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It's nice to build chip fabs in the USA, but is it _really_ necessary to "gift" some of the most capable and productive companies on the planet billions of doll

It's nice to build chip fabs in the USA, but is it _really_ necessary to "gift" some of the most capable and productive companies on the planet billions of dollars (not even counting the tax freebies)? The whole CHIPS act thing seems backwards and short-sighted. As the US education system is backsliding into literally worse-than-third-world outcomes, can we expect that companies like TSMC will even be able to find enough US workers to staff these facilities at a scale which will be large enough to move the economic needle?

aurareturn 3y ago
The Biden administration sees it as 2 birds with 1 stone. Intel and TSMC are investing in swing states. It matters to Biden when it comes to the election. The second is that the US genuinely wants chip fabs in US in case war breaks out. It's most definitely inefficient use of dollars for mega corporations.
- senectus1 3y ago
  Without a doubt the biggest reason here is to ensure the tech is capable on their homeland. having most of modern tech being build in China/Taiwan and Japan is a HUGE security risk for US (and other "wesetrn countries")
harry8 3y ago
>can we expect that companies like TSMC will even be able to find enough US workers to staff these facilities at a scale which will be large enough to move the economic needle? Immigration.
- xnx 3y ago
  Is part of the statecraft at play here to brain drain all the valuable engineers from Taiwan and China?
joshuacc 3y ago
How else do you propose to get a company to build a factory at your preferred location rather than theirs? Paying companies is the usual way to get them to do things. The economic effects are important but secondary to the national security effects of having TSMC chip manufacturing on US soil.
- poidos 3y ago
  I wish it could be an investment instead of just grants and loans. Could be a way to jumpstart a national sovereign wealth fund.
  - xyzzy4747 3y ago
    I disagree. You don't want the government to own things because they would be slow and ineffective at corporate governance. It's better to simply subsidize and let the business owners make the important decisions.
    - afavour 3y ago
      Feels like a self fulfilling prophecy. There’s no reason government can’t be effective at decision making if things are set up the right way (their involvement could be distant). There’s also no reason to assume a giant company (like, say, Intel) is going to be particularly fast at it.
      - xyzzy4747 3y ago
        The people in government aren't incentivized to be effective largely because they have no personal financial reason to be. There's no stock options or things like that, no good bonus programs, etc.
        afavour 3y ago
        What about a competitive salary they lose (i.e. get fired) if they underperform? We’re used to underpaying and overprotecting government employees but if you were setting up a new publicly owned company there’s no reason you’d have to do it that way.
tomohawk 3y ago
[flagged]
- slaw 3y ago
  These chips could be used in national chips reserve. The same way like national cheese reserve. https://en.m.wikipedia.org/wiki/Government_cheese https://en.m.wikipedia.org/wiki/Government_cheese
melling 3y ago
I think you’re completely missing the point. This has nothing to do with moving the economic needle. Having 90% of the most important semiconductors in the world made on an island 90 miles from China, which China wants to take back, is a bit of a problem. What happens in a protracted skirmish that lasts a year, for example, where we can’t get any of those semiconductors.
- etiam 3y ago
  > which China wants to take back That's Beijing rhetoric. They can't take it back because it's never been theirs. It would be more accurate to say they want to conquer the last remaining territory from the legitimate government of China and wipe out the main alternative to their hegemony.
amelius 3y ago
By the way, doesn't competition law say anything about these gifts?
- Cthulhu_ 3y ago
  The OECD has a good writeup about this very subject: https://one.oecd.org/document/DAF/COMP/GF(2022)6/en/pdf https://one.oecd.org/document/DAF/COMP/GF(2022)6/en/pdf > This is however not the case and subsidies are, with a few exceptions, mostly assessed or controlled using multilateral rules and free trade agreements. I haven't read the full thing because I'm no economist, but it seems to be above board. For comparison, Intel is getting $8.5 billion from the CHIPS Act (https://www.intel.com/content/www/us/en/newsroom/news/us-chips-act-intel-direct-funding.html); https://www.intel.com/content/www/us/en/newsroom/news/us-chi... I can't find other US based chip companies like NVidia or AMD getting any from that pot of money though, which is weird. Although NVidia doesn't need it, given how their stock price and valuation rocketed up.
xyzzy4747 3y ago
