The most advanced category of mass-produced semiconductors – used in smartphones, military technology and much more – is known as 5 nm. A single company in Taiwan, known as TSMC, makes about 90 percent of them. American factories don’t make one.
The US’s struggle to keep up with semiconductor manufacturing has already had economic drawbacks: many manufacturing jobs pay more than $100,000 a year, and the US has lost them. In the longer term, the situation could also trigger a national security crisis: if China were to invade Taiwan and cut off semiconductor exports, the US military would risk being outdone by its main rival for global supremacy.
For these reasons, a bipartisan group of senators and the Biden administration negotiated a bill last summer that included $52 billion to jump-start the domestic semiconductor industry, as well as other measures to help the US compete economically with China. The bill would provide the kind of semiconductor subsidies that other countries — including China, South Korea, Japan, India and Germany — offer. Without such subsidies, companies like Intel and Broadcom would probably choose to build new factories outside the US
But the Senate semiconductor bill still hasn’t become law. The House has spent months negotiating its own bill, pass one in February† Since then, the House and Senate have failed to resolve differences between the two bills, and Republican Senate leader Mitch McConnell recently threatened to stop talks.
The deadlock has become another example of dysfunctional congressional politics weakening the US’ global position.
There is broad consensus — among many pundits, President Biden, an overwhelming majority of Democrats in Congress and a significant number of Republicans — that the federal government must act. But it’s still not there.
Today’s newsletter addresses the debate on the bills and recent efforts to find a solution before Congress leaves for its August recess.
Social well-being?
The strongest substantive argument against the subsidies is that they are a gift to the semiconductor industry. The bills would use taxpayers’ money for large companies that can already make a profit on the products they sell.
In economic terms, this argument makes a lot of sense. But geopolitics is also important. Political leaders in other countries have already decided to grant subsidies for semiconductor production because they want some of this production to take place in their country.
If the US doesn’t also provide subsidies, it may continue to struggle to attract factories. The US market share of all semiconductor manufacturing has already fallen to about 12 percent, from 37 percent three decades ago.
Pat Gelsinger, Intel’s CEO, has said a typical factory costs about $10 billion to build, and subsidies from some countries cover 30 to 50 percent of that cost. China’s subsidies cover nearly 70 percent. “It’s not economically viable for us to compete in the global marketplace if everyone we compete with sees 30 to 50 percent lower cost structures,” Gelsinger said.
Senator Rob Portman, an Ohio Republican who helped write the Senate bill, has acknowledged that it violates the free-market philosophy he usually favors. But, Portman explained at the Aspen Ideas Festival last month, “if we continue to blindly follow a political philosophy that generally makes sense but doesn’t work in the practical world, I think we’ll end up with a much less competitive economy and a national security risk.”
Biden and his closest aides agree. “We are now in a very dangerous situation where we are completely dependent on Taiwan for the vast, vast majority of our most advanced semiconductors, exactly the kind of semiconductors you need for military equipment,” Commerce Secretary Gina Raimondo told me. “You can’t be a global superpower if you don’t make any of these things.”
What China wants?
So why didn’t the Senate and House pass the bill?
House Democrats added provisions to the Senate bill that Republicans disliked, such as extra money for employee retraining. Democratic House leaders appear willing to remove most of these from the final bill, but it remains unclear whether the two parties can agree on a compromise†
McConnell — despite being one of 19 Senate Republicans to vote for the original bill — also seems hesitant. He tweeted on June 30 suggesting he could block a semiconductor bill if Democrats continued to try to pass a separate bill on climate change and drug prices, which Republicans oppose.
McConnell may have taken a stance, hoping to intimidate House Democrats into dropping the provisions in his version of the semiconductor law. On the other hand, his history suggests that he may be willing to defeat a policy he would otherwise prefer to make a Democratic president look weak.
To improve the bill’s chances, Chuck Schumer, the Democratic Senate leader, held a secret briefing for all senators yesterday. There Raimondo and Avril Haines, the director of Biden’s national intelligence agency, discussed the US military’s current reliance on Taiwan. Big companies are too lobbying for the bill, as my colleague Catie Edmondson points out. “So many powerful industries really want this bill passed, from the chipmakers to defense contractors to manufacturers,” she said.
There is still one outspoken opponent of the bill: the Chinese government. The state media has criticized the idea as “bullying” and part of a “Cold War mentality”. In recent decades, no country’s share of semiconductor manufacturing has grown as rapidly as China’s.
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The pandemic has disrupted lunchtime expense reporting operations and luxury restaurant owners aren’t sure how or if they should reopen.
Power lunchers make deals and make “connections in front of a computer screen at home while eating salads from takeout boxes,” Brett Anderson writes in The Times† The slow return of office workers has made it difficult for sit-down restaurants to justify hiring workers for lunch service.
“It’s not like it was before Covid,” said Ashok Bajaj, owner of the Bombay Club, a restaurant near the White House. “The energy has been sucked out of the center.” Instead, since the start of the pandemic, sales at fast-serve restaurants have been higher than those at table-service restaurants. Bajaj himself opened a fast casual Indian street food place.