Professor at Cornell University
- Implications for the semiconductor industry of President Biden signing the 2022 CHIPS and Science Act into law
- Extent to which chip manufacturing and supply chain issues exposed during the pandemic are driving increased need for domestic capacity expansion
- US-China foreign relations – shift in the status quo, Biden Administration's industrial plans and impact of Taiwan-related geopolitical dynamics on domestic semiconductor manufacturing
- Benefits from national and state level manufacturing subsidies and encouragement to increase capacity
- Possible future policy initiatives and funding avenues for semiconductor and related technologies
Specialist (SP): It’s a great question, and a good way to get us started here. I think there are probably four key underlying structural conditions that came together to lead to the convergence of this legislation, the CHIPS-Plus Act, that we’ve seen over the last few weeks. One of those big ones is that the US share of the manufacturing of semiconductors went from about 37% in 1990 to about 12% today. This is a long-term trend and so I don’t think that alone explains the momentum and energy behind doing something about semiconductor reshoring. Another couple of things happened. (1) Starting in about the mid-teens, we really saw an increasingly adversarial relationship with China, really a sense of zero sum-ness, that as we’re losing market share China was gaining market share. If you look at these figures on the percentage of the chip manufacturing market, China went from 0% in 1990 to about 25% in 2020, so they’re really making up that loss that I had identified a few minutes ago. Then a third, really, and this is obviously mid-2020, is the supply chain shock that we saw from COVID, so it snarls the supply chains worldwide and leads to this sense that maybe we should be bringing business closer to home because of the lockdowns abroad and ships that are unable to unload at port.
That’s a big factor, the supply chain, the lockdowns, but then also the surge of demand in the late 2020. Then, a broader trend I would identify as well is a globalisation backlash, which we’ve seen again in the last few years. The number of reshoring jobs in the last few years has kept increasing. You can look at this as evidence of the end of the Obama administration with TPP ahead of Hilary Clinton saying that she would not have signed TPP or endorsed it, and then President Trump really touting the increased reshoring of American industry and that’s another longer term trend. I think all of those factors come together to create a bi-partisan interest in what started as what was called the Endless Frontier Act, that would expand the NSF, the National Science Foundation, with a tech directorate to then this creating helpful incentives to produce semiconductors for America, the CHIPS Act, and then culminating in what we’ve seen, the CHIPS-Plus Act passed and signed into law in early August.
SP: I think the Biden administration has been pretty clearly focused on supply chain resilience, really, since 2021, a real focus, but then I think what makes semiconductors different, and really unique in a way, and I mean that in a literal sense of uniqueness, it’s hard to think of something else that has such relevance to the economy but also national security. The estimate from the Biden administration is that, when we had the supply chain shock in 2020 with semiconductors, it created a loss of about 1% of GDP. For the size of the US economy, that’s huge. It’s a large number, many zeros, and so I think this has really pushed the issue and prioritised it for the Biden administration. Not just supply chain resilience, but semiconductor space where it almost is emblematic of these supply chain resilience issues.
SP: Yes, I would say that, actually, a lot of the momentum, and this is why we have the kind of government that we do, which is to say we have senators that have six-year terms that create continuity. This really started in 2020, with senators Todd Young, a Republican from Indiana, and Chuck Schumer, a Democrat from New York, so this is well before the Biden administration comes into office. I actually think a lot of this had come antecedent to the Biden administration, but they have, I think, taken up this mantle, this 100-day supply chain review report, that I think really identifies what they see as a concern, as reliance on foreign manufacturing for semiconductor chips, on which the US economy and our national security is so critically reliant. I think the real focus here is to be less reliant on these foreign firms, especially TSMC, but Samsung as well.
