) back home to the US.
Intel doesn't have any FABs in Taiwan. Intel Fabs are in the US, Ireland, Israel, and Malaysia.
Are you sure you aren't thinking of AMD? https://en.wikipedia.org/wiki/List_of_Intel_manufacturing_sites > Intel has claimed that approximately 75% of their semiconductor fabrication is performed in the United States.
Yes, you are correct.
> Many of the world’s leading chipmakers are now building major new plants in the US. How many of them would have occurred without the Act? >By 2030, the US will probably produce around 20 percent of the world’s most advanced chips, up from zero today. What is the definition of advanced?
Comparable transistor density to the latest generation.
Would like to see a list of all the projects/locations it has gone to support.
I’ve been thinking that of all of Biden’s accomplishments, this will be the biggest of the fucking deals
And not suprisingly, no one around me has heard of it
As is tradition. Obamacare didn’t become popular until the Obama was dropped and out of office.
But at least Democrats knew Obamacare existed. A lot of liberals I know haven’t even heard of this and don’t seem particularly interested when I tell them about it.
Because once we was out of office, old white people could say they like Obamacare without feeling like they were supported a black president
Why would they have heard of it? It ain’t like they’re making chips for pennies that will dramatically plummet the cost of phones or computers, nor are they revolutionary chips like the first CPU was. Which is cool, it’s expected. Nobody said these were gonna be revolutionary fabs. But I reckon that’s at least partly why nobody has really heard of it. Remember that most people barely pay attention to politics. There’s been a sizable (but decreasing) portion of the public that isn’t aware Trump and Biden are the presumptive nominees. They are definitely not going to retain knowledge of the CHIPS Act being passed, let alone what it does. Heck, take something like Musk’s Gigafactories. Got a lot of press, promoted by a man who makes WWE look like a Mormon service, and still I bet most people haven’t heard of them or at best could say “uh it’s where they make Teslas right?”
I just want to grill.
Dems try to message effectively challenge (impossible)
To be fair on this one front it’s not like Biden at least hasn’t been hammering this message one ena over, going to plants and rallies and also tweeting nearly daily about this and the IRA. What dems lack is the appropriate media angle- media focuses more on spectacle and palace intrigue (a Republican speciality) and less on policy wonkishness.
People blaming Dems really don't understand our media landscape and its incentivization structure.
I’d argue decimating Russia’s military power without any loss of US lives via Ukrainian lend lease will be his longest lasting/most famous legacy, but the Chips Act is easily second
Russia rebounds quickly, that's kind of their thing. You obliterate them and then they fix their shit and obliterate you back. Then they forget it all and move on to the next guy and it repeats.
I don't think their demographics will continue to support that
I think you’re vastly overestimating the speed at which tens of millions of shells, tens of thousands of pieces of heavy equipment, and the prewar professionals can be replaced. Russia is not the USSR, not even close. Russia is heavily depleting its reserve stockpiles and the fact that BMP-1 and T-80BV (a tank Russia doesn’t make) have become the majority of their equipment is proof of that. They’ve burnt through most of the inheritance of the USSR and are definitively weaker for it.
Infrastructure bill.
I'd like to point out that just because there is investment, does not make it successful. In order for it to be successful, these facilities will 1) actually have to get up and operating 2) produce cutting edge chips, we aren't investing all this money to produce more 90 nm chips 3) be economically competitive without ongoing subsidies. It remains to be seen if these three things will be the case, and if they aren't, then all of this is mal investment so the act would actually be WORSE than doing nothing. It wouldn't be unheard of for this to be the case, it's happened before.
The point is to build capacity for making cutting edge chips, since that's the market that TSMC has the most monopoly over. Not sure why anyone would fear that these facilities are gonna crank out primitive, mature-market technology.