Have you ever played an economics game such as Victoria 3? IMO the government should do a lot more subsidizing of important businesses. It would grow the economy faster in useful ways.
dwheeler 3y ago
Yes, it is necessary if the world wants to have high-end chips manufactured more than a few miles from China. China's government has been spending billions and billions on an utterly massive military build-up. The US goal is to be able to continue to have chips, which are necessary to power almost everything else. I think what's going on is a geopolitical struggle. The US views this as a national security issue. A good question is whether or not this will work. A big building is not the same as a working best-in-class fab.
hiddencost 3y ago
It's about war. The US wants on shore chips facilities with trained US staff so that if we end up in a shooting war with China we won't lose our supply of chips. That's the whole thing.
- Clubber 3y ago
  >It's about war. I mean yes, ultimately, but it's also about supply chain disruption that we just experienced with COVID. The US economy (and subsequently the Western economy) would probably get hit pretty hard with a chip cutoff and 5 years to onshore it. The economy is also about war; without a strong economy, we can't stockpile all our murder toys. It's also about leverage with China. With China on an aggressive footing and Taiwan so vulnerable, they have a leverage point we're now addressing. We got this way because we thought if we brought China into the modern economy they would democratize. I think we came to the conclusion that it's not working out that way so we're adjusting and divesting from China. COVID was a wake up call in regard to having a single country be the world's production of goods. It ups the bet when that single country is becoming more of an adversary than a competitive partner.
Salgat 3y ago
Chip demand is cyclical, and idle capacity is extremely costly, so chip fabs are built around the bottom of the demand curve to always run at full capacity. If you want to avoid another chip shortage, especially for national security reasons, financial incentives are the only way to do it.
oiu423432424 3y ago
[flagged]
Jedd 3y ago
> ... but is it _really_ necessary to "gift" some of the most capable and productive companies ... As I understand it, the gift is, for the most part, what we'd call 'funny money' - no one's really handing over the proverbial briefcase of USD$11B in return for them building out a fab plant on US soil. While the figures are referred to as loans, I suspect in practice they manifest quite differently.
- northhanover 3y ago
  Well then maybe I can pay my taxes this year with the “funny money” you are talking about. Forgone taxes are REAL money.
  - pixl97 3y ago
    Or maybe you can pay 4-10x or even more the price for chips when something in the world destabilizes (remember that during covid?), was that not real money? Libertarian types love to make models of the world that are so simplified they are totally incorrect. But hey, you'll be able to save on taxes in the good times, and starve in the streets during the bad.
  - Jedd 3y ago
    I see your point, but if the USA didn't encourage the company to set up fab shops domestically, then it wouldn't be receiving those taxes either - but in that scenario it also wouldn't be receiving the indirect benefits of having that company operating locally. Your personal taxes are a different matter - the nation state is not trying to court you into operating within its borders with some tempting on-paper discounts.
natnat 3y ago
In what world is the US education worse-than-third-world? The US has universal literacy, phenomenal higher education institutions, and primary and secondary schools that are comparable to peer countries on average. We spend lots of money on schools in the US and generally get pretty good outcomes. Our math scores leave something to be desired, but average reading scores are better than peer countries. There are plenty of exceptions, especially in poor neighborhoods, and chronic absenteeism is a real problem, but it's worth keeping sight of the fact that the vast majority of American schools are quite good. Some examples: * PISA scores: https://www.oecd.org/pisa/OECD_2022_PISA_Results_Comparing%20countries%E2%80%99%20and%20economies%E2%80%99%20performance%20in%20mathematics.pdf https://www.oecd.org/pisa/OECD_2022_PISA_Results_Comparing%2... * PIRLS/TIMMS scores: https://nces.ed.gov/fastfacts/display.asp?id=1 https://nces.ed.gov/fastfacts/display.asp?id=1
- deleted 3y ago
  [deleted]
- CharlieDigital 3y ago
  Per your first link, the US is below the OECD average with a -13 delta from 2018
  - calderarrow 3y ago
    That section is just for mathematics, which the commenter specifically called out. The reading and science are above average
    - newshackr 3y ago
      Above average seems like a low bar if the US wants to stay the top economy.
      - CharlieDigital 3y ago
        Particularly so given how "wealthy" the US is.
thomastjeffery 3y ago
Why are you pitting this against education funding? The US spends more on defense than both put together. A lot more.