A couple of things, I think, stand out here and, actually, it’s interesting for the White House to note, the analogy they say is that Taiwan is to semiconductors as Saudi Arabia is to OPEC and oil, and there’s a real interest in being less reliant and the way that they have intended to do that is to make more of these chips at home. The reason why I think Taiwan is a concern is not just, as we saw during the pandemic, we have the logistics issues, but we have kind of interwoven into this the China issue and the concerns about Taiwan’s security. If Taiwan is manufacturing more than 90% of the most sophisticated chips that are military uses, we’re not the vanguard of reliance that the White House has indicated that it wants to be.
SP: I think, what’s interesting, when you trace, almost, the genealogy of this legislation, what might strike people as puzzling is why, when this has been a trend for four decades, why there was this urgency now to do something. I mentioned those numbers of the US went from 37% to 12%, but one of the key numbers here, as I mentioned, is that Taiwan has really honed its position as the premiere country to manufacture the smallest and most sophisticated semiconductor chips that are used for the things that we think are most important, our fighter planes, the real, national security and critical infrastructure. That, I think, is a real concern about Taiwan and TSMC in particular, which is that they really all are almost in a monopoly position, with respect to this specific, very sophisticated, under 10-nanometre chip.
SP: Yes, I think that those four big ones, the globalisation backlash, COVID, China and this long-term shift away from US, or outsourcing, are the big four, but what really, I think, made this the pressing issue, politically, for the Biden administration was inflation. We have inflation rates that are the highest they’ve been in 40 years and these are issues that every single poll will indicate are the issues that people vote on. This was something that the Biden administration could not ignore and so the reason why there’s, of course, a connection here is the concern that, if we’re unable… and you can see this actually, there’s some interesting econ 101 figures that show the reduced inventory from January 2020 of chips into 2021 that, not surprisingly, is inversely related to the price of chips. If, politically, inflation had become this big issue for the Biden administration, one clear way to address that is through normalising the access to chips. I think that’s where this impetus really came from.
SP: One of the reasons I led with those four factors is that maybe this emphasis could have happened with one of those factors alone, or two of them. I think it took some of all of them and one of the reasons why I think, corollary to that would be, if one of those factors is no longer present, will we still see this emphasis? I think, actually, that speaks to that fourth issue that I mentioned, which is this anti-globalisation, this backlash. This sense that started a few years ago that we’re making too much abroad and that we need to bring jobs back home, and what I think has happened in the political economy space is this view that globalisation left some people behind and what we need to do is bring some of those jobs back home. I think that there are a lot of economists who would reasonably disagree with that perspective, which is to say that what drove globalisation in the first place was this idea of neoliberalism and comparative advantage, which is, it doesn’t always make sense for countries to make everything on their own soil. Taiwan was going to specialise in the five-nanometre chips and we were going to specialise in a different part of that supply chain.
I think the risk, and this will be a real tension, I think, for the Biden administration, is I don’t necessarily see reshoring, I don’t see this investment of trying to bring manufacturing back home as a way to address inflation. I think, arguably, it will actually make that worse because the US labour costs, again, the whole drive behind globalisation in the first place is that US labour costs are much higher than the rest of the world. I’m not sure that they have looked down that game tree far enough to realise, since these plants aren’t coming online until 2024-25 anyway, whether they’ll just kick that can down the road, but what I think we also see, and there was an interesting piece in the Wall Street Journal about this this week, is this view that we lived without inflation, really, for about 40 years. This view that, maybe, these forces that were behind inflation no longer being an issue have gone away. Maybe with all of this reshoring, we’re going to have to expect that prices will remain, not 2% any more like the fed target, but something slightly higher.
SP: What’s fascinating about this, and this is why we can almost wonder how globalisation happened at all, because there’s such a bipartisan yearning for jobs being back home. It’s not just the Biden administration, it’s this vote. The CHIPS-Plus Act was 66-to-33 or something like that, hugely lopsided in a politically toxic political landscape. It’s really stunning, and I think what it is, if you look at the aerospace industry and the making of the F-22 where you have these defence contractors that put small offices that create jobs in almost every district, and I do think that there’s some of that going on with the semiconductor space as well, which is that it’s making it very politically appealing across the political spectrum because it means jobs in these congressmen’s districts. I do think that it’s bigger than the Biden administration. I think that there are these political stakeholder reasons why these kinds of incentives and investments, whether it’s the semiconductor space or others, are here to stay.