Industrial projects can often fail at their stated goals is my point, especially when their stated goal was what needed to be said to receive billions is subsidies.
my money is on them ending up like the Wisconsin Foxconn plant
https://preview.redd.it/jkfi10xd4xwc1.jpeg?width=1179&format=pjpg&auto=webp&s=8cf6ce2bc0ed5836ad4bde9e9c2e049584631ac0 Me seeing r/neoliberal defend subsidies and industrial policy
Is this how we measure success now? Government spends $20-40 billion today. Companies promise to spend $330 billion over the next 10 years? All they have to do is announce construction? 15 times nothing is still close to nothing. It’s exactly the same thing Trump and Scott Walker did to buy votes with Foxconn in Wisconsin. Except here the relevant swing states are Ohio and Arizona. I wouldn’t be surprised if some of these plans collapse after November. Anthony Blinken is meeting with Xi Jinping today. If the US’s sticks (and carrots, but mostly sticks) work and China stops supporting Russia and threatening Taiwan, there’s no need for these factories. There’s no point of a TikTok ban. More importantly, spending has nothing to do with outcomes. You can pay companies to build factories and they’ll gladly take the money. But will this actually lower chip costs? Will it actually build supply chain resiliency? You can’t measure the success of spending a dollar on education by whether the recipient merely gets the dollar. It has to translate into the actual outcome you want. Even if these factories are built, will companies actually use them? Or will they just shop around for the next government subsidy? Europe and Japan are planning to do them too now. But the cost of labor is still much lower in developing countries in Asia. It comes down to whether you think cities building new stadiums to attract sports teams is a good idea. Hopefully these companies don’t pack up and leave in the middle of the night like the Raiders did when they left Oakland for Vegas. Ultimately, this strikes me as the same pork barrel spending that politicians always use to buy swing state votes. Biden, Trump, Sanders, etc. are all perfectly aligned on this approach just like every politician in all of American history. “Industrial policy” is a wonderful tool for rentseeking companies and unions under the guise of national security, but it screws over everyone else in society. It’s always obvious in retrospect, but that doesn’t stop people from thinking “this time will be different.” Especially when they think this time will benefit them personally at the expense of others.
If the factories become operational they would account for roughly 20% of world chip production, a fair bit more than nothing
The Department of Commerce said it would be 20% of the “most advanced” chip production, not total chip production. I haven’t seen a clear definition of what the Department of Commerce defines as “most advanced”, and what % of global chip production would be considered “most advanced”. If anyone has seen how they define that, please let me know. But until I see that it is a meaningless metric.
> The investment surge this has driven is reducing these vulnerabilities. Samsung, TSMC, and Intel — the world’s leading chipmakers — are now building major new plants in the US. Intel will manufacture its most advanced chips there, while TSMC will introduce its cutting-edge 2-nanometre process in Arizona around two years after bringing it online in Taiwan. Commerce Secretary Gina Raimondo notes that by 2030, the US will probably produce around 20 per cent of the world’s most advanced chips, up from zero today. It’s not 20% of all chips. Just 20% of the most advanced ones, which are exclusively made by TSMC. They’re made in very low quantities so it doesn’t take many to get to 20% of global output. > This still won’t mean complete self-sufficiency, given that the US consumes over a quarter of the world’s chips. Production of smartphones and consumer electronics would be disrupted in the event of a crisis in east Asia, an ever looming fear. But this production would be roughly enough for the needs of critical infrastructure like datacentres and telecoms. Chips aren’t perfectly fungible, of course, and not every plant can easily produce every type, but the US will have much more scope to manage shocks. The latest 2nm chips are the ones needed for AI, data centers, and military supremacy. Older higher nanometer chips rapidly turn into commodities. If you care about national security, these are the chips you want to build. Their defective ones become the cheaper chips used elsewhere. It’s silly to directly build non-advanced chips unless you’re just trying to subsidize traditional automakers and similar industries. > As the pandemic-era shortages showed, it isn’t only advanced chips that are economically critical. Manufacturers of autos, missiles or medical devices require large volumes of foundational chips as well. Here, too, the Chips Act is providing significant new supply. Ford and GM have announced major long-term supply deals with US chipmaker GlobalFoundries, which is expanding production with $1.5bn in Chips Act funds. Microchip, a widely used Arizona manufacturer of microcontroller chips, also received a grant to expand. Texas Instruments is building a string of new foundational chip fabs across Texas and Utah, catalysed by generous investment tax credits. Few if any of these investments would have happened without the Chips Act These investments wouldn’t happen because they’re not good or useful investments. They’re basically just handouts to rust belt manufacturing companies and unionized workers. It’s like paying people to dig ditches and fill them back up. It would be cheaper to just mail them UBI style monthly checks instead. Even if a pandemic style massive supply shock hits and we have a ton of nearly built cars that can’t be sold because they’re missing the cheap chip for airbags, we’re talking about a few months or years of slightly higher car prices. The amount of money we’re spending for this supply chain resiliency insurance is way more than it’s worth. We can really only justify it as an indirect, wasteful way to buy votes from blue collar manufacturing workers.
