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U.S. senators propose 25% tax credit for semiconductor manufacturing

• EnlightenedBro 5y ago
  How does one start a semiconductor manufacturing company?
  • whatshisface 5y ago
    First, find several dozen billion dollars. More seriously, find a low-performance niche application and make chips on old technology for it. Differentiate yourself on the basis of being easy for your customers to work with, a natural advantage for US-based companies. Then you only need several dozen million dollars.
    • an_opabinia 5y ago
      > First, find several dozen billion dollars. Some electric car companies have not had trouble tapping into capital markets. Even Transmeta, a fabless IC maker, could tap $275m in 2000. If you were a super talented engineering firm with the ability to spend $2b on a fab, you could tap finance for it. > More seriously, find a low-performance niche application and make chips on old technology for it. This seems like the opposite of any winning strategy, and the opposite of what the government should subsidize. TSMC is so successfully because it relentlessly focuses on performance chips. If you are enjoying American subsidies it better be for the cutting edge, what the hell else are we paying for? > Differentiate yourself on the basis of being easy for your customers to work with The only customer that matters is Apple, and your only competition is Samsung and TSMC. Everyone else is using "foreign chip manufacturers" as a way to launder low Chinese labor costs, not because there is inadequate supply or poor competition in specifically semiconductor manufacturing. Perhaps that's what people want - a manufacturing hub, i.e., assembly of chips, not the chips themselves. I don't know if that's super important.
      • qbasic_forever 5y ago
        Starting from zero and competing directly with TSMC's top end processes right now is basically being at the "President Kennedy said we're going to the Moon" stage of landing on the moon. You are going to need many, many billions and billions of dollars and years of engineering and manufacturing (and failures) to get there. This is not something you just turn on the money spigot and solve the problem overnight. It is spectacular engineering at the smallest atomic level to produce in mass quantity the chips from TSMC today.
        • javajosh 5y ago
          The US has an overabundance of brilliant physics PhDs most of which are probably pretty sick of academia's bullshit at this point. Let's give 2000 of them a 100k/year job plus $5B, cheap/free access to federal land, energy, and water, and see what kind of fab(s) they could make. I bet they'd get to TSMC's level pretty quick. If we offered Taiwan a mutual defense pact, we might even get their help to get there.
          • an_opabinia 5y ago
            This is the right idea. But like I said, most of the value is in exploiting cheap Chinese labor, not the chips, which is why really none of that would work accounting wise - like you’re talking about a valuable economic enterprise but not one that would produce a lot of profits for shareholders.
          • qbasic_forever 5y ago
            They'll turn it down because they can make $250k a year writing code for Facebook/Google/etc. And it's really more talent in process engineering that you need, not in the physics of chip building. We already know what has to be done to make transistors. It's the how to do it at scale and with high enough yield that's impressively difficult.
            • javajosh 5y ago
              Haha. No way. I don't think anyone who gets a physics PhD is excited by the prospect of solving ad market problems. Or financial market problems (because you forgot to mention the $500k quant jobs). Physics PhDs aren't, in my experience, particularly motivated by money. How could they be? A project like this would a) let them use far more of their training than coding ever would and b) it is for a good cause, effectively a peaceful version of the Manhattan project.
  • willis936 5y ago
    This question makes me think of another question: is there a difference between a rich tax credit and a poor tax?
    • lisper 5y ago
      Yes. The difference is in how it is perceived, but in an economy, perceptions actually matter. If you give a tax credit to the rich, the poor don't perceive it as a tax on them even though the strict monetary effect is the same in both cases i.e. a wealth transfer from the poor to the rich. But because the poor don't perceive rich tax credits as a tax on them they are less likely to object.
      • Ericson2314 5y ago
        That type of thinking is political suicide in the long term. Big meddling government that doesn't attack the fact that we have far more demand than supply problems is going to get thrown out.
    • zdragnar 5y ago
      They aren't related at all, because the federal budget and revenues don't need to balance. They rarely ever do. On the other hand, tax credits can be (but arent guaranteed to be). That is, if a tax credit incentivizes creating jobs that would not have existed (in the US) otherwise, those jobs end up also stimulating other economic activity. Tax incentives at the state level tend to be closer to zero sum (or a net loss) if the jobs would have been created anyway, or when thr incentives aren't strictly tied to quantifiable completion metrics like factory completion, number of positions filled, etc. (Much ado about Foxconn in Wisconsin, etc)
      • Ericson2314 5y ago
        Huh? Yes federal debt doesn't matter but that's why they are similar—they are both shifting power to capital away from labor. The fact that governments try to do Keynesian by making manufacturing jobs in 2021 kills me. We're decades past the point where those sectors were sufficiently unproductive to benefit the workers as they did in the glory days. Boost demand directly (UBI), keep an ey on imports, and let private capital fend for itself.