SP: That is the million dollar question that I think China watchers talk about a lot, which is, does it make it more likely or less likely that they would see to reunify Taiwan? What I would say is that China has considerable domestic, economic, COVID concerns to be addressing right now without having a war going on. My sense is that it probably pushed back the timeline for some sort of military action because of, what I think has been made quite manifest, that even a big country like Russia cannot overtake a much smaller country as easily as they think they can. I think what has happened with the Russian economy, I think it’s pretty clear, just the punitive sanctions and, again, the material support that the West has provided to Ukraine has made this a real uphill battle. Again, I think the combination of China’s economic issues, which we’ll probably get into during this call, as well as their ongoing COVID issues, as well as the clear evidence that it’s not that easy to occupy a country which, obviously, the US, one would’ve thought, made that clear to countries from the Iraq and Afghanistan experiences, but I think that’s been made even more clear from the last six months in Ukraine.
SP: How likely an outcome is, that they could successfully invade the island?
Third Bridge (TB): Either how successful it could be, or whether or not it would attempt such an invasion sooner rather than later?
SP: It’s interesting, I have a few Chinese students in my law class this semester and I asked them this question this week and it was an interesting response because their view is that they’ve already reunified Taiwan, so there’s not much need to invade the island. It seems as though that’s one perspective, which is that, in their view, it’s already part of China, why would they need to invoke or engage in a military conflict to take over something that they already have told the world is rightfully theirs? It should also be noted that not that many countries have recognised Taiwan, and the US, its own position on Taiwan is, I think, quite murky. I do think it’s in everyone’s interest to keep the status quo on this, again, not least because we’re going into a period where, economically, we’re in a bit of uncertainty. Given the stakes here, I think there are a lot of reasons that these countries would have more hesitation. That’s something that President Xi said recently, during these military exercises, that he felt like now is not the time for military escalation, and so my reading of the military exercises is that the Chinese, the PLA, had to do something to demonstrate against the Pelosi visit but, again, was not in a position, or did not have an interest, certainly not now, of escalating in any kind of demonstrable way.
SP: I think it certainly does because the Chinese regime has, I think, survived and, arguably, thrived because they have been able to pull, through their economic growth, massive numbers of people out of poverty. That whole bargain, in which the people will not push back against infringements of rights or freedoms in exchange for an increase in quality of life, really starts to look a little bit shaky given what we’re seeing, first, again, with the slowing economy with the COVID lockdowns. Again, which, one question that has been asked is, “How long will China continue with its zero COVID policy?” because that clearly has an impact, not just on its own economy and manufacturing capacity, but therefore on the world. Also, then, the broader structural factors that people have been predicting for some time now, which is they have this ageing population and now this, what looks to be, a real estate bubble. It’s hard to predict how that will contaminate the rest of the market but, already, the currency has been dropping against the dollar and it seems as though the Chinese regime, which had long depreciated the currency in order to make its exports more attractive, the irony is that now the authorities seem to be getting uncomfortable with the speed of that slide of its currency. The currency has hit a two year low and continues to be slowing down. I think it’s hard to say how far that goes, but none of the signs coming out of China are very optimistic at this point.
SP: There was this term referred to as diversionary war theory. When a President is in political crisis, that he’ll seek a war abroad because the public will rally around the flag and he’ll be a hero, but there are so many examples that run counter to that, to suggest that maybe that’s actually a strategy that is more likely to backfire than pay dividends. Coming back to your question about Ukraine, I think, along those lines, China would look at what’s happening in Ukraine and think, “Our diversionary war in Korea or in Taiwan might actually backfire. It’s not going to shore up domestic opinion, it actually might cause the public to turn against us.” I would think they’d be looking to something other than invading another country, even if, again, there is certainly a virtue, domestically, to looking like they’re standing up to the United States and its allies.
