How the White House plans to spend $52 billion on semiconductor chip factories: NPR


President Biden holds a semiconductor chip in this 2021 file photo. The White House is considering how to spend $52 billion that Congress provided to stimulate U.S. chip factories.

Saul Loeb/AFP via Getty Images


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President Biden holds a semiconductor chip in this 2021 file photo. The White House is considering how to spend $52 billion that Congress provided to stimulate U.S. chip factories.

Saul Loeb/AFP via Getty Images

President Biden heads to an IBM manufacturing plant in Poughkeepsie, New York, on Thursday to tout a new $20 billion investment the company is making in semiconductor research and development and other advanced technologies.

It’s the second major tech manufacturing announcement this week, following news from Micron that it will spend $100 billion on a new computer chip plant in upstate New York.

The White House says the announcements are part of a “manufacturing boom” fueled by the CHIPS and Science Act, which Biden signed into law in August, a law that includes more than $52 billion in federal grants.

As Biden travels to New York, a high-powered group will gather at the White House for its first meeting on how best to get that money out.

“We need a whole-of-government approach, and we need to get everyone on the same page to figure out how we’re going to use that $52.5 billion,” said Ronnie Chatterjee, who coordinates implementation of the CHIPS law.

Biden wants to strengthen US resilience after the pandemic

Semiconductors are needed to make almost anything that has an electronic component work, from cars to weapons that the US is sending to Ukraine.

But they are in short supply in the United States and around the world due to supply chain disruptions exacerbated by the global pandemic.

The Biden administration is desperate to address domestic chip shortages — and it also wants to counter China’s growing power.

The White House says the U.S. produces only about 10 percent to 12 percent of the world’s semiconductor supply and none of the advanced chips, while East Asia accounts for 75 percent of global production.

The White House wants to reverse that. “We invented this industry in the United States. I mean, there’s a reason it’s called Silicon Valley,” said Chatterjee, who was chief economist at the Commerce Department and served on former President Barack Obama’s Council of Economic Advisers.

Chatterjee’s team is holding its first meeting with senior White House officials and Cabinet members on Thursday, including representatives from the Commerce, Defense and State Departments. Chatterjee said the goal was to “make everyone aware of our goals and metrics.”

The rise in car prices showed why it was important to make chips in America

In an interview with NPR, Chatterjee said the spike in car prices last year underscored the urgency and importance of his team’s work.

“This has been one of the biggest drivers of inflation,” Chatterjee said. “Probably a third of the increase in inflation in 2021 is due to cars… We couldn’t get the chips we needed to make the cars. And when you can’t get the chips you need to build the cars, workers get furloughed and prices go up.”

Concerns about China’s economic, technological and military ambitions have also fueled bipartisan interest in investing in American semiconductor manufacturing.

But the subsidies represent a significant shift in thinking for Washington. Republicans and some Democrats have long opposed government interference in free markets. There are also concerns about wasteful spending.

A student wearing a clean room suit conducts research in the Taiwan Semiconductor Research Institute’s clean room during a semiconductor tour at Hsinchu Science Park on September 16, 2022 in Hsinchu, Taiwan.

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A student wearing a clean room suit conducts research in the Taiwan Semiconductor Research Institute’s clean room during a semiconductor tour at Hsinchu Science Park on September 16, 2022 in Hsinchu, Taiwan.

Annabelle Chee/Getty Images

There are concerns about picking winners and losers

In the past, US government investments in private sector companies have not always gone smoothly. The government has a poor record of “trying to pick the winners and avoid the losers,” said Scott Lincicome, a trade economist at the libertarian Cato Institute.

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Lincicome says that too often the grants go to those who spend the most money on lobbying — or sometimes projects end up in politically important regions instead of where they make the most sense.

“Time and time again with US industrial policy projects, the government has good intentions but ends up actually backing the wrong horse,” Lincicome said.

And he says there is no guarantee that bringing semiconductor makers back to the United States will prevent shortages, citing as an example the recent shortage of baby milk despite the country’s large manufacturing capacity.

Lincicome supports more trade agreements and reduced trade barriers to allow global markets to respond more quickly to domestic and global supply shocks.

Chatterjee is aware of the pitfalls associated with industrial policy. He said transparency, governance to avoid conflicts of interest and “rigorous performance measurement” were key.

But he said he is confident the administration can achieve its goals if all stakeholders work together: governments, private companies and workers.

We need to keep our eye on the ball on laying a foundation for the survival of the whole industry, including SMEs,” he said. “This is how we avoid this criticism of picking winners that has plagued industrial policy in the past. “

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