  • bob1029 5y ago
    Very carefully. And as of 2021, also with the aid of a time machine.
  • xbmcuser 5y ago
    Starting a semiconductor manufacturing company is 1 thing starting 1 that will be competitive will require 100s of billions of dollars.
  • breck 5y ago
    Copyright and patent laws make it near impossible except for a few thousand people.
• xony 5y ago
  useless move..
• DSingularity 5y ago
  Wow, I always thought Intel will go bankrupt but I guess it’s clear that US is going to back them. Gotta give Intel a lifeline because the longtime strategy of in-house design+manufacturing no longer works when you lost the manufacturing edge, when you missed the transitions to mobile and GPU, and when you are stuck with the same crappy designs for the one market you dominate: server.
  • eulers_secret 5y ago
    How would Intel go bankrupt when their net income is still $20 billion? Sure they’re loosing some ground, but I see no indicators they’re at risk of a near-term bankruptcy...
    • klelatti 5y ago
      I don't think bankruptcy is likely at all but they have more competition than for a long time (if ever) in their most profitable markets. I don't think backwards looking measures like historic earnings are that useful - if you look at the price / earnings ratio of 12 that tells you that the market is sceptical about Intel's prospects.
    • b9a2cab5 5y ago
      If Sapphire Rapids and Meteor Lake fail they might be in danger. Increasingly the threat is not AMD but Arm, since cloud hyperscalers can bring CPU design in house and undercut x86 and Arm's fixed length instruction encoding is fundamentally better for very wide decoders.
    • DSingularity 5y ago
      Once they stutter it’s game over. You have to research and build fabs years before you start using them. What happens when they get stuck and fall behind TSMC for a few generations?
      • 0x456 5y ago
        Intel can just use TSMC to build their chips: https://9to5mac.com/2021/01/08/bloomberg-intel-considering-outsourcing-some-production-to-apple-chip-maker-tsmc/ https://9to5mac.com/2021/01/08/bloomberg-intel-considering-o... If second place wasn't fatal for TSMC, AMD, or ARM, perhaps it won't be for Intel either?
• tolbish 5y ago
  Can we also offer tax credits to encourage making the next hardware innovation hub somewhere other than Phoenix, Arizona? I thought the southwest is being ravaged by the effects of climate change (120+ degree weather, massive droughts)
  • bgorman 5y ago
    The water used by a chip factory is almost 100% recycled
    • deleted 5y ago
      [deleted]
    • KingMachiavelli 5y ago
      So they would be OK paying a 10x price premium? at least that would be the easiest way to determine if the claim is true. At least in Taiwan earlier this spring was facing a drought which came close to impacting semiconductor production.
    • farco12 5y ago
      Do you mind providing a source for that claim? I've seen several articles[1] mentioning that the current Taiwanese semiconductor shortage has a lot to do with water rationing due to drought. Do semiconductor manufacturers in Taiwan not recycle water like semiconductor manufacturers in Phoenix? [1] https://www.wsj.com/articles/the-chip-shortage-is-bad-taiwans-drought-threatens-to-make-it-worse-11618565400 https://www.wsj.com/articles/the-chip-shortage-is-bad-taiwan...
      • BlueTankEngine 5y ago
        Pretty sure the OP is right, not sure about Taiwan Source: https://www.cnbc.com/2021/06/04/why-intel-tsmc-are https://www.cnbc.com/2021/06/04/why-intel-tsmc-are -building-water-dependent-chip-plants-in-arizona.html
        • pretendscholar 5y ago
• underseacables 5y ago
  After years and years of pushing American manufacturing overseas, suddenly Congress wants to entice them back with a tax credit. Why not just lower the tax rate for corporations altogether, or better, close the loopholes that allow them to offshore their profits. Tax credits seem to be a a short term, ersatz panacea.
  • dantheman 5y ago
    How about not taxing offshore profits, and allow them to bring that cash back to the US and lower taxes overall.
    • HWR_14 5y ago
      Because then you end up in situations where all of your patents are held by a subsidiary in the Cayman Islands and 100% of their domestic sales happen to go to paying off the patent license fees.
      • nickff 5y ago
        We’re already in that situation, and the USA could use a re-capitalization.
      • koheripbal 5y ago
        Then, frankly, we should just incorporate the Cayman Islands into the USA
        • HWR_14 5y ago
          I mean, the US Government just suggested a new taxation at the G7 to prevent this. The EU and US (and UK) are going to fix the issue. But it will probably take a few years.
        • dmoy 5y ago
          The British might object to that...
      • 5y ago
• bbarley 5y ago
  After China annexes Taiwan, we will be much more reliant on other sources of computer chips. Ideally for national defense concerns, these sources should be domestic.
