Raise your hand if you want to gift $40 billion in tax dollars to the tech oligarchs.

Photo above - Jenson Huang, NVIDIA CEO, whose personal net worth is $120 billion. The Biden administration is finalizing $40 billion in subsidies to chipmakers like NVIDIA.

Headline – “Biden scrambling to send billions to chipmakers before Trump is sworn in.” (see link below)

Wow, is it possible to envision a MORE direct link between Big Tech and Big Government? I’m all for “mo’ better chips”, but aren’t these billionaires already yucking it up on their ginormous yachts? If the tech bro’s need extra money to develop new chips, they could slow down the pace of their flotilla expansion, no?

Wait, it gets worse. A bunch of this money isn’t even going to US chipmakers. $7 billion has been earmarked for an outfit called TSMC – Taiwan Semiconductor Manufacturing Company. Go the head of the class if you guessed that this company is based in Taiwan. WTH!! Now we’re giving taxpayer dollars to companies in a nation which we don’t even recognize. About a half dozen US presidents have saluted Beijing's slogan “one China”. In order to smooth trade relations with the Peoples Republic of China, and inundate America with cheap imports. Which violate our patents and trademarks. This is win-win, right? (Insert sarcasta-bang punctuation here).

I’d have less of an issue about the subsidies if Biden (and Kamala) has made this front and center during the presidential campaign. How about some TV spots telling us “I want to give billions to US and overseas tech companies. Trump won't. Please stand with me."

Can congress stop this absurd giveaway, which will certainly add even more to the national debt? Actually, congress signed off on Biden’s "CHIPS act" giveaway back in 2022. Because . . . Covid 19. Anyway, showering billions on tech companies probably looks better than Covid money bailing out hotels, casinos, cruise lines, airlines, and buying rappers new sports cars.

If you want to know WHY we continue to have insane inflation (despite government manipulation of the data), it’s insane spending like this. Bailing out companies whose rank-and-file workers are then expected to vote for “the right party”.

I’m just sayin’ . . .

The Biden administration is scrambling to send billions to chipmakers before Trump takes over

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CedricH · 22-25, M Best Comment

So a couple of thoughts here.

You‘re right, the Chips & Science Act is a classical case of corporate welfare packaged as a supposedly futuristic industrial policy.
I‘m generally opposed to active industrial policy (meaning domestic production subsidies for industry or agriculture). It tends to be wasteful, inefficient, distortive and misallocates scarce public and private resources. It’s only justified to boost military-industrial production.

The Chips Act was politically crafted amidst a temporary semiconductor shortage and the political momentum this “crisis” presented was leveraged to push the legislation through Congress even though the shortage had already been alleviated by the time it was eventually passed.

The Act, to be quite plain, was the result of a highly effective corporate lobbying effort by Pat Gelsinger, CEO of Intel. He weaponized the general Sinophobia in Washington D.C and the growing bipartisan receptiveness to economic populism, economic nationalism and protectionism to advance his agenda because his company needed to get a quasi bailout. His decision to shift Intel‘s business strategy from high-end creative chip design and R&D to semiconductor production and mega fabs put the company‘s future in jeopardy. Even with the subsidies in the form of tax credits and grants, Intel‘s prospects remain on shaky ground.

It would be more than welcome if the incoming administration could renege on any commitments that are not yet legally binding to potential recipients and use all the non-R&D funds of the Act that haven’t been disbursed yet to help finance the planned tax reform and the increase in military spending. Both the tax cuts and the growth of the DoD‘s budget will do considerably more to help US growth, competitiveness and national security than some misconceived industrial policy adventures at the taxpayers expense.

SusanInFlorida · 31-35, F

@CedricH good details. thank you. i agree that chips are vital. so why did the government stand by with its hands in its pockets as manufacturing was offshored?

CedricH · 22-25, M

@SusanInFlorida In a word? Comparative advantage. The US is still leading the world on the most sophisticated stages of the semiconductor value chain. The US tech sector dominates R&D, marketing and chip design. So without these pre and post-production stages, high quality semiconductors couldn’t be produced at all.

Meaning, the US retains a considerable amount of geo-economic leverage. The US economy evolved since the height of domestic semiconductor production in the 1980s. It shifted towards more productive and innovative activities while the less sophisticated and profitable stages of the value chain were outsourced to countries with a comparative advantage in actually producing or packaging chips, mainly Taiwan (before that to a lesser degree South Korea and Japan). All the critical, essential inputs for modern semiconductors are located in pro-American allied countries.

Specialization occurred and created efficient supply chains, lowering costs across the board for every industrial or consumer product that included semiconductors. This kind of specialization also made it possible for the US to stay ahead of China‘s domestic efforts to advance to the level of Western semiconductor sophistication.

SusanInFlorida · 31-35, F

@CedricH mostly agree. but america LOSES its tech advantage when we outsource manufacturing to countries which ignore patents and trademarks.

China became a world leader in EVs only AFTER Elon Musk built a factory there, and they could copy his designs and processes.

China's "homegrown" smartphone industry was jumpstarted by Apple and Samsung outsourcing their manufacturing to chinese siberian gulag factories.

CedricH · 22-25, M

@SusanInFlorida Joint ventures produce mutually beneficial outcomes, for both parties. And a knowledge transfer is mostly part of the business to business agreement.

Joint venture requirements, however, are problematic because they force companies into JVs to get any market access, any serious trade negotiation with the PR China should aim at reducing or eliminating JV requirements.
To a degree, China‘s technological achievements are homegrown. They do have capable firms and invest a lot in ways that are costly and inefficient but occasionally lead to breakthroughs.

As for IP/patent violations, that‘s another issue that needs to be addressed in a bilateral trade negotiation. Chinese IP courts exist, they usually adjudicate the cases in favor of the plaintiffs, but the penalties are puny. So that would be another adjustment the Chinese government should be persuaded to make.

Generally, US technological primacy (which I value and want the US to maintain) isn’t hollowed out just because the US is not technologically autarkic. That‘s neither feasible nor desirable in the current modern, globalized technological ecosystem.

Investments in R&D, improvements to the education system, a low tax and light regulatory environment as well as an openness to international capital, trade, and qualified immigration flows will keep the US in a pole position to lead the world on innovation.

SusanInFlorida · 31-35, F

@CedricH i object to most government corporate joint ventures. because they were unnecessary for

1. the model T

2. the wright brothers

3. the cotton gin

in the 1800's the biggest "joint venture" was the government partnering with railroads to build the transcontinental railroad. and look how that turned out. they are still a legacy monopoly that can't compete for passenger traffic. where are the budget railroad operators, like budget airlines?

CedricH · 22-25, M

@SusanInFlorida The railroad situation did improve somewhat when the freight and passenger train sector was deregulated in the late 1970s.