I understand the point of these subsidies. I am just doubting (a personal opinion) that they'll actually work and calculating the wealth transfer happening here.
Do you think that the gain from this (investment into Saratoga Fab) is useless or that the state pays too much for it?
Because I personally believe that this is a decent deal; I hate the idea and it still reeks of protectionism to me, but I think this serves US (taxpayers!) interests decently well.
I especially like the investment matching aspect, where the necessary commitment from the company is much larger than the grants, so in the end, they are dropping money into that fab (fudging numbers only gets you so far), and its in their best interest to make it work out.
I'd be very careful with characterising this as "wealth transfer", because it seems significantly less questionable than most defense spending to me and even that I wouldn't label as "wealth transfer".
Out of personal curiosity: Are you similarly opposed to agriculture subsidies, or do you consider those less problematic (magnitude is somewhat comparable at ~20billion$/year)?
> Out of personal curiosity: Are you similarly opposed to agriculture subsidies, or do you consider those less problematic (magnitude is somewhat comparable at ~20billion$/year)?
European here, we could and should close our borders for agricultural goods that we can grow ourselves (and you Americans should ban alfalfa exports from California, while you're at it). Ag subsidies are only required because there's no way an US or European farmer can compete with Russian, Ukrainian, South American or African labor and land costs, but we still need farmers to ensure we're self-sufficient and don't end up like many developing nations did once Russia blockaded Ukrainian grain exports.
Well, agricultural subsidies are also needed because agriculture has become too efficient. The dairy industry is prime example in both US and EU of agriculture that overproduces so much milk that the US has farmers demanding we sanction Canada for their milk quotas (Canada using the quotas on all their farmers to prevent overproduction) and the EU dumps their milk on Africa and prevents any development of the dairy industry in Africa.
The same applies to so many other types of agriculture. Nobody wants to let farmers go out of business for decades now in the Western world. And the rate of "natural attrition" hasn't matched the rate of technological efficiency improvements.
There is of course agriculture that isn't as efficient because higher human labor required for things like picking and sorting. But the automation for that is slowly coming.
> there's no way an US or European farmer can compete with Russian, Ukrainian, South American or African labor and land costs
For certain agricultural goods perhaps, but the Midwest is the most productive region for agriculture on the planet. Russia and Ukraine have vast areas of land, they focus on wheat because they mainly have marginal land and a limited growing season and wheat is perfect for that. Most of Africa and much of South America (Argentina being a notable exception) have terrible soil and require significantly more fertilizer to grow crops at scale. Labor is cheaper in those regions but that’s only one factor and it’s why so much farm labor has been automated in the US.
to this point, the US isn't the single biggest producer, or consumer -- that'd be China.
but they are the single largest exporter of grain overall, mostly corn from the midwest and California produce. the Green Revolution hit hard, and most farms are now huge consolidated enterprises. by comparison, in a lot of the world, most farms are smaller and often single family, and in many cases still using old world techniques -- e.g. non-trivial numbers of people plowing their fields with oxen, etc.
That is an interesting take. If I'm not mistaken in India at least (which one would imagine has fairly cheap labour) sugar and corn is still cheaper imported, although in sugar's case I think the production costs are higher due to water requirements. The sugar import situation had become highly political some years back.
I agree with you in principle, but I believe this is basically impossible in any democracy because you just get un-elected immediately.
Just consider the Polish protests against Ukrainian grain, or the recent German protests against cutting fuel subsidies for agriculture. It just costs too much political capital to do anything about this...
Which parts of the CHIPS act would you like to see changed?
I personally think that its quite difficult to make protectionism happen in a way where you don't prop up an inefficent industry with continuous infusions of tax dollars in the end...
Not parent poster, but there's a long track record of these sorts of subsidies to big tech companies already rolling in money to go bust with little oversight, investigation, or prosecution.
The big one everyone remembers is the set of grants giving to incumbent providers to expand access to broadband (25 Mbps down/3 Mbps minimum) to everyone in the country - a promise that, despite three rounds of grants in the billions, has not materialized.[1]
Chips and telecom are pretty different markets, right? GlobalFoundries needs a leg up, most of the big telecom companies are already abusive monopolies.
Because they do not fix the underlying causes; and also they create perverse incentives. Most companies are in the business of extracting money and will see this as such: an opportunity to extract money and the product is bureaucracy checkboxes. It would make more sense, in this personal view, to restrict sales to domestic production only and make sure the field is even for competitors to out-compete one another. This guarantee the dependency aspect at least (as you already restricted yourself!).
Another solution: Move the manufacturing to a near-shore and friendly country (ie: Mexico or Puerto Rico) and keep the design part in the US. But of course, that wouldn’t be as politically popular and wouldn’t create the extraction opportunity (which lots of companies will want to benefit from).