  • systemvoltage 5y ago
    Purely from a technological standpoint (not humanitarian or geopolitical), I see annexation of Taiwan as a great thing to get US out of it's current laissez faire in Semiconductors, esp Intel. It would be a good wakeup call for Silicon Valley to stop working on Ad-Tech and start semiconductor startups to live up to its legacy dating back to 1970s. I am afraid, it won't be SV doing this, it will be Austin (R&D, currently Apple/Samsung SoC) and Phoenix (Manufacturing - currently, Fab-42 in Ocotillo).
    • randomopining 5y ago
      Lol what kind of comment is this.
  • onlyrealcuzzo 5y ago
    Wouldn't it be pretty easy for Taiwan to cause irrevocable harm to China? Why would you assume that they'll just sit around and be conquered? Hong Kong didn't have a military - and even if they did - they share a border with China. It wouldn't exactly be a walk in the park for China to get airplanes over Taiwan or to land boats for an invasion. And if they tried, I can't see the world blaming Taiwan for blowing up the Three Gorges Dam - which for China would be literally catastrophic.
    • whatshisface 5y ago
      I am pretty sure that China would lose more trying to take the heavily guarded island than they could ever get back from occupying it afterwards. Unfortunately that's not enough to stop major powers from invading for irrational reasons. If major powers only invaded when they had something to gain, Saddam would still be in office.
• lettergram 5y ago
  Why not just do 25% corporate tax, with a reduction of 5% for every 1/4 of your workforce in the US. The added taxes from people working in the US more than makes up for the loss in corporate tax. Further, we can then export the goods and make a buck on that. I really don’t get what our gov is doing besides trying to do the worst job possible.
  • howmayiannoyyou 5y ago
    Because when you are paying zero (or close to zero) corporate taxes by offshoring your revenue recognition, a 25% rate is a big increase.
  • HWR_14 5y ago
    > The added taxes from people working in the US more than makes up for the loss in corporate tax. Further, we can then export the goods and make a buck on that. The US government makes zero dollars on exports. And there's no reason to believe that the people working in the US would make up for corporate tax dollars. That logic is frequently thrown around to justify large corporate tax breaks but to the best of my knowledge, no review of the results has shown it to be true.
    • Turing_Machine 5y ago
      > The US government makes zero dollars on exports. The companies that make the exports pay taxes. Their employees pay taxes.
      • HWR_14 5y ago
        > The companies that make the exports pay taxes. Except this thread is about doing away with those taxes because somehow "exports" make up for it. > Their employees pay taxes. Yes, they do. And this person suggests cutting corporate taxes by 5% for every 25% of the the employees located in the US. Do those additional employee dollars pay for the corporate tax cut?
  • chiefalchemist 5y ago
• gjsman-1000 5y ago
  I have seen some economists say that the best corporate tax would, ironically, be 0% Corporate Tax. Why should we double-tax income with Corporate Tax and then Income Tax when it goes to individuals? Plus, the corporate tax tends to cause all sorts of shenanigans. And this isn't a radical idea. Both right-wing and left-wing publications (such as The Washington Post) have proposed it.
  • HWR_14 5y ago
    Why is "double-taxation" bad? What act do you think should be taxed where it is being taxed twice? > The Washington Post) have proposed it. Leaving aside the idea that a paper owned by the world's richest man (with unrealized billions in gains) is neutral on the topic of taxation can you cite this?
    • zdragnar 5y ago
      Corporate taxes directly impact consumers and employees. Corporations just increase prices or cut costs to manage it... Or, if they are multinational, play accounting shenanigans and choose not to remit money back to the US.
    • rsj_hn 5y ago
      > Why is "double-taxation" bad? It's not that double-taxation is bad but people are claiming that corporate profits aren't taxed or are taxed at very low rates (I've heard people use numbers like 5%) and so need to be taxed more on general fairness grounds. Pointing out that they are already taxed negates that argument. In general, all "fairness" arguments (this tax is "bad") to taxation are quite awful, because they tend to be made by people who have no idea of what the actual incidence of taxation is. (Really most fairness arguments of any kind are awful and suffer from similar problems about people not understanding the consequences of their proposals and thus not being qualified to decide on what is fair and what is not). For example the same people enthusiastically argue for taxes on corporations but not sales taxes, when these have the same incidendence and thus are the same tax. The difference is primarily one of shifting the burden of who fills out the paperwork and a lot of marketing. And that tendency to view taxation on grounds of fairness (e.g. emotion) rather than economic concerns (the ultimate cost of the tax) is what opens the door to massive tweaks of the tax code by various lobbyists. A simpler tax code that treated all sources of income in the same way and did not distinguish between expenditures would be a much better system than we have now. No tax deductions for any purpose and no separate treatment of wage or capital income, or inheritance income, etc. Just put it all into one pile and apply the tax rate for that pile. Similarly consolidate all corporate and sales taxes together into a single VAT that does not distinguish by industry or product type. Then if the government wants to give money for fab construction (a foolish policy, IMO) they can do that directly. It would be great if we had taboos against tweaking the tax code entirely.
