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If we look back at the administration Bidenthe approval of the Chips and Science Lawbipartisan in nature, should rank near the top of any list of achievements. It has long been evident that not only the United States, but the world, needed a more diverse group of microprocessor production centers, the lifeblood of the digital economy. Until very recently, most were made in Southeast Asia and almost all high-end ones were assembled in Taiwan, the third most geopolitically conflictive place in the world after Ukraine and the Middle East.
Now, thanks to the Chip Act, new production capacity is being built in both the United States and Europe, and the eurozone is launching its own stimulus to compete with the US.
Although some in economic and business circles doubted that the United States would be capable of industrializing again, the economy goes where incentives push it. It is surprising what can be achieved in two years when 53 billion dollars of public money and almost 400 thousand million of private investment are invested in encouraging national production.
For example, in early September, Taiwan Semiconductor Manufacturing Company (TSMC), which plans to begin mass production of chips in Arizona in 2025, achieved production yields similar to what it can do at home. Rate of return is not only a key factor in profitability, it also leads to higher productivity.
This is the big lesson from Taiwan’s success with chips: making things matters. By producing more and more of something in the physical world, you move up the food chain of innovation. That’s something that has always been obvious to engineers, if not also to economists.
Despite criticism surrounding delays in semiconductor production (as if it were possible to rebuild a multitrillion-dollar industry in a few months), much progress has been made, not only in yields, but also in areas such as workforce training.
The lack of qualified labor has been a major bottleneck for chip production. When industries disappear, so do the workers and the educational programs that support them. Much of the money going to the chips went to bolster schools and vocational programs in areas like upstate New York, where the U.S. science department signed a memorandum of conditions with Micron Technology, which plans to invest. around $100 billion in chip production over 20 years.
The Commerce Department, which runs the chip program, worked with the American Federation of Teachers and Micron to craft a new technology curriculum that launched in 10 state school districts this fall and is now rolling out to other states. This is the kind of deep engagement between educators and job creators we need to build a better workforce.
But with all that said, I’m concerned about where America’s chip production efforts are headed from here. While we learned that doing things matters, we still haven’t learned how to make real industrial policy in a systematic way. Nor have we learned how to promote the greater public good above private interests. The production of chips, particularly those related to artificial intelligence (AI), is an area where the challenges in these issues are acute.
A big challenge is with which countries to friendshore (relocation of production to friendly or allied countries) and how. Let us consider that in September, the US and the United Arab Emirates agreed to deepen cooperation in advanced technologies such as semiconductors and clean energy, with the aim of strengthening capacity in AI. Microsoft and OpenAI They are among the American companies that invest in the region or receive financing from the Gulf.
Partly this has to do with trying to attract more countries into the US tech orbit, but more importantly it is the lobbying power of tech companies, which are desperate to take advantage of the huge subsidies and cheap energy they offer. Gulf countries seeking to develop an AI industry.
If we are going to worry about the national security implications of Nippon Steel’s purchase of US Steel, I suggest we also be skeptical about sharing the most advanced and strategic technologies with an autocratic country that has little respect for human rights. human rights or privacy and deep academic and commercial connections with China.
Many people in defense and intelligence circles share this concern. As one person familiar with the matter told me: “Silicon Valley executives love this free money party in the desert, but the Gulf nations are very close to China,” and there is almost no way to prevent the transfer of technology in sensitive areas.
It’s not just the software that worries you, the same goes for the hardware. TSMC and Samsung are studying building huge high-end chip production facilities in the United Arab Emirates. That’s not a problem in itself, although I’m surprised how tax breaks and subsidies are going to drive an industry with a huge dependence on precise temperatures and large quantities of water, whether in the Gulf or Arizona, into the desert.
The problem is what happens if the huge amounts of cheap capital and energy that the United Arab Emirates are investing in the industry undermine US production efforts. After all, that’s why the entire chip industry ended up in Southeast Asia.
If the US is serious about resilience and security in semiconductors and AI, the next president will have to think even more than Joe Biden about the risks and rewards of reindustrialization.