aurareturn 3y ago

The Biden administration sees it as 2 birds with 1 stone. Intel and TSMC are investing in swing states. It matters to Biden when it comes to the election. The second is that the US genuinely wants chip fabs in US in case war breaks out. It's most definitely inefficient use of dollars for mega corporations.

senectus1 3y ago
Without a doubt the biggest reason here is to ensure the tech is capable on their homeland. having most of modern tech being build in China/Taiwan and Japan is a HUGE security risk for US (and other "wesetrn countries")

harry8 3y ago

>can we expect that companies like TSMC will even be able to find enough US workers to staff these facilities at a scale which will be large enough to move the economic needle? Immigration.

xnx 3y ago
Is part of the statecraft at play here to brain drain all the valuable engineers from Taiwan and China?

joshuacc 3y ago

How else do you propose to get a company to build a factory at your preferred location rather than theirs? Paying companies is the usual way to get them to do things. The economic effects are important but secondary to the national security effects of having TSMC chip manufacturing on US soil.

poidos 3y ago
I wish it could be an investment instead of just grants and loans. Could be a way to jumpstart a national sovereign wealth fund.
- xyzzy4747 3y ago
  I disagree. You don't want the government to own things because they would be slow and ineffective at corporate governance. It's better to simply subsidize and let the business owners make the important decisions.
  - afavour 3y ago
    Feels like a self fulfilling prophecy. There’s no reason government can’t be effective at decision making if things are set up the right way (their involvement could be distant). There’s also no reason to assume a giant company (like, say, Intel) is going to be particularly fast at it.
    - xyzzy4747 3y ago
      The people in government aren't incentivized to be effective largely because they have no personal financial reason to be. There's no stock options or things like that, no good bonus programs, etc.
      - afavour 3y ago
        What about a competitive salary they lose (i.e. get fired) if they underperform? We’re used to underpaying and overprotecting government employees but if you were setting up a new publicly owned company there’s no reason you’d have to do it that way.

tomohawk 3y ago

[flagged]

slaw 3y ago
These chips could be used in national chips reserve. The same way like national cheese reserve. https://en.m.wikipedia.org/wiki/Government_cheese https://en.m.wikipedia.org/wiki/Government_cheese

melling 3y ago

I think you’re completely missing the point. This has nothing to do with moving the economic needle. Having 90% of the most important semiconductors in the world made on an island 90 miles from China, which China wants to take back, is a bit of a problem. What happens in a protracted skirmish that lasts a year, for example, where we can’t get any of those semiconductors.

etiam 3y ago
> which China wants to take back That's Beijing rhetoric. They can't take it back because it's never been theirs. It would be more accurate to say they want to conquer the last remaining territory from the legitimate government of China and wipe out the main alternative to their hegemony.

amelius 3y ago

By the way, doesn't competition law say anything about these gifts?

Cthulhu_ 3y ago
The OECD has a good writeup about this very subject: https://one.oecd.org/document/DAF/COMP/GF(2022)6/en/pdf https://one.oecd.org/document/DAF/COMP/GF(2022)6/en/pdf > This is however not the case and subsidies are, with a few exceptions, mostly assessed or controlled using multilateral rules and free trade agreements. I haven't read the full thing because I'm no economist, but it seems to be above board. For comparison, Intel is getting $8.5 billion from the CHIPS Act (https://www.intel.com/content/www/us/en/newsroom/news/us-chips-act-intel-direct-funding.html); https://www.intel.com/content/www/us/en/newsroom/news/us-chi... I can't find other US based chip companies like NVidia or AMD getting any from that pot of money though, which is weird. Although NVidia doesn't need it, given how their stock price and valuation rocketed up.

xyzzy4747 3y ago

Have you ever played an economics game such as Victoria 3? IMO the government should do a lot more subsidizing of important businesses. It would grow the economy faster in useful ways.

dwheeler 3y ago

Yes, it is necessary if the world wants to have high-end chips manufactured more than a few miles from China. China's government has been spending billions and billions on an utterly massive military build-up. The US goal is to be able to continue to have chips, which are necessary to power almost everything else. I think what's going on is a geopolitical struggle. The US views this as a national security issue. A good question is whether or not this will work. A big building is not the same as a working best-in-class fab.

hiddencost 3y ago

It's about war. The US wants on shore chips facilities with trained US staff so that if we end up in a shooting war with China we won't lose our supply of chips. That's the whole thing.