• specialist 5y ago
  Public equity. US Govt should invest (by whatever means) and then retain some reasonable ownership. Direct action with direct results. Moot the whole taxation culture wars food fight. Edit: aka sovereign wealth funds. Sorry, brain cramp, forgot the phrase.
  • narrator 5y ago
    Maybe they should have some deal where the military gets semiconductors at cost or something. Having politicians messing around with the management decision making will just screw stuff up.
  • dehrmann 5y ago
    If the state wants to subsidize an industry for strategic reasons, that's the state's business. Tying it to ownership could scare away potential producers, and it's a step towards a state-run enterprise. The US already subsidizes farms for food security; no one's saying it should take partial ownership of them because of that subsidy.
    • specialist 5y ago
      All of our modern standard of living traces back to initial govt investment. Govt routinely provides seed capital, grants, financing, patents, and other perks. Which then attracts private interests. Often jump starting entire sectors, creating new markets. Do you think we'd be enjoying solar boom today were it not for public investment?
      • dehrmann 5y ago
        Doesn't mean the first instinct needs to be public ownership of it, though. The tax revenue will come on its own. > Do you think we'd be enjoying solar boom today were it not for public investment? This is somewhat awkward because it also wouldn't be where it's at today without cheap Chinese panels, and I doubt US tax subsidies would have been enough to make up for China's manufacturing expertise.
• qbasic_forever 5y ago
  Do any of the big companies that could be enticed to build here actually pay enough taxes to care about a tax break? There are already plenty of ways for them to skirt paying taxes.
• crb002 5y ago
  This is in line with State tax credits on large data centers. At least a credit wouldn't favor Intel over AMD. Companies like Tesla, Deere, Ford would abuse the credit shifting as much cost as they can on their unit that manufactures and tests boards.
• cartoonworld 5y ago
  I know this is so different, but I can't help but think of the 1950's DoD Heavy Press Program[0]. I think about these special industrial monsters a lot when I read about semi fabs. In WW2 after examining the components from aircraft kills, german wing spars would often survive. It was discovered that Germany used unique forged alloy wing spars to achieve their excellent aircraft performance, perplexing allied engineers. These wing spars' strength and weight is critical to the structural properties of modern air frames. Without them, jet air craft like the f-15 would have been impossible. Machining these advanced alloy parts proved difficult, expensive, error prone, and impossible to manufacture but a die forged alloy wing spar was stronger, lighter, cheaper and beyond the industrial capability of every allied nation. We did not have the metallurgical technology to create such a large forged alloy wing spar in 1945. After the war, the US and Soviets recovered designs for the extremely large press assemblies required for advanced air frames. In the 1950s, a huge national program was geared up to create absolutely massive Heavy Press machines. The Soviets had a massive 30,000lb press for these parts, and we created a couple of monstrous 50,000lb machines[1] that are still in operation today. These things are older than we are and still out there cranking out air frame parts today for modern air frames in 2021. Without this kind of national investment in this kind of unique manufacturing, we would be unable to fly without importing 747 parts from wherever they could be created. [0] https://en.wikipedia.org/wiki/Heavy_Press_Program https://en.wikipedia.org/wiki/Heavy_Press_Program [1] https://www.youtube.com/watch?v=iZ50nZU3oG8 https://www.youtube.com/watch?v=iZ50nZU3oG8
  • aww_dang 5y ago
    These presses were necessitated in Germany by a shortage of materials, abundant magnesium and limitations of the Treaty of Versailles https://www.forgemag.com/articles/84706-invisible-strength-forgings-hidden-value-in-military-aircraft https://www.forgemag.com/articles/84706-invisible-strength-f... The conclusion about the inability of the market to develop alternative or similar manufacturing techniques isn't established by observing that the state did.
