It's nice to build chip fabs in the USA, but is it _really_ necessary to "gift" some of the most capable and productive companies on the planet billions of dollars (not even counting the tax freebies)?
The whole CHIPS act thing seems backwards and short-sighted.
As the US education system is backsliding into literally worse-than-third-world outcomes, can we expect that companies like TSMC will even be able to find enough US workers to staff these facilities at a scale which will be large enough to move the economic needle?
In what world is the US education worse-than-third-world? The US has universal literacy, phenomenal higher education institutions, and primary and secondary schools that are comparable to peer countries on average.
We spend lots of money on schools in the US and generally get pretty good outcomes. Our math scores leave something to be desired, but average reading scores are better than peer countries. There are plenty of exceptions, especially in poor neighborhoods, and chronic absenteeism is a real problem, but it's worth keeping sight of the fact that the vast majority of American schools are quite good.
I'm not trying to say that the US educational performance is great, just that it's not terrible. I think there's a lot of room for improvement, but there's a narrative that US schools are failing horribly and that just isn't true.
Wouldn't you agree that "failing" is relative? Given just how much money the US has, wouldn't you agree that we should expect better outcomes? Wouldn't it be a failure that despite our massive wealth, we are below OECD average in any subject?
The PISA scores are below average in 2022 but not significantly so. Most countries have had a pretty bad decline in test scores due to covid, but that's (hopefully) a one-time problem and future cohorts will do better.
I'm not saying that's a good thing. We're a very rich country and we should do better.
But the US also has a lot of systematic problems that peer countries don't, like child poverty, that are likely a bigger cause of subpar test scores than bad schools.
There's a difference between "below average and rising" versus "below average and falling". The US, over this period, happens to be the latter: below average and falling.
Merely focusing on "below average" without acknowledging the trend -- declining -- seems to be disingenuous.
How else do you propose to get a company to build a factory at your preferred location rather than theirs? Paying companies is the usual way to get them to do things.
The economic effects are important but secondary to the national security effects of having TSMC chip manufacturing on US soil.
I agree with you, and am excited for TSMC fabs in the US. At the same time, I also wonder if this would lead to _less_ defense of Taiwan if we neuter its strategic importance by building those crucial fabs somewhere else. Mind you, this is not an argument against building them. It just makes me wonder what the other effects will be.
US will still have plenty of reason to defend Taiwan, if only because it is a crucial part of America's containment strategy - China would have a much easier time operating in the Pacific if it controls Taiwan, and the US won't allow that. Further, if Taiwan falls a lot of countries will lose faith in America's ability to protect them from China which would thrust the entirety of South-East Asia into China's hands, also something the US can't afford. Though, with recent claims that China can build 1000 cruise missiles a day[0] it might not matter whether US defends them or not.
Yes, Vivek famously already said during his campaign that he'd tell the CCP that we need a few years to catch up on chips and then they can have Taiwan. I'm sure other share this (IMO inhuman, deprived of any morality and allegiance to our liberal western alliance and any foresight) sentiment
They have said they will not build the best and latest here in the US. Many of the fabless companies here in the US want access to that latest stuff and the US is vested in keeping that channel open for market/defense/security reasons.
The Chip Wars book is an excellent read and tells you us the supply chain is globally integrated. If we were to draw a country graph of technology dependence to create semiconductor technology T (tools, chips, etc) - well, there is no DAG. The defense department is not so happy to see all this free market sharing of essential technology going on as it benefits non-friendly nation(s).
The book also illustrated how behind Russia was/is with weapons technology and semiconductors in general (compared to the US).
Being 2-3 years ahead in chip making(with other closing the gap over time) is not a defence against a potentially WW3 level event. Anyone who thinks millions of life is less important than few percentage increase in performance is delusional. I don't know how this discussion surfaces in HN so many times.
At the end of the day it’s a trade-off decision. It’s probably cheaper to build highly subsidized factories in the States than to go to war over Taiwan.
I disagree. You don't want the government to own things because they would be slow and ineffective at corporate governance. It's better to simply subsidize and let the business owners make the important decisions.
The biggest owner of TSMC is National Development Fund, which is a fund owned by Saudi Arabia. I'm not sure if a US owned fund would be slower and more ineffective in corporate governance than a Saudi owned one.
Feels like a self fulfilling prophecy. There’s no reason government can’t be effective at decision making if things are set up the right way (their involvement could be distant). There’s also no reason to assume a giant company (like, say, Intel) is going to be particularly fast at it.
The people in government aren't incentivized to be effective largely because they have no personal financial reason to be. There's no stock options or things like that, no good bonus programs, etc.
Here in Norway the government fully owns several "private" companies[1], like Statkraft[2]. They can have bonus programs and similar. Some are too good[3][4], others[5] not quite as wild.
What about a competitive salary they lose (i.e. get fired) if they underperform? We’re used to underpaying and overprotecting government employees but if you were setting up a new publicly owned company there’s no reason you’d have to do it that way.
It's already difficult to fire people in large businesses, but firing people from government is in a whole different level. Especially for performance unless we're talking about extreme underperformance or job abandonment.
What I’m saying is that a publicly owned company has a lot of flexibility in this regard. Employees are not government employees. It’s like a regular private company except the government is the sole shareholder.
My broader point here about self fulfilling prophecy is reflected in your comment: it has been this way, therefore must always be this way. That’s not true.
For example, the Federal civil service ("general service") pay scale tops out around $160k. This really doesn't make sense and costs the government multiples of market wages for hiring for roles where market pay is higher than this. One route is to hire that person via a contracting firm with a huge (double or triple) markup.
And of course the reason we don't just revamp the pay scales and pay market wages is because it's political suicide to pay people half a million or more at market rates.
