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Senate Majority Leader Chuck Schumer, in the middle, talks about the CHIPS and Science Act at a news conference at the U.S. Capitol on July 27. The Senate passed a bill that gives $52 billion in grants and tax breaks to companies that make semiconductors in the US. In recent years, this industry has been steadily losing ground to foreign competitors.
Voting for the Semiconductor Bill
Soon, the House of Representatives will vote on a very important bill that will give federal money and tax breaks to help rebuild advanced semiconductor manufacturing in the U.S.
Even though there are parts of the law that could be better or that, if Congress funds them in the future, could take us too far, the law is good at its core. It gives money right away to things that are very important to our economic and national security at a time when big nation-state competitors like China are becoming more dangerous.
Given this, and despite the fact that many of the compromises at the heart of this bill were put together quickly as Congress heads toward its summer break, all members of Congress, especially those who care about our national security and want to stop China’s very real threat, should support this bill.
Local Manufacturing of Semiconductors
The manufacturing of semiconductors in the United States is in a very bad place right now. The US is very dependent on foreign semiconductors and the supply chains that support them. All you have to do is look at how hard it is for the average American to buy a car to get to work.
In fact, America, which literally invented the modern computer chip, has gone from making almost 40% of the world’s semiconductors to just over 10% in the last 30 years. This is a huge worry because it gets most of our semiconductors from other countries, especially those that are directly threatened by China, like our allies in Taiwan, South Korea, and Japan. This is especially true for semiconductors that are used for national security.
America doesn’t have a reliable foundry for some of the most important and cutting-edge national security technology needs, such as chips that have already been made overseas.
Many of the world’s largest chip companies still have their headquarters in the United States, where they continue to make new, powerful semiconductors. But when it comes to making these chips in the United States, it just hasn’t kept up. China wants to be the biggest supplier of semiconductors in the world, so they are spending a lot of money to build up its capacity.
Biding on Newer Semiconductors Tech Companies
The US did create this problem, though. It became dependent on foreign suppliers in this area, just like it did with our core telecommunications skills. American technology companies, both newer ones, and ones that have been around for a while, as well as research universities, keep coming up with new ideas at a rapid rate. However, it is losing the ability to take advantage of these ideas by building the devices they imagine here.
The bill helps in these areas by giving direct funding and loans to American and allied companies that build manufacturing capacity here, by supporting a next-generation, open-access innovation fund in the telecommunications space, and by giving a tax credit for investments in domestic semiconductor manufacturing and the specialized tools those factories need.
Even in key areas like quantum computing and artificial intelligence, the US is starting to lose its edge in terms of new ideas. China spends billions of dollars and uses cyber and other methods to extort and steal what it can’t develop on its own.
The US also gets other important goods from China and other places outside of the U.S. The Americans learned the hard way early on in the COVID-19 pandemic that this includes both the ingredients for drugs and personal safety gear. But China makes a lot of other things the US needs, like rare earth metals, which are needed for electric cars, which are leading a green energy revolution in the United States.
No More Tech Dependency
If the US wants to protect its economy and national security as well, it needs to at least stop being so dependent on imported goods that Beijing and the Chinese Communist Party control or have a lot of influence over. Even though Beijing’s threats of military action were already at an all-time high, they got worse in the last week as American political leaders planned to visit our allies in Taiwan, which is home to one of the largest semiconductor manufacturing hubs in the world.
And if you think these threats don’t matter because they aren’t close to us, think about how the advanced processing these chips give our modern military is the key to how they fight. They help the fighter jets that protect our skies find their targets and are essential to the artillery and tanks that keep our enemies away on land and the carrier battle groups that stay afloat and ready to fight at sea.
The Senate bill also has parts that would allow money to be spent, but not actually spend money, to keep America’s technological advantage. There is some extra fat in these provisions, but since the bill doesn’t force Congress to pay for all of them right away, those of us who want more focused spending can keep pushing for that.
The bill has some important parts that protect the investment that American taxpayers would be making. For example, it bans using taxpayer money to pay for stock buybacks, making investments in China, or working with Chinese companies. This is a very important safeguard.
There’s no doubt that the US needs to do a lot more to fight China. It needs to be much tougher with the government in Beijing, make a promise to stop relying on critical goods from China, and fight back much more forcefully against their threats to us and our allies in the region and in cyberspace. This will create real deterrence. The US has to promise again to defend Taiwan in full force if China makes the strategic mistake of attacking our ally.
The CHIPS-Plus Act is a good step forward. It deserves the support of people who, like us, think that China is the biggest strategic threat to American security in the modern era.
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