    • cartoonworld 5y ago
      There was a shortage of materials and manpower in late Germany, that is another benefit of the forge and extrusion process. The alternative to forging the wing spars is to create a sub assembly from a dozen or more smaller components. The fasteners, drilling, and overlapping joints create a mechanically weaker, larger, and heavier assembly with worse material properties than a one-piece forged part. In addition, assembling a wing spar from a dozen parts creates wasted materials from additional steps in the process (machining, forging, drilling, riveting a dozen parts) which takes much more time, requires skilled technicians, and decreases tolerances in the resulting assembly. Machining titanium has different and worse metallurgical properties than a single forged part. You can heat treat the forged titanium part which has totally uniform mechanical properties, where in an assembly each part might have different inclusions and defects that are much harder to control for in process. This aids QC as well, as you can just X-ray the forged titanium part once. So yes, they did, but its much more than that. The forged wing spars improve dozens of manufacturing, QC and engineering problems in addition to the material savings. Even without that, the forged parts are still a prerequisite for modern air frames. EDIT: sorry, I didn't notice your edit. It may be that the market would provide these Heavy Press machines, and I mean the DoD partnered with ALCOA and other existing experts to build and run the presses, and the private market owned and profited from them, but in 1945 there wasn't a market for this except to the Air Force. That's why the DoD funded it. I'm sure the market could have also invested the absurd dollar sums, I mean the things are still used today, what was the total ROI on the Iron Giant presses... its incalculable. But I'm almost certain today's globalized manufacturing would do what they are doing now: Make them in Taiwan, China, developing nations, and ship them across the ocean. The point is that the Air Force recognized the value of making the wing spars in country, so you can't bomb, flood, or capture the presses. We should definitely be able to crank out i7's on our continent, I don't care how.
• eplanit 5y ago
  Hopefully it will happen. And, while we're properly reversing course on bad policy, let's start building some nuclear power plants, too.
• jeffbee 5y ago
  The government should not be throwing money at the world’s richest companies. Intel, Apple, Nvidia, AMD, IBM etc can all afford to do this without my assistance.
  • GoOnThenDoTell 5y ago
    But would they choose to build in the US without the enticement
    • jeffbee 5y ago
      If the problem is that Asian governments subsidize the fabs, the answer is not to match their subsidies. The answer is to tax imports to even the score.
  • georgeburdell 5y ago
    Only the first company on the list owns enough semiconductor equipment for this proposed legislation to matter.
• andyana 5y ago
  Don't we trash the Chinese for subsidizing their industries? I'm not against it, but if this helps people, why aren't we doing it for everyone?
  • fma 5y ago
    The US subsidizes industries pretty frequently - especially agricultural. https://www.thebalance.com/farm-subsidies-4173885 https://www.thebalance.com/farm-subsidies-4173885 The US got sued by Brazil for it. https://en.wikipedia.org/wiki/Brazil%E2%80%93United_States_cotton_dispute https://en.wikipedia.org/wiki/Brazil%E2%80%93United_States_c...
• pydry 5y ago
  It seems that the 90s free trade zealotry from the US is finally dead and buried now that there's a rival out there.
  • adventured 5y ago
    It was never alive to begin with, it was all a con. Some people fell for it, some people didn't. Either way, it was never not obvious that it was a lie. If what you're signing are trade agreements, what you have is inherently not free trade, and there is no way to dance around that fact. There has never been a time when the US or any other major nation wanted free trade, and that includes China today (which similarly lies every time it says the words "free trade" and pretends to be in favor of it; trade with China is anything but free of heavy restrictions). All major economies want carefully restricted trade, controlled trade, and there are no exceptions. There will never be exceptions. If you hear the US say it wants free trade, understand that it's always a lie that you are hearing. The same with any nation that claims they want free trade (while negotiating trade restricting agreements). It is that simple. What is really being said is: we think we can get one up on you through a trade agreement that favors us more than it favors you, or at the very least we think we can craft the terms in such a way that we both gain something while some other external parties lose out (which is what eg NAFTA/USMCA accomplishes, external parties lose, the parties to the agreement gain by restricting trade in a manner favorable to the people inside the trade agreement). USMCA is an aggressive trade restriction agreement, not a free trade agreement (they like to throw around phrases like "free trade agreement" to continue the con). The purpose of allowing China into the WTO was for the big globalist corporations to go in and feast on what was believed to be an epic consumer & manufacturing opportunity, that was the sole purpose of it. And it's the sole reason Bill Clinton was tasked with making it happen by his moneyed masters, the people that de facto control him and everyone else like him in politics. It almost entirely blew up in their faces, rather hilariously. McDonald's? They don't even own their own restaurants in China today. Disney? It doesn't even own the majority of its own park in China today. The globalist parasites are getting what they deserve re China. It's one of the few times where I'll applaud China - they made something of their nation and have built up extraordinary household wealth - rather than allowing themselves to be forever fleeced by parasites and allowing the gains to all be expropriated back to some other shore. If China had allowed things to go any other way, the parasites would have abandoned China when convenient politically (eg today), and would have left China for dead economically, without a care in the world for the fleecing that went on or the wasteland left behind. Instead, China made itself self-sustainable by heavily restricting what the parasites could do, it kept plenty of the profits onshore and they used that capital to build up their nation.
• Traster 5y ago
  As others have pointed out, the US has completely shot itself in the foot. Large corporations and their biggest shareholders have been systematically moving themselves out of the tax base. So now when the US tries to use the tax code to encourage certain industries and behaviours, but everyone points out that the tax code doesn't exist for the companies they're trying to have leverage over. So what's left? Move the rich back into the tax system? You can't, the money you let them keep turns out to be a pretty effective tool for preventing that. Or the next natural step, take money from that schmuck working a 60 hour week in starbucks and hand it over to the world's most profitable companies so they fulfill some ill thought out requirements.