Clubber 3y ago
>It's about war. I mean yes, ultimately, but it's also about supply chain disruption that we just experienced with COVID. The US economy (and subsequently the Western economy) would probably get hit pretty hard with a chip cutoff and 5 years to onshore it. The economy is also about war; without a strong economy, we can't stockpile all our murder toys. It's also about leverage with China. With China on an aggressive footing and Taiwan so vulnerable, they have a leverage point we're now addressing. We got this way because we thought if we brought China into the modern economy they would democratize. I think we came to the conclusion that it's not working out that way so we're adjusting and divesting from China. COVID was a wake up call in regard to having a single country be the world's production of goods. It ups the bet when that single country is becoming more of an adversary than a competitive partner.

Salgat 3y ago

Chip demand is cyclical, and idle capacity is extremely costly, so chip fabs are built around the bottom of the demand curve to always run at full capacity. If you want to avoid another chip shortage, especially for national security reasons, financial incentives are the only way to do it.

oiu423432424 3y ago

[flagged]

Jedd 3y ago

> ... but is it _really_ necessary to "gift" some of the most capable and productive companies ... As I understand it, the gift is, for the most part, what we'd call 'funny money' - no one's really handing over the proverbial briefcase of USD$11B in return for them building out a fab plant on US soil. While the figures are referred to as loans, I suspect in practice they manifest quite differently.

northhanover 3y ago
Well then maybe I can pay my taxes this year with the “funny money” you are talking about. Forgone taxes are REAL money.
- pixl97 3y ago
  Or maybe you can pay 4-10x or even more the price for chips when something in the world destabilizes (remember that during covid?), was that not real money? Libertarian types love to make models of the world that are so simplified they are totally incorrect. But hey, you'll be able to save on taxes in the good times, and starve in the streets during the bad.
- Jedd 3y ago
  I see your point, but if the USA didn't encourage the company to set up fab shops domestically, then it wouldn't be receiving those taxes either - but in that scenario it also wouldn't be receiving the indirect benefits of having that company operating locally. Your personal taxes are a different matter - the nation state is not trying to court you into operating within its borders with some tempting on-paper discounts.

natnat 3y ago

In what world is the US education worse-than-third-world? The US has universal literacy, phenomenal higher education institutions, and primary and secondary schools that are comparable to peer countries on average. We spend lots of money on schools in the US and generally get pretty good outcomes. Our math scores leave something to be desired, but average reading scores are better than peer countries. There are plenty of exceptions, especially in poor neighborhoods, and chronic absenteeism is a real problem, but it's worth keeping sight of the fact that the vast majority of American schools are quite good. Some examples: * PISA scores: https://www.oecd.org/pisa/OECD_2022_PISA_Results_Comparing%20countries%E2%80%99%20and%20economies%E2%80%99%20performance%20in%20mathematics.pdf https://www.oecd.org/pisa/OECD_2022_PISA_Results_Comparing%2... * PIRLS/TIMMS scores: https://nces.ed.gov/fastfacts/display.asp?id=1 https://nces.ed.gov/fastfacts/display.asp?id=1

deleted 3y ago
[deleted]
CharlieDigital 3y ago
Per your first link, the US is below the OECD average with a -13 delta from 2018
- calderarrow 3y ago
  That section is just for mathematics, which the commenter specifically called out. The reading and science are above average
  - newshackr 3y ago
    Above average seems like a low bar if the US wants to stay the top economy.
    - CharlieDigital 3y ago
      Particularly so given how "wealthy" the US is.

thomastjeffery 3y ago

Why are you pitting this against education funding? The US spends more on defense than both put together. A lot more.