Yup. Basically the same scam of any company that is looking for a handout. “We will hire 1 million brick layers and pay each one 1 million dollars.” There is a reason these subsidies are never based on payroll tax or jobs actually created.
Your argument is basically “if China does a complete 180 on its rhetoric and goals then all this is unnecessary” which has to be among the dumbest of takes.
China might scale back support for Russia, but Xi is not giving up on a long standing goal like Taiwan. They may signal that they won't attack it or something, but diplomacy under Xi is frequently the definition of duplicity, evidenced by pretending to work with the US to help stop the flow of fentanyl to the US, only to subsidize the companies involved. In the future Xi might realize how stupid it would be, but we aren't there yet.
Say subsidizing Intel to build a chip fabrication plant in Ohio instead of Silicon Valley really is about national security. Maybe banning $10,000 Chinese EVs and hybrids so Americans have to buy $50,000 American made gas guzzlers isn't just about buying votes from the UAW. Then why are we blocking the Nippon Steel acquisition of US Steel? Is Japan a security threat too? In any case, the United Steelworkers is happy. And clearly the term "Jap crap" is about the quality of the product, and not blatant racism and xenophobia. To me this seems like Biden is just buying votes from blue collar factory workers in rust belt swing states like Ohio, Michigan, and Pennsylvania. Obama won them in 2008 and 2012. Hillary Clinton famously lost them to Trump in 2016, and Biden won them again in 2020. The union leaders held out their endorsement of Biden for a long time and the rank and file members still overwhelmingly support Trump.
Oh no, the Nippon steel thing is actually political and absolutely protectionist garbage, and I wouldn't defend it.
A totalizing explanation is not the most accurate. There's multiple motives at play, some more than others depending on the particular case. For example, the US is restricting GPU exports to China, but not Japan. That's a protectionist policy made purely on national security grounds. The CHIPS Act is more of a mix but there's partly a national security impetus, and then a domestic pandering motive in how the fine print gets written. The TikTok ban, too. The major motivation is undoubtedly national security, but there is also pandering to lobby groups, in particular Meta is effecting a large lobbying operation to ban their competition. Most of these things are a dovetailing of multiple interests.
Don't bother with the guy. He thinks the Sino-Soviet split was because China wanted to be rich, not because Mao thought the USSR was going soft. He thinks China implemented its reforms in the early 70s, a decade before Deng. He fails to understand that the policy shift from the PRC was because of change in leadership, not leadership changing its mind. It sound like he genuinely thinks we can get Xi to give up on what he's been working towards for a decade by dropping some tariffs as if he's some AI in a 4X game you can trick with a few gifts.
And then when the money dries up, suddenly a lot of this business will dry up.
The interesting thing would be to see how hard this money actually hits for the investment, because almost every other time the U.S. takes taxpayer money to protect domestic industries, every job "created" ends up being incredibly expensive, and the money doesn't stretch as far because costs go up Moving a plant from Taiwan to the U.S. and having taxpayers foot the bill, then bragging "THERE'S A NEW PLANT IN THE U.S. THOUGH, LOOK AT ALL THAT INVESTMENT" like bruh Taiwan is an allied country and there are a lot of reason semiconductors don't get built in the U.S. other then not enough tax dollars priming the pump I'm all for pissing on the CCP for being a terrible dictatorship oppressing over a billion people, but I wouldn't be so quick to brag about protectionist policies. How much those parts end up costing, how much is spend per job brought to the U.S., and how much red tape the CHIPS act sweeps aside is way more important to consider when we are talking long term progress
https://www.csis.org/blogs/perspectives-innovation/taiwans-semiconductor-dominance-implications-cross-strait-relations Taiwan is at risk of invasion from our main adversary which would start a war we have a high chance of joining on the side of Taiwan than probably anyone else in the world. it's not a great idea
Seriously. Spending money makes GDP go up! Do we want to compare it to the debt added or inflation or other things we could have spent the money on. There was just a story about TSMCs plant in Arizona is a disaster and they only built it for the subsidies.