SP: I would not be terribly optimistic if the outcome is a warming period. I think that there is just too much now, too much, for different reasons, on both sides of the aisle, emphasis on an anti-China platform and, again, for different reasons. I think the left has been concerned about China’s human rights policies and the right has been concerned about China’s rise as a national security threat. That certainly underlies this momentum or the policy shift and some of this, especially early, semiconductor legislation. When I was first looking at this in 2020 I had noted, 2020 and 2021, these early versions of the CHIPS Act, Endless Frontier, the US Innovation and Competition Act, these earlier versions of the CHIPS Act, it was very interesting that one of them mentioned China 666 times, which seemed too much of a coincidence, but the ultimate legislation only referenced China 11 times. What I see in the US/China relationship now is there will be a tendency to talk a big game, so a good example of that is that the US Congress is picking up this thread, no pun intended, on TikTok, which had started, if we recall, back in the Trump administration. Now I think there’s increasing wariness about this relationship between the prevalence and popularity of TikTok and the information that the Chinese government has, as a result of that popularity.
I would say that, as much as there is that rhetorical emphasis against the Chinese regime and those concerns, there’s a lot of evidence to suggest that there’s almost a status quo, as I said to a reporter recently, this third rail of economic and commercial relationships. Again, there was this great piece in the Wall Street Journal recently that showed the percentage of, or the growing semiconductor part exports to China in the last five years. What we all should know, and we’ve been talking about it for the last 30 minutes, is that the export, and now we can tee up, the export controls are such that almost none of this should be going to China, and yet 94% of applications for tech exports to China have been approved. What that suggests to me is evidence of this third rail approach which is that we’re going to see, in the very visible ways, that the US is going to have this adversarial relationship with China, China’s going to reciprocate by doing these very symbolic things back, but underneath all of that we’re going to see almost a status quo. The reason why, I think, is that it’s nearly impossible to exclude China from, let’s say, the semiconductor space without actually harming US industry. It’s a really self-defeating approach, and I think that’s why the US moved away from that initial approach from the earlier legislation and why we see, now, China is almost an afterthought, it’s because it’s shooting ourselves in the foot if we put China in the cross hairs.
SP: I think there are two parts of that question. What tools does the administration have at its disposal and, relatedly, do those tools work? I think there’s evidence to suggest, just answering the second question first, that they don’t really work. In 2018 the Congress passed the Export Control Reform Act, it required tightening those controls on, as you were mentioning, AI and quantum computing, and a number of members of Congress have pushed for tighter controls, and yet USD 100bn worth of export licences have been issued between November 2020 and April 2021 to suppliers of black-listed Chinese firms Huawei and Semiconductor Manufacturing International Corp. We added these Chinese firms to the entity list, but they continue to make pretty significant gains in terms of manufacturing seven-nanometre chips, the most advanced yet.
It’s not clear to me, there are so many workarounds and, again, the evidence suggests that tens of billions, if not USD 100bn, worth of export licences have been issued anyway. It’s almost this Swiss cheese export control that looks good on paper but doesn’t appear to be, not only enforced but actually, therefore, not having an impact in deterring them from making these advancements. I think there is a question that we ask and I come down on the side, as the listeners may infer, that there is a self-defeating aspect of having export controls that are too stringent, and I think the reason for that is, we know that China has a lot of IP that, probably, they didn’t get on their own. I think this technology, that cat is out of the bag and us trying to tighten the export controls is harming our own industry without actually having the intended effect but, in theory, that’s what this entity list is intended to do.
TB: How likely do you think is it that the Biden administration could use any of those future tools, especially given what you just mentioned as the questioning of whether or not these actually work and have the desired effect?