> Move the manufacturing to a near-shore and friendly country (ie: Mexico or Puerto Rico)
Puerto Rico isn't a foreign country, it's a territory of the United States. Regardless of that, semiconductor fabrication is one of, if not THE most complex form of manufacturing.
It's not enough to simply build a fab in Mexico, the supply chain of materials and highly skilled labor that runs these fabs needs to exist there too. That's not to say that it can't exist somewhere like Mexico, but currently it doesn't and it would take longer to build up.
So while moving it to Mexico would remove the geopolitical risk problem, putting it there instead of the US would only give the advantage of cheaper labor but at the cost of taking much much longer to ramp up.
Not everything needs to be fabbed at 7 or 3 nm. Malaysia does well as a place where industrial nations can put mature manufacturing processes and get high quality outputs.
You think people will stop buying NVidia GPUs, AMD GPUs, PS5, XBox, Nintendo Switch, iPhone, Pixels, Samsung Galaxies, and a litany of major automotive parts from Microchip/STMicro/etc. etc.?
Because none of these are made in the USA. The only major chips made here are Flash/RAM by Crucial, CPUs by Intel, and some lower-tech (but still important) chips by TI. The vast majority of chips, well over 60% of the worldwide supply, is made by TSMC IIRC, and another huge chunk are made by other companies located in Taiwan.
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Furthermore, Taiwan is a close ally who has extremely friendly relations with USA. Yes, there's a war-risk with China here, but Taiwan fairly competes with us. I don't think anyone has a single piece of anti-Taiwan hate inside of them.
Its not a protectionist thing. Its purely the "what if China attacks Taiwan" thing. Economically speaking, trade with Taiwan and USA is a good thing. Geopolitically, trade with Democracies is a good thing, and trade with a century+ old friendly nation is a good thing.
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Taiwan can create this tech because they are smarter than us and outcompeted us on this subject. Its not "low tech", its extremely difficult chemistry, high-end PH.d stuff here.
Taiwan is basically the Vulkans from Star Trek. They're smaller, more technologically advanced, but weaker militarily. They're so obviously good allies that its unthinkable to do anything against them. We need a "just in case" plan if trade between our nations gets interrupted because chips are a strategic good, but... cutting them off would mean that they ally with someone else and that's even worse.
> some lower-tech (but still important) chips by TI
TI makes plenty of pretty high-tech chips, just not necessarily bleeding edge digital logic processors. Their real high-tech stuff are analog devices, something far less sexy to people on HN but still incredibly crucial.
Analog is important for cutting another 20% off of MOSFET resistances or whatever, which means even more efficient electric engines or other electric components.
Yeah, important but not as much of a headline as 20% more GHz or FLOPs for some reason.
It’s an accident of history and the hubris of Intel that they passed over an opportunity to buy the last generation machines from ASML leading to TSMC taking the advantage.
It’s not that they are intrinsically superior Vulkans as you’ve described.
It’s a temporary distortion caused by Intel trying to rest on their laurels and drip feed advancements.
Even *IF* Intel reaches parity with TSMC (which seems unlikely...), Intel doesn't have much experience with external customers (like Apple, Qualcomm, AMD, NVidia) like TSMC does.
Even if we magically wave a wand and give Intel next-generation lithography today, they still don't have the capabilities to take orders from customers and translate them to designs.
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Its not Intel who needs to catch up to TSMC. Its a 3rd party fab like GloFo who needs to catch up for USA to recapture that market share.
I'm happy that GloFo is getting some scraps and investment from this CHIPS act, its the right move. But I have my doubts that we'll reach the technological level of TSMC / Taiwan any time soon. But whatever we get its still better than nothing.
ASML began to ship its first High-NA lithography tool to Intel late last year ,and the machine will be fully assembled in Oregon in the coming months. [1]
A lot of countries shoved tons of money into chips. In fact, a ton of countries have more money than Taiwan.
And yet, it's Taiwan who won. We gotta give them props for that, and we can also thank the gods that it was a close ally of the USA who got so good at it.
This is a compelling perspective. But putting sales or import restrictions in place right now would be damaging in the short term both for the manufacturing partners and the US. They’ve already put some export restrictions in place (ie preventing nvidia from selling their most powerful chips to china).
In terms of nearshoring - that’s a good idea too but I think the workforce training would be even more difficult than it has been in the US and it would be less popular politically as you said. (Side note: PR is part of the US - maybe you meant Costa Rica)
Intel does (or used to do) wafer packaging in Costa Rica. On paper, CR is an attractive near shore location: Good amount of English speakers, time zone parity with the US, and not difficult to travel to.
If a certain former president is reelected he will likely continue to push for the type of tariffs that will incentivize domestic production over foreign imports. If that happens the chips act will have put us on the footing required for that ramp up to begin.
