Today, the United States Senate approved the FY2021 National Defense Authorization Act (NDAA), which contains an amendment passed earlier this week, with little floor debate and by a 96–4 margin, that would provide billions of dollars in new federal support for the U.S. semiconductor industry, most notably tax credits and grants for the construction of new domestic manufacturing facilities. The House passed a similar bill with a similar amendment earlier this week, so the legislation now goes to conference, where the subsidies are expected to survive. The two main reasons for the Senate and House amendments (formerly a standalone bill called the “CHIPS Act”), as helpfully summarized by House co-sponsor and Foreign Affairs Committee Ranking Member Michael McCaul (R‑TX), are (1) to boost U.S. semiconductor manufacturing and jobs and (2) to prevent China from “dominating” the global semiconductor market:
Ensuring our leadership in the future design, manufacturing, and assembly of cutting edge semiconductors will be vital to United States national security and economic competitiveness. As the Chinese Communist Party aims to dominate the entire semiconductor supply chain, it is critical that we supercharge our industry here at home. In addition to securing our technological future, the CHIPS Act will create thousands of high-paying U.S. jobs and ensure the next generation of semiconductors are produced in the US, not China.
Similarly dire, China-centric statements have been issued by other supporters in Congress (see, e.g., these from Senators Doug Jones (D‑AL), Tom Cotton (R‑AR), or Chuck Schumer (D‑NY)), most of whom – unsurprisingly – appear to have semiconductor manufacturers in their states or districts that stand to profit from the new taxpayer funds. (Schumer’s statement, in classic fashion, actually emphasizes how this cash will help New York companies.)
The congressional statements, urgency and near-unanimity would lead a casual observer to believe that the U.S. semiconductor industry is in a truly-desperate position, hobbled by a heavily-subsidized, globally dominant China and in dire need of a massive and immediate injection of government support. That would not, however, be the reality – even assuming (erroneously) that “reshoring” global supply chains advances actually national security. Instead, numerous facts and analyses show the U.S. semiconductor industry to be in pretty good shape and the Chinese industry – while certainly subsidized – to not be the dangerous juggernaut that our elected officials claim.
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