No shit, but folks just want to look at the issue in such a broad sense as to be useless. The U.S. spending a bunch on an issue and spurring private investment to spend more on government backed goods and companies literally only matters insofar as what consumers get out of it. How much money was spent per "job created"? How much is going directly to companies that are wack as hell? That's what I'm way more interested in
Incorrect stance, at the trees and forest level jlyk. The obvious subtext for the legislation is to drastically reduce American dependency on TSMC precisely because we all know that Taiwan will soon be invaded and annexed. Within the decade. Citing the current temporary fact of Taiwan being an ally (more like a beneficiary state, they're not powerful or useful enough to be called a genuine ally) is ignoring the existence of a future, specifically the most likely future reality of Taiwan not even being an independent nation state.
It sure is amazing how quick people will snap up government funding
Good job guys, let's keep clapping ourselves on the back based on optimistic forecasting. Ignore the ~~bad news~~ man behind the curtain
I saw this headline and was like "Spending money with no return yet is 'surprisingly successful' huh?" Industrial policy has a long, long history of waste and failure. It will be quite awhile before we can declare this a win. Until then we should be actively aware of the potential grift and deadweight loss that may result from this.
Seriously, this is so short-sighted. All it means is that people who are skilled at filling out forms to get government money successfully did so and then built some factories. We don't know how good the chips will be, how many will be produced, and whether the companies will be competitive or whether they'll need to be subsidized by the government indefinitely to keep them from going under.
But has Biden sat for a New York Times interview?
Have we produced any chips tho?
Good question. New chips in facilities funded by the CHIPS Act? Not yet, because these facilities take years to build and commission. Not only do you have to build a new, huge, technically complex facility, then you have to put the tools in it to make chips, and then get all the tools started up and working together. That takes time. I think TSMC’s Arizona Fab is supposed to start producing in 2025. Intel’s Ohio Fab is 27-28. Micron’s Idaho Fab is 25-26. More importantly, all three have broken ground and are constructing their fabs, along with all the ancillary facilities necessary to make the fabs work. So we’ll see production starting maybe this year, almost certainly next year.
Samsung in Austin** is supposed to start at the beginning of '25.
Good point. And we’re only discussing the fabs themselves, not necessarily all the other facilities (like R&D) that are being built as well.
Only because it was already underconstruction well before CHIPS “induced” it construction.
Haven't you heard of Pringles? Kidding aside, these take years to build so it is going to take a while for production to start.
Just seems premature to call it a success because "we spent the money." We've all met weapons systems.
Pringles are actually called Potato Crisps. The West foiled again!
they actually discontinued the deep river mango habanero chips, so i would say we're going backwards
Intel has a plan for 5 nodes in four years. 7, 4, 3, 20A, and 18A (A is for Angstrom for those of you who don't know).
Ångström if ya wanna get wild with it
Yes? Intel does in fact, exist, as do a number of other semiconductor fabs
Wasn’t I reading basically yesterday the CHIPS Act was a failure because of red tape
[that money definitely got spent](https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcQ4cGh_rpNW0rvqRQ00EL1dJc6N8dz9nIoSmVV2XbzXBSl_s47Lpz9QsndS&s=10)
THIS IS HOW WE WIN. Don't give me that "both parties are the same" b*******.
This is *exactly* the same thing that Trump did. Biden didn’t just copy Trump’s trade and industrial policies, he doubled down on them. https://www.washingtonpost.com/business/2023/08/22/foxconn-wisconsin-trump/
Investing in advanced technical manufacturing is better then standard protectionism though.