  • wizzwizz4 5y ago
    > So what's left? Move the rich back into the tax system? You can't, the money you let them keep turns out to be a pretty effective tool for preventing that. Or just fund the tax collectors, so they can go after the bigguns in court. The richest usually wins a legal fight.
    • Justin304 5y ago
      ...The lawyers always win in a legal fight.
• javajosh 5y ago
  How about a 100% tax credit? That would shift some serious capital into this space.
• lanevorockz 5y ago
  Too little, too late ? Asia at the moment produces almost everything we consume.
  • adventured 5y ago
    You might be astounded to learn that just prior to the pandemic, US manufacturing output in dollar terms was only about 7% smaller than China. [1] Germany does about 35% the manufacturing output of China, with a mere 6% of China's population. The US + Canada, as of 2018-2019, had a greater combined manufacturing output than China, with a mere 25% of the population of China. North America + Europe still manufacture more than Asia does in terms of dollar value output. Asia produces more total widgets (of lower total value). Germany is the per capita manufacturing king (and they also have been running the largest trade surplus). Poland has the highest percentage of its workforce employed in manufacturing globally. The trend prior to the pandemic was for China's manufacturing position to erode due to their loss of the previously significant cost advantages they had (most everybody else had become far more competitive on manufacturing costs as incomes and operating costs in China had soared). The pandemic threw those trends into flux, we'll see how it shakes out this decade yet. [1] https://www.brookings.edu/research/global-manufacturing-scorecard-how-the-us-compares-to-18-other-nations/ https://www.brookings.edu/research/global-manufacturing-scor...
    • trainsplanes 5y ago
      This measures output in dollars, which is an absolutely useless metric since China’s manufacturing appeal lies in its ability to undercut every other country on earth in its cost to quality ratio. If you can make, say, a screwdriver in the US for $2/unit, you can make 50 in China for the same cost. But if the US makes 1 million and one screwdrivers and China makes 50 million, then technically the US has higher manufacturing output since the dollar total is higher.
      • adventured 5y ago
        > This measures output in dollars, which is an absolutely useless metric since China’s manufacturing appeal lies in its ability to undercut every other country on earth in its cost to quality ratio. Of course it's in absolute dollar terms and I pointed that out in the comment repeatedly to pre-empt retort comments that would inevitably attempt to focus incorrectly on that. I also pointed out that Asia produces more units for the same reason, to pre-empt the need to waste time on someone posing that attempted retort. It's the exact opposite of useless. You just tried to pretend that high-value manufacturing is useless by claiming that low-value high-volume manufacturing is what matters. Be sure to let Germany and Japan know that their high-value manufacturing is useless. It doesn't even warrant a serious rebuttal it's so clearly wrong. Japan is just off the coast of China and yet China has been entirely unable to take their high-value manufacturing position away from them despite the past several decades of trying. If China were so impossible to compete with as you're claiming, their share of global manufacturing would not have stagnated for years prior to the pandemic. They have lost their ability to easily undercut everyone else on a cost + quality ratio. In fact leading up to the pandemic they were losing manufacturing on a cost + quality ratio to other regional competitors. That's why Samsung was able to relocate half of their smartphone manufacturing to Vietnam. Vietnam was able to undercut China on a cost + quality basis. There is nothing special about what China does such that no other nations can replicate it (whether Vietnam, Indonesia, the Philippines, Mexico, India, et al.). > If you can make, say, a screwdriver in the US for $2/unit, you can make 50 in China for the same cost. But if the US makes 1 million and one screwdrivers and China makes 50 million, then technically the US has higher manufacturing output since the dollar total is higher. That's an entirely fake premise you're staging (and I don't mean the specific example you gave, the wider premise is fake). In instances where there's an enormous cost imbalance, the US offshores low value manufacturing, such that the US isn't going to manufacture $50 screwdrivers when they can be made at 85%-95% the same quality for $1 or $2 in China. That's what the manufacturing flight to China was all about 10-30 years in the past. You're merely providing support for my core point: the US, Europe and Japan dominate high-value manufacturing (which is where the high dollar manufacturing totals derive from), not high cost screwdriver manufacturing. Germany isn't generating its $700 billion in manufacturing output through the manufacture of $50 screwdrivers (or the equivalent) when they can outsource that to Eastern Europe or China for a dollar. Nobody does that today or can afford to do that today, given it's a hyper competitive global economy. The US-China trade imbalance overwhelmingly consists of low-value high-volume widgets. That huge wall of imports largely consists of $1 screwdrivers. The same exact situation exists across Europe as well. Where China can undercut on cost + quality, they have; if they could take any and all manufacturing so easily, they would have (they