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March 28, 2023 at 8:10 a.m. EDT
WASHINGTON, DC - FEBRUARY 24: U.S. President Joe Biden holds a semiconductor during his remarks before signing an Executive Order on the economy in the State Dining Room of the White House on February 24, 2021 in Washington, DC. (Photo by Doug Mills/Pool/Getty Images) (Photographer: Pool/Getty Images North America)
By now it’s clear that the Chips and Science Act — which includes a $52 billion splurge for the semiconductor industry — is unlikely to work as intended. In fact, its looming failure is a microcosm of all that’s wrong with America’s current approach to building things.
Passed last year with bipartisan support, the law was meant to revive US chipmaking capacity. Although America is a world leader in cutting-edge chip design, its share of global semiconductor manufacturing has declined from 37% in 1990 to about 12%. Given the importance of such chips to the economy and especially to national security — the Defense Department needs about 1.9 billion of them a year — a more or less coherent case could be made for subsidies, prudently applied.
Yet simply writing checks was never going to be enough. Producing chips in the US still takes 25% longer and costs nearly 50% more than doing so in Asia. Significant policy changes would be needed for US-based manufacturers to be even remotely competitive. As things stand, they face three serious impediments — all inflicted by the government.
Chief among them is red tape. From 1990 to 2020, the time required to construct new chip plants (called fabs) in the US soared by 38%. Clean Air Act permits can take 18 months. National Environmental Policy Act reviews take an average of four and a half years. A half dozen other federal laws may come into play, plus endless state and local variants. At every step, myriad agencies must be consulted and parochial interests must be heard. Yet technology does not stand still for these bureaucratic tea parties; such delays only add expenses, discourage private investment, and prevent US manufacturers from seriously competing with overseas rivals.
$52 Billion Chipmaking Plan Is Racing Toward Failure
Analysis by The Editors | BloombergMarch 28, 2023 at 8:10 a.m. EDT
WASHINGTON, DC - FEBRUARY 24: U.S. President Joe Biden holds a semiconductor during his remarks before signing an Executive Order on the economy in the State Dining Room of the White House on February 24, 2021 in Washington, DC. (Photo by Doug Mills/Pool/Getty Images) (Photographer: Pool/Getty Images North America)
By now it’s clear that the Chips and Science Act — which includes a $52 billion splurge for the semiconductor industry — is unlikely to work as intended. In fact, its looming failure is a microcosm of all that’s wrong with America’s current approach to building things.
Passed last year with bipartisan support, the law was meant to revive US chipmaking capacity. Although America is a world leader in cutting-edge chip design, its share of global semiconductor manufacturing has declined from 37% in 1990 to about 12%. Given the importance of such chips to the economy and especially to national security — the Defense Department needs about 1.9 billion of them a year — a more or less coherent case could be made for subsidies, prudently applied.
Yet simply writing checks was never going to be enough. Producing chips in the US still takes 25% longer and costs nearly 50% more than doing so in Asia. Significant policy changes would be needed for US-based manufacturers to be even remotely competitive. As things stand, they face three serious impediments — all inflicted by the government.
Chief among them is red tape. From 1990 to 2020, the time required to construct new chip plants (called fabs) in the US soared by 38%. Clean Air Act permits can take 18 months. National Environmental Policy Act reviews take an average of four and a half years. A half dozen other federal laws may come into play, plus endless state and local variants. At every step, myriad agencies must be consulted and parochial interests must be heard. Yet technology does not stand still for these bureaucratic tea parties; such delays only add expenses, discourage private investment, and prevent US manufacturers from seriously competing with overseas rivals.
