What $8.5 billion can buy: Biden wants to boost chip manufacturing

President Biden’s announcement Wednesday of an $8.5 billion federal grant to Intel to build some of the world’s most advanced computer chips is one of the most notable American experiments in industrial policy since Dwight D. Eisenhower used federal funds to build the nation’s highway system.

But rather than a new beginning in America’s attempt to recover a technological capability it invented – and then all but lost – there is a significant risk that this could be the culmination of the effort.

When the CHIPS and Science Act was passed two years ago, it was promoted as a down payment on the kind of long-term investments in crucial sectors of the economy that made Taiwan the world’s dominant chipmaking player. It’s a strategy China began pursuing nearly a decade ago, pouring new money year after year into high-capacity chips and batteries, quantum computers and artificial intelligence, to name a few.

But while Biden celebrated the construction of Intel’s factory as a turning point in the US industrial and national security strategy, there is no prospect of a follow-up program in the near term. And Congress has quietly thrown away the billions of dollars that were authorized – but never fully appropriated – for research, training and production.

So while Mr. Biden touts the immediate benefits of the Intel investment — 10,000 manufacturing jobs in Arizona, New Mexico, Oregon and Ohio, and 20,000 construction jobs to get things going — many in his administration are concerned privately worry that their strategy may not survive this. moment of political polarization.

That’s why Mr. Biden and his Commerce Secretary, Gina Raimondo, aren’t talking much about the size of the additional government investments that might be needed if the country is serious about investing in everything from the priciest semiconductor factories to the technologies for automakers. will have to comply with the emission mandates.

“President Biden often spoke of this act as a ‘tipping point,’ a new role for federal investments in the toughest problems in high technology,” said Doug Calidas, a fellow at the Belfer Center for Science and International Affairs at Harvard and a senior vice president for Americans for Responsible Innovation, an advocacy group for emerging technologies, especially artificial intelligence.

There was a hint of that concern in Intel CEO Patrick Gelsinger’s comments to reporters Tuesday evening.

“It won’t be solved in one three- to five-year program,” Mr. Gelsinger said. “I think we need at least a CHIPS 2 to do that job.”

That was an optimistic assessment. Many involved in the sector say they believe federal investments will need to be repeated as technological challenges change, along with assessments about which technologies are simply too critical for the United States to rely on foreign supply chains for them. Past attempts to strengthen the chip industry with one-off investments, when Japan was still the main competitor, ended in spectacular failures.

The passage of the CHIPS Act in 2022 was the result of the confluence of several extraordinary events. Most vivid was the discovery during the coronavirus pandemic of how vulnerable the supply of critical goods could be – from surgical masks to vaccine precursors to the everyday chips needed to produce cars and washing machines. Added to the mix was growing fear of China’s power, both to disrupt the US economy and to threaten Taiwan, where more than 90 percent of the world’s most complex and advanced semiconductors are made.

Ms. Raimondo and Avril D. Haines, the director of national intelligence, briefed senators in the weeks before the bill’s passage on the notable vulnerabilities of America’s defense industrial base and how a freeze on certain technologies could ground missiles and could take the production of fighter aircraft to a higher level. a stop. The specter of a rising, manipulative China that could hold Taiwan’s semiconductor manufacturing centers hostage swayed enough Republicans to secure a truly bipartisan majority. The bill was passed in the Senate by a vote of 64 to 33.

Even then there were doubters. Morris Chang, the MIT-educated engineer who left Texas Instruments and founded the Taiwan Semiconductor Manufacturing Company, argued that money alone would not be enough to reproduce the magic he created. He mentioned the billions in subsidies “a very expensive exercise in futility.”

At the heart of Mr. Chang’s criticism was an argument that even if Intel were to copy Taiwan Semiconductor’s core strategy and become a “foundry” producing chips designed by the likes of Apple and Nvidia, American engineers wouldn’t have to put in the grueling hours and put in the perfectionism that is necessary. to be successful.

But there were other criticisms, too, from industrial policy advocates: that Biden’s push to bring manufacturing home had come too late, and that the bill was far too small to drive the private investment needed to bring about a real manufacturing renaissance. .

The politics of an election year add another layer of difficulty.

Former President Donald J. Trump has regularly launched attacks on another form of industrial policy: Mr. Biden’s incentives to purchase electric vehicles, a key part of his climate agenda.

Those cars have become part of Mr. Trump’s campaign rants. He argues, without evidence, that electric cars will “kill” the US auto industry and said the Biden administration had given “a big mandate to Michigan manufacturing” by enticing buyers to electric vehicles through tax breaks and other subsidies .

But even Mr. Biden seems somewhat reluctant to fully support his own policies. The original CHIPS Act authorized the United States to spend $35 billion on science and innovation research through government agencies by 2025; Mr. Biden’s budget request, made last week, is closer to $20 billion.

“The rhetoric is much more impressive than the budget numbers,” Calidas said.