Home BusinessEconomy Congress Is Giving Billions to the Chip Industry. Strings Are Attached.

Congress Is Giving Billions to the Chip Industry. Strings Are Attached.

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This is an adoption of industrial policy that has not been seen in Washington for decades. Gary Hufbauer is an Adjunct Senior Fellow at the Peterson Institute for International Economics. US Industrial Policy Investigatedsaid the bill was the most significant investment in industrial policy the United States has made in at least 50 years.

American politicians of both parties have long embraced the economic power of free markets and free trade, emphasizing the dangers and inefficiencies of government intervention. Republicans and some Democrats argued that government was a poor mediator between business winners and losers, and that government intervention in private markets was futile at best and often destructive.

However, China’s growing dominance in key global supply chains such as rare earth metals, solar panels and certain pharmaceuticals has prompted both Republicans and Democrats to seek new opportunities for governments to foster strategic industries. support has been generated. South Korea, Japan, the European Union, and other governments have outlined aggressive plans to attract semiconductor factories. Also, the production of many advanced semiconductors in Taiwan, which is increasingly at risk of invasion, poses an unacceptable security threat to many.

Semiconductors are needed to power other major technologies such as quantum computing, the Internet of Things, artificial intelligence, warplanes, and even mundane items like cars, computers, and coffee makers.

“We need to move from why we pursue industrial strategy to how we pursue industrial strategy,” said Brian Diess, director of the National Economic Council, in an interview. “This allows us to really shape the rules of where cutting-edge innovation happens.”

Disruptions to supply chains for essential goods during the pandemic have heightened the sense of urgency to stop American manufacturing from flowing overseas. This includes semiconductors, according to the Semiconductor Industry Association, where the US share of global manufacturing has fallen from 37% in 1990 to 12% in 2020. China’s share in manufacturing rose from almost zero to 15% over the same period.

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