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$52 Billion Chipmaking Plan Is Racing Toward Failure
Analysis by The Editors | Bloomberg
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.
Another challenge is that the US lacks the needed workforce for this industry, thanks partly to a broken immigration system. One study found that 300,000 more skilled laborers may be needed just to complete US fab projects underway, let alone new ones. Yet the number of US students pursuing advanced degrees in the field has been stagnant for 30 years.
Plenty of international students are enrolled in relevant programs at US schools, but current policy makes it needlessly difficult for them to stay and work. The strains are showing: New plants planned by Intel Corp. and Taiwan Semiconductor Manufacturing Co. are both struggling to find qualified workers.
A final concern is politics. Companies hoping for significant Chips Act funding must comply with an array of new government rules and pointed suggestions, meant to advantage labor unions, favored demographics, “empowered community partners” and the like. They should also be prepared to offer “community investment,” employee “wraparound services,” access to “affordable, accessible, reliable and high-quality child care,” and much else. One can debate the merits of any of these objectives. But larding already-uncompetitive businesses with crippling new costs to advance completely unrelated social goals is simply at odds with the stated purpose of this law.
The good news is that these are mostly solvable problems. As just a start: Issue “fast track” exemptions for chipmakers under federal environmental law — or, better yet, amend the law to accelerate all such projects and inhibit frivolous lawsuits. Increase visas for skilled workers, prioritize applicants with needed STEM abilities, and exempt foreign graduates with advanced science degrees from the cap on green-card allotments. Slash the costly and counterproductive strings attached to Chips Act funding and accept that the proper venue for enacting the progressive agenda is Congress, not random companies.
The challenge here goes far beyond semiconductors. Misguided policies are impeding American ambition on all fronts. If lawmakers want to solve them — to start building again — they can’t just push more money out the door. They need to do the hard work that national progress demands.
Analysis by The Editors | Bloomberg
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.
Another challenge is that the US lacks the needed workforce for this industry, thanks partly to a broken immigration system. One study found that 300,000 more skilled laborers may be needed just to complete US fab projects underway, let alone new ones. Yet the number of US students pursuing advanced degrees in the field has been stagnant for 30 years.
Plenty of international students are enrolled in relevant programs at US schools, but current policy makes it needlessly difficult for them to stay and work. The strains are showing: New plants planned by Intel Corp. and Taiwan Semiconductor Manufacturing Co. are both struggling to find qualified workers.
A final concern is politics. Companies hoping for significant Chips Act funding must comply with an array of new government rules and pointed suggestions, meant to advantage labor unions, favored demographics, “empowered community partners” and the like. They should also be prepared to offer “community investment,” employee “wraparound services,” access to “affordable, accessible, reliable and high-quality child care,” and much else. One can debate the merits of any of these objectives. But larding already-uncompetitive businesses with crippling new costs to advance completely unrelated social goals is simply at odds with the stated purpose of this law.
The good news is that these are mostly solvable problems. As just a start: Issue “fast track” exemptions for chipmakers under federal environmental law — or, better yet, amend the law to accelerate all such projects and inhibit frivolous lawsuits. Increase visas for skilled workers, prioritize applicants with needed STEM abilities, and exempt foreign graduates with advanced science degrees from the cap on green-card allotments. Slash the costly and counterproductive strings attached to Chips Act funding and accept that the proper venue for enacting the progressive agenda is Congress, not random companies.
The challenge here goes far beyond semiconductors. Misguided policies are impeding American ambition on all fronts. If lawmakers want to solve them — to start building again — they can’t just push more money out the door. They need to do the hard work that national progress demands.
William Gallagher