SP: We talked earlier in the call about inflation, and that’s where this question of inflation comes up again, which is that this supply chain, the semiconductor supply chain is arguably one of the most multi-step complex supply chains of anything there is and, as we talked about earlier as well, any decline and gluts, or the negative shocks to the supply, have an adverse effect on our GDP. I think, again, there’s that awareness that, if we are taking measures to impede China that will have this adverse effect on our tech companies that are actually trying to sell some of this technology, and I think that that will be something of a deterrent to the administration of taking some of these measures too far. I think at the current level of the relationship between the US and China, I wouldn’t see an escalation in terms of tightening of screws on the entity list and I think we’re seeing this as a half-step away, but adjacent, which is that the Biden administration has had to be revisiting some of the Chinese tariffs. Why is it having to do that? Same reason, which is the prices are an issue for Americans now. I think some of these policies that might, in normal times, be more attractive have had to be re-evaluated in a period of inflation.
SP: It sounds like President Biden and President Xi will meet alongside the G20 meeting this fall, and I think those kinds of meetings are helpful and have not been afforded to the US and China in the last few years since COVID, and I think those are helpful steps. I’m not sure, it’s tough to assess that question in the sense that the Trump administration certainly was very vocal on the issue of China, so I’m not sure that I would say that the Biden administration has been more reactionary against Chinese provocations, I think they’ve really just been status quo, carrying some continuity with what, I think, we would’ve seen in the previous administration. I think some of that is just a function of the fact that, in Congress, there is this bipartisan, it’s constantly legislation in Congress that is somewhat adversarial to China, and in some ways I think that’s the interesting wildcard politically because right now there’s a measure on Taiwan in Congress, and if something like that goes forward that certainly does a disservice, I think, to what I would see as Biden’s ambitions of having a fruitful rapport with the Xi regime, if for no other reason that they have common needs, common goals. If we think about when the Biden administration came in, they came in on a much more hopeful tone, which is, “We have common goals, we can see common purpose with China, we both want to take climate change seriously.” That quickly, of course, deteriorated, but I do think that that tenor is still in there, if it’s not hijacked by a much more hawkish US Congress.
SP: That was really interesting. I think we were all watching to see whether she persevered. Again, she is not someone that generally has a lot of cross-the-aisle support on anything she does, but certainly did in this case. Again, it is emblematic of this bipartisan support for a tough on China policy, but I do think that some of the brouhaha is likely to be somewhat transient. The Chinese government, I think, had to do something, but what I’m seeing much more is a genuine interest/need on both sides, as the two largest economies, to find common ground and find ways that they can carry out some of these. TikTok, let’s say, that they can carry out some legislation that carves out TikTok as a Chinese entity that they need to be more careful with, while also maintaining constructive economic relationships with the US and China.
SP: I think India is a good example. I think there are a couple of countries that I would flag in that category of seeing a real opening in this market, so India is one, Singapore is another and South Korea is the third. India has huge chip demand. We’re coming a little bit back to semiconductors here, but their chip demand is growing two-fold every year, which is just a huge increase in demand. They have a tech-savvy populous, they have a history of geopolitical neutrality and they also recently invested USD 30bn in their tech chip supply chain. India, and they’re in Asia, sort of in this, geographically, an advantageous position. South Korea is another one, they’re a semiconductor superpower, of course. They have close trade ties with China and with the US, so I think that South Korea can also broker and help stabilise these supply chain links. Lastly, Singapore is an interesting country. I was just there this summer and, using Indonesian sand, they’re building their own islands in the South China sea so they can be manufacturing chips on Singapore soil. Their politics are more stable than Hong Kong and Taiwan, but geographically they have advantages too. I think that the current state and shifting chess board is really opening opportunities for new markets and new growth.