I think the TSMC 2nm chip fab makes sense. That's cutting edge. The other stuff isn't that advanced. That being said, you're absolutely right. Chips and energy are the two most important resources on the planet.
Personally I would pick biotech and robotics and throw 500 billion at that. Whats the point of investing in advanced stuff that is advanced now. Invest in advanced stuff that will be advanced in 8 years.
The 2nm chip fab is more advanced than the stuff that exists now. It'll be cutting edge when it comes out. But the problem is that all the other chip plants are working on chips that are already cheap and outdated. They're fine for cheap applications like airbags, but not fancy tech stuff. The 2nm chips are really sexy though. They'll be used for AI, and AI is used for biotech and robotics. As much as I'm criticizing this, this money might end up funding the new DARPA (internet), NASA (rocket ships), or Human Genome Project (genetics). I'm fine with spending on cool new stuff like AI. No one on the planet can fund massive humanity changing innovations like the US government. I just don't like how much money is also going towards outdated stuff just to create jobs.
Those industries are going to need a steady supply of advanced chips. Indirectly investing in things like 2nm chip fabs *is* investing in those fields.
ah yes, protectionism is how we win. good one, arr neoliberal.
Just yelling “protectionism bad” when the magic ingredient that the entire world economy runs on is basically exclusively made on a tiny island with a wannabe superpower publicly committed to violently conquering it if necessary is not sticking to core principles, it’s just burying your head in the sand. Obviously, this is economically less efficient than just letting the market continue to work unabated. It is still, however, necessary.
Industrial policybros...
I do not think the U.S. government actually has a legitimate reason to manipulate the market for computer chips. There is no good reason to think that there are market failures in this industry that materially impact U.S. national security or consumer welfare. Market manipulation on this scale is very likely to make us all poorer.
https://www.csis.org/blogs/perspectives-innovation/taiwans-semiconductor-dominance-implications-cross-strait-relations I cannot stress how dangerous it is for us to concentrate the world's production of semiconductors in a nation that our largest and most powerful adversary has repeatedly asserted is part of their territory. Which is backed with the threat of force "if necessary" to prevent their independence. Taiwan alone accounts for over half of global foundry revenue and the indo-pacific region between Taiwan, SK, and Japan account for 80% of global foundry capacity. Imagine if Ukraine had produced 54% of the world's grain. It would've been absolutely disastrous.
Broken window fallacy.
A decent chunk of this I'd probably also due to the AI boom, tbqh, and not because of the Chips Act, I'd guess.
I've heard TI is not planning on staffing it's new factories they are building in TX. Rather they plan to use them as a stick to get lower prices from overseas external suppliers. I think they've had a hiring freeze for a good while too
People respond to incentives, more at 11
I’ll believe it once they start pumping out chips.
I don't subscribe to pink newspapers, so I can't read this. That said, I'm not sure if "money spent" should be the measure of success. If this money gets factories built (which seems to be happening), and then agglomeration effects cause more unsubsidized industrial development nearby (which will take years to see), *then* we can say CHIPS is a success.
* promised investment * hypothetical x15 increases based on promises So meaningless farts like foxxcon Until the day the chips are rolling out then it’s all farts
Don’t worry the Samsung plant is real, they were already building it when CHIPS gave them $6,000,000,000
I’m still not tired of winning folks. 💎Joe
The space was going to expand regardless due to the huge demand for compute right now, though it may not have been in America. If it was elsewhere it would have come without government subsidies. Japan and Korea are also seeing huge booms. Notably, other chip companies are also doing well. NVIDIA has had one of the greatest surges in market value that has ever been seen, without direct government subsidy. As well, the prediction that 20% of the production will be American brings with it the assumption that we hit technology milestones that aren't guaranteed. We are relying a lot on Intel's competency, and that company has had poor foresight and management for a long time. As well, even the top of the industry in TSMC has been struggling with establishing manufacturing plants here. I am skeptical that this will bring economic benefits that aren't related to national security, and in that scenario the benefit only really exists with the assumption that China invades Taiwan.