The American people, on average, don't like the level of wage inequality in society. For any particular issue where you shove it in their faces (like proposing to pay the project lead "competitive salary"), you will get shouted down.
That's also why we get strange arrangements like Congress members making around $170k a year with legal insider trading. The insider trading money they make looks like "free" and isn't easily quantified.
Great connection you make on the insider trading! That never occurred to me despite recently being fed up with local mayoral candidates; looking at mayor comp and immediately noping out because a substantial paycut for the pleasure of dealing with the biggest BS imaginable seems rather unattractive.
From working in government, “no, they don’t care about doing it the right way.” The people who get hired are, largely, the ones who will work for the lower salary paid, and plenty lack enough experience and/or capability to even do what they need to. At least in IT.
> The people in government aren't incentivized to be effective largely because they have no personal financial reason to be. There's no stock options or things like that, no good bonus programs, etc.
I would hazard to guess that most employed people do not have stock options or get bonuses (only salary), but are still "effective" because they consider that doing a job well is its own reward: i.e., they have intrinsic motivation (rather than extrinsic).
I have worked in private sector, and in government (including academia/research), and most folks want to do a job well because they like the satisfaction of being able to know they did the job well.
I'd say it's not that clear cut. Do we have any facts (research) here or are these just beliefs? I can point to several but companies doing very well owned by governments, as well as many doing very badly.
Could be slow and ineffective. It's as likely a company would run it into the ground because of short-sightedness. There are so many examples of government services becoming private company enterprises and in short order everything got worse. But I guess there are equally many examples of the other way around as well.
Isn’t that effectively what they’re doing? They’re using their riches to pay the people with the necessary institutional knowledge to build it in the USA.
The US really doesn't do things directly like that, at least not in the last 50 years. Maybe you could point to this and say its wrong, but going through a contractor or company is the way the government typically operates.
Another approach would be to apply tariffs to chips coming from adversary countries, until it becomes more economical to produce them in North America.
>can we expect that companies like TSMC will even be able to find enough US workers to staff these facilities at a scale which will be large enough to move the economic needle?
Yes, it is necessary if the world wants to have high-end chips manufactured more than a few miles from China. China's government has been spending billions and billions on an utterly massive military build-up. The US goal is to be able to continue to have chips, which are necessary to power almost everything else. I think what's going on is a geopolitical struggle. The US views this as a national security issue.
A good question is whether or not this will work. A big building is not the same as a working best-in-class fab.
I mean yes, ultimately, but it's also about supply chain disruption that we just experienced with COVID. The US economy (and subsequently the Western economy) would probably get hit pretty hard with a chip cutoff and 5 years to onshore it. The economy is also about war; without a strong economy, we can't stockpile all our murder toys. It's also about leverage with China. With China on an aggressive footing and Taiwan so vulnerable, they have a leverage point we're now addressing.
We got this way because we thought if we brought China into the modern economy they would democratize. I think we came to the conclusion that it's not working out that way so we're adjusting and divesting from China. COVID was a wake up call in regard to having a single country be the world's production of goods. It ups the bet when that single country is becoming more of an adversary than a competitive partner.
> ... but is it _really_ necessary to "gift" some of the most capable and productive companies ...
As I understand it, the gift is, for the most part, what we'd call 'funny money' - no one's really handing over the proverbial briefcase of USD$11B in return for them building out a fab plant on US soil.
While the figures are referred to as loans, I suspect in practice they manifest quite differently.
I see your point, but if the USA didn't encourage the company to set up fab shops domestically, then it wouldn't be receiving those taxes either - but in that scenario it also wouldn't be receiving the indirect benefits of having that company operating locally.
Your personal taxes are a different matter - the nation state is not trying to court you into operating within its borders with some tempting on-paper discounts.
Or maybe you can pay 4-10x or even more the price for chips when something in the world destabilizes (remember that during covid?), was that not real money?
Libertarian types love to make models of the world that are so simplified they are totally incorrect. But hey, you'll be able to save on taxes in the good times, and starve in the streets during the bad.
Chip demand is cyclical, and idle capacity is extremely costly, so chip fabs are built around the bottom of the demand curve to always run at full capacity. If you want to avoid another chip shortage, especially for national security reasons, financial incentives are the only way to do it.
I think you’re completely missing the point. This has nothing to do with moving the economic needle.
Having 90% of the most important semiconductors in the world made on an island 90 miles from China, which China wants to take back, is a bit of a problem.
What happens in a protracted skirmish that lasts a year, for example, where we can’t get any of those semiconductors.
They can't take it back because it's never been theirs. It would be more accurate to say they want to conquer the last remaining territory from the legitimate government of China and wipe out the main alternative to their hegemony.
Without a doubt the biggest reason here is to ensure the tech is capable on their homeland. having most of modern tech being build in China/Taiwan and Japan is a HUGE security risk for US (and other "wesetrn countries")
> This is however not the case and subsidies are, with a few exceptions, mostly assessed or controlled using multilateral rules and free trade agreements.
I haven't read the full thing because I'm no economist, but it seems to be above board. For comparison, Intel is getting $8.5 billion from the CHIPS Act (https://www.intel.com/content/www/us/en/newsroom/news/us-chi... I can't find other US based chip companies like NVidia or AMD getting any from that pot of money though, which is weird. Although NVidia doesn't need it, given how their stock price and valuation rocketed up.
The whole CHIPS act thing seems backwards and short-sighted.
As the US education system is backsliding into literally worse-than-third-world outcomes, can we expect that companies like TSMC will even be able to find enough US workers to staff these facilities at a scale which will be large enough to move the economic needle?