SP: Yes, I think that this is, again, one of these issues where we’re likely to see more of a status quo. Having worked in the US government, let me take a step back, it’s easy to look from the outside and look at the Biden administration or the Trump administration. A lot of these policies are, really, both developed and carried out by career civil service personnel who, they have their agenda and this is what they’re doing, and so when you look at what gets added a lot of it is more independent of specific administrations’ political agendas and more longer-term currents. I have not seen big disjunctures between the Biden administration and the Trump administration. If anything, what surprised me is I had thought that the Biden administration would come in with a more conciliatory approach, I think what they’ve done instead is really just continue many of these same policies. Maybe tempered, again, a little bit by the realisation that many of these entity lists haven’t worked in terms of stopping the Chinese from manufacturing these five-nanometre chips, but also, again, the need for a more stable supply chain. Having said that, this recent evidence suggests that, as I had mentioned, 94% of applications for tech exports to China had been approved in 2020. That number went down to 88% in 2021, so it was a decline of about 6%, but it’s hard to know whether that was because of declining demand, so many things were going on. I would expect to see a more status quo continuity rather than a big tightening of these controls in the second half of the Biden administration.
SP: It’s a great question, and just by way of context, as we probably all know, the CHIPS Act part of this, the investment, is USD 52bn. By way of context, this is a USD 75bn industry. Outsiders might look at USD 52bn and say, “That sounds like a lot of money,” but it actually isn’t against the backdrop of what this industry size is. The question, I think, is what is that actually going to mean in terms of impact on bringing these firms home, bringing chip making back to the US? I think a couple of things to note, (1) Samsung and other firms had already been building on US soil prior to the passage of the CHIPS Act, and TSMC, I should note, as well. What was very interesting, and I mentioned this at the outset, was that the early version of the legislation was US-only firms, so only Intel, let’s say, would benefit from these incentives. What’s interesting is that Samsung and TSMC have been around long enough to recognise how you get things done in Washington so they started lobbying and also indicating, almost like a sort of economic blackmail, suggesting that they’d already started building these plants, the cost had really gone up and they were not going to continue unless this CHIPS Act also included foreign suppliers of chip-making technology in the US. I think that this is something that we’re likely to continue seeing, and there are reasons.
Again, having the concerns raised with COVID, which is there are some reasons to suggest that having shorter supply chain, just-in-time, creates bottlenecks sometimes. I think that there will be a new set of bottlenecks and that’s where I would be concerned, and if we see these plants, the manufacturing of both the plants and the chips, raising these concerns I think we’ll see some reassessment, and those have to do with the construction jobs. We’re already seeing this, so there’s evidence in Johnstown, Ohio, already Intel is suggesting they don’t know how to find the 7,000 construction workers for the chip plants. What we know is that we have right now a lot of economic uncertainty, but we have record low unemployment. A lot of people have left the workforce, maybe they’ll come back, but I think that’s a real limiting factor that would make reshoring a challenge. I think, again, it’s one of the original impetuses for globalisation which is there were a lot of jobs that just we couldn’t fill, but that other countries could. That, I think, is an interesting question that the jury is still out on. Again, where are we going to get the 3,000 people who have an average salary of USD 135,000 working at that plant as well? We have, really, a shortage of the H1B, high tech parts of that, so I think that will really drive this question of whether this is something that we’ll continue to see momentum behind or whether this will be a realisation of, “This is why we have globalisation and outsourcing in the first place.”
SP: I think it will have to take a few forms. Some of these are federal, some are state because we’re also seeing this jockeying take place at the state level. We have federal legislation but these plants are built in states, and so how does Samsung get convinced to build in Texas? Texas offers incentives and tax breaks. In this case, Ohio had offered Intel USD 2bn in incentives, a 30-year tax break and then Intel is providing, or promising, I should say, USD 150m in educational funding aimed at growing the semiconductor industry, regionally and nationally. When you look under the hood on this current legislation, it is a little bit murky in terms of what this looks like but, to your question, is what needs to happen. I think tax credits would be helpful and I think that’s certainly what is part of this recent legislation, so temporary tax credits, for example, equal to 25% of the tax basis of a qualified property, which is part of the advanced manufacturing facility, placed in service during the taxable year. We know that taxes and compliance are always tricky things, and this is no exception, that the regulations on this, not only are still being written, but they’re murky, but that’s a big part of it. The tax credits that are structured a little bit similarly, actually, to renewable energy projects, so meant to encourage and really offset the amount that it takes to build and manufacture. If we think about, let’s say, 25% and the winds of globalisation, “How much was a firm saving by going overseas?” I think that’s what this is intended to offset, is, “Provide 25% tax credits so that we can offset, let’s say, the 25% higher cost of producing this back on US soil.”