can't). China is rapidly losing its textile crown as another example of your premise being incorrect. Precisely because they're not always able to compete effectively on cost + quality and are susceptible to being undercut as their labor costs will persistently climb. Textiles are gradually fleeing China for better cost + quality ratios (which is exactly what happened to the US across the 20th century as textiles fled from US shores and went to Asia, due to a weakening cost + quality proposition centered on labor costs). Via Google you'll find a large number of business stories covering China's eroding textile dominance going back across the past decade, as other competitors with superior cost + quality ratios take their market share - 2018: "China’s once-booming textile and clothing industry faces tough times" "China’s market share by value in the global textile and clothing industry fell from 38.6 per cent in 2015 to 35.8 per cent in 2016, with a downward trend in major apparel importing regions such as the US, European Union and Japan." "Since 2014, exports of Chinese textiles and clothing have declined sharply from about US$236 billion in 2014 to US$206 billion in 2016, according to the World Trade Organisation. "Chinese customs data showed exports of clothes and accessories fell by 0.4 per cent last year from 2016, while textiles exports saw annual growth of 4.5 per cent last year." "Meanwhile, labour costs in China have been rising steadily. The minimum wage in the southern boomtown of Shenzhen is now about US$336 per month – more than double the rate in some Southeast Asian countries." https://www.scmp.com/news/china/economy/article/2143938/chinas-once-booming-textile-and-clothing-industry-faces-tough https://www.scmp.com/news/china/economy/article/2143938/chin...
• Animats 5y ago
  How about starting with a 25% tariff on imported consumer electronics? And make it for at least 5 years, so plants get built in the US.
  • wolverine876 5y ago
    Isn't that regressive and unfair to everyone but consumer electronics corporations? Force consumers to pay more for consumer electronics, in order to direct more money to specific corporations (and they are uncompetitive corporations). Perhaps we should invest more in people who will create competitive businesses, such as in education.
    • Ericson2314 5y ago
      It's also regressive to cut taxes on some new privately owned businesses. The right way to do this stuff is raze wages in Taiwan and Korea. Supply side subsidy race to the bottom when we have an aggregate demand issue is stupid.
      • wolverine876 5y ago
        > It's also regressive to cut taxes on some new privately owned businesses. What does this refer to? Did someone suggest that? > The right way to do this stuff is raze wages in Taiwan and Korea. Is it a wage issue? Also, if we education and train American workers, maybe they can have higher paying (and physically and mentally better) jobs than manufacturing.
        • Ericson2314 5y ago
          > What does this refer to? Did someone suggest that? I mean the original propose. Hopefully it's not just Intel and TSMC getting the tax break? > Is it a wage issue? Yes, see https://news.ycombinator.com/item?id=26996090 https://news.ycombinator.com/item?id=26996090 https://phenomenalworld.org/interviews/trade-wars-are-class-wars https://phenomenalworld.org/interviews/trade-wars-are-class-... https://newleftreview.org/issues/ii125/articles/aaron-benanav-world-asymmetries https://newleftreview.org/issues/ii125/articles/aaron-benana... The last is a critique of the book, but one that disagrees about wages being too low in the exporting countries. > Also, if we educat[e] and train American workers, maybe they can have higher paying (and physically and mentally better) jobs than manufacturing. Also, manufacturing is fairly automated for quite some times now. Boosting manufacturing to create jobs no longer makes sense, as much as the nostalgics wish it would. I don't think education is the problem here. The last 10 years were a credentials rat race because the labor maket was too slack. That does cause a "skills are going to waste, degrading education" problem, but that's very different. If we can't boost demand enough without more environment destruction, then we must to cut working hours. (And we should do that anyways.) Either of those will create a genuine need for skills to increase productivity, not just to have the best résumé.
• throwaway4good 5y ago
  I wonder what the deeper thinking is here. So right now China consumes most of the world's semiconductors but only produces a modest fraction of them. China is going through a whole of society effort to expand its semiconductor sector in order to not be dependent on anything the US can cut off via sanctions. China will expand its semiconductor sector, regardless whether it is economical feasible, because it is a matter of national security. The countries that are going to be hurt by these US semiconductor subsidies are going be Taiwan, South Korea, Japan ... not China.
  • shkkmo 5y ago
    In an actual military conflict with China, all those countries are more vulnerable to infrastructure damage than the US. I believe the thinking is to shore up the supply chain so that the US is in a stronger negotiating situation if relations with china deteriorate to the point where the threats are less implicit. There is also a significant "America First" mentality that wants to boost our economy, no matter what it costs our allies.
    • throwaway4good 5y ago
      The major military conflict scenarios sounds unlikely to me, whereas the cost allies South Korea and Taiwan seems quite real.
      • shkkmo 5y ago
        I think it is less about the likelihood of a major conflict and more about the position of strength in negotiations to prevent a major conflict. Edit: Any major military conflict would come at a large economic cost to both sides (which is why I agree it is pretty unlikely.) However there is an element of negotiating strength that comes when the economic costs to your side is relatively lower than the economic costs to the opposing side.
  • pretendscholar 5y ago
    >China will expand its semiconductor sector, regardless whether it is economical feasible, because it is a matter of national security. Isn't that the same justification for U.S. re-shoring of semiconductor manufacturing? Tighter control over security and not being vulnerable to some conflict in the pacific endangering everything from automobiles to cloud services. Today, everything relies on some chip so domestic production reduces vulnerability to fragile global supply chains. Covid-19 highlighted that vulnerability so I think both the private and public sectors in the US are looking to do more of all sorts of production at home.
• WalterBright 5y ago
  Amusing that while there's proposed legislation to punitively tax tech companies and break them up, there's also proposed legislation to have huge tax credits for tech companies.
  • zamadatix 5y ago
    Eh, the issues seem largely orthogonal. If anything semiconductor manufacturing subsidies propping up companies that are primarily software driven is an argument for breaking them up not an opposing idea.
    • WalterBright 5y ago
      It's the same thing. Breaking up large tech companies will be a golden opportunity for foreign companies to step in and take those positions. Ever wonder if the public support on social media for breaking up the tech companies isn't actually coming from the US?
      • zamadatix 5y ago
        Which 2 "it"s are being referred to in "It's the same thing"?
      • swagasaurus-rex 5y ago
        What about reversing acquisitions? I'd love if the Occulus headset didn't require me to associate a facebook account and send telemetry to Zuck's servers.
  • madengr 5y ago
    FANG (Apple excluded) are not tech companies. Semiconductor fabs are actual tech companies.
• elihu 5y ago
  That's a lot of money. Perhaps it's good policy, but the idea of transferring large amounts of money from taxpayers to private industry seems a little sketchy if the government isn't requiring anything in return. What could the government ask for in return? Perhaps an assurance that the fab will give priority of at least 10% of its output, including its most modern process, to foundry service with reasonable and non-discriminatory pricing for at least twenty years. Perhaps there are other ways the government could ensure these fabs will be used in ways that are beneficial to all local electronics manufacturers and not just the one company that owns the fab? (It's possible these details might be in the actual bill already; the article doesn't say.)
  • adam_arthur 5y ago
    Is it a transfer, or just a reduction? Presumably the plants won't exist without this subsidy, so it's a win win if it incentivizes creation of plants. The government isn't paying anybody anything, if I understand it correctly.
• jollybean 5y ago
  If foreign goods are subsidized, the most obvious thing to do would be to raise a levy to the amount of the subsidy, and probably to enact other anti-dumping measures. To the extent that business was confident those measures would remain in place, the 'free market price' (heavy quotations) may be enough to provide for material investment.
• AzzieElbab 5y ago
  This is laughable. A temporary tax credit for super long term investments? Who on Earth would go for it?
• eunos 5y ago
  Now autarky is cool again? Sucks to be emerging market countries right now, when the developed countries start building moats.
• giantg2 5y ago
  I must just be dumb. We can't really compete with free trade because of a high cost of living, so we subsidize (including some items that we export like crops). These subsidies require the government to borrow, usually from other countries that are our competitors. It seems like were screwed either way - pull out of free trade and trade deficit tends to increase, or subsidise and pay those competitors interest on the subsidies, or pull out of subsidies and we will become uncompetitive.
• adminscoffee 5y ago
  there we go, let's build the robots
• cft 5y ago
  When America built it's wealth (until 1909) the corporate tax rate was 0% [1]. Since soon after, the country has been cruising on thus accumulated wealth, while doing various experiments, redistributing that wealth to non-productives and now increasingly to outright parasites. Not much longer is left until the dollar collapses however.
• gremlinsinc 5y ago
  WTF did the USA expect...give all jobs to cheap labor over in China, prop up chinese economy, take loans from china, etc... then when pandemic hits and supply chains dry up? Where do we get the stuff we need like medicine, etc? Globalization failed. We need a more open immigration policy so we can compete, it's a fact that Americans are having less children, this will be critical in coming decades. 25% tax credit should be for ALL manufacturing where the plant is in the USA, and employees are citizens, or legal residents of the USA. This would help with better paying jobs locally, and they should require all companies that take the credit must have either a union or meet a basic common good standard like: Pension/401k, Healthcare, Minimum Wage of $22/hour, etc. My bestfriend's dad worked at GM in the 80s on the factory line he got a pension, he got benefits and he made like $20+ per hour. That same job would be competing with McDonald's employees today.