SP: I think there are a couple of reasons for this. (1) As with legislation in general, these things end up being albatrosses of thousands of pages of verbiage and the key that legislators are trying to do is, they have an intent/strategy and then the details get worked out later. I think that this is an example of that, but these details will get worked out later, but I think the key is the allocation is there. Where I see, again, the devil in the details is, as I said earlier, USD 52bn, it’s not chump change but it’s not as much as would be needed given, let’s say, that a plant itself, one plant, would cost USD 20bn, let’s take the one in Arizona. What does this actually do in a meaningful way, to get these companies to decide that they should invest on American soil? One of the things that was very interesting being in Asia, and this is where in Singapore they were saying, “Americans don’t have our work ethic so we think that we can provide a very attractive alternative because we have the Asian work ethic.” I found that an interesting, “How do we think about this and where is this going?” kind of question. The other reason why this is a little bit challenging is the US is a federal system, so we have, overlaid or underlaid on these federal regulations are all of these state considerations. I’m in New York, so I know Schumer has been very active and vocal trying go create their own set of incentives to almost outbid Ohio or outbid Texas, so that up-state New York can become an attractive place for a foreign firm or US domestic firm to build a plant.
SP: I’m glad you brought that up, because that is a big part of this CHIPS Act that we haven’t discussed, which is the USD 13.2bn earmarked for developing semiconductor workforce alongside additional R&D funding. Again, it’s a little bit unclear. I’ve looked through the legislation to look into the specifics. I think a lot of this is for these regional research hubs and for the NSF, National Science Foundation, tech directorate, so creating the AI and quantum directorate which, to me, sounds very much aimed at China. Trying to hone and attract talent, almost like the Cold War, Sputnik moment, but people follow the money and I’m in a university, if there’s USD 13bn in research we’re going to be interested in it. I think there is that positive externality that will come out of this on the R&D side, too.
SP: I do actually think, in this case, it is a lot of the usual suspects, but you’ve mentioned Samsung, just that foreign firms got into this game in a pretty savvy way, realising that they’re not going to be employing their own domestic workforce and they’re privileging a US domestic workforce by building in Arizona and building in Texas, and so why shouldn’t they be eligible for these same investments and incentives? I think their firms very much jumped on that lobbying train as well, in order to be a more inclusive outcome.
SP: Very much so. Apple, 95% of the chips that go into an iPhone, or maybe all of them, are TSMC-made, and so they can’t do business without a real, robust investment in this industry so they very much have a dog in this fight, but there are a lot of other smaller actors. I was talking to a smaller lobbying firm in DC and they were saying they’ve been lobbying for this legislation for 10 years but no one listened until about three years ago, when China hopped onto the radar, and then if you added China onto anything, it would get passed. Then, of course, it accelerated with COVID, so I think there are now so many actors that actually stand to gain financially, to be beneficiaries of this, and they’re all a piece of that puzzle.
SP: I think the big thing is that we have been talking about supply chains and investment in the US, but one of the things is that the supply chain of semiconductors is really complicated and manufacturing is just one part of that. There are thousands of inputs. We need the tools. These are all made and manufactured in different spaces, we need the logistics. I think it looks, sometimes, by focusing on this investment and the plants in the United States, we might miss some of the nuance and the complexity of the supply chain, and if we do miss that I think we also risk neglecting those other parts of the supply chain that are essential to actually getting these in peoples’ iPhones when they need them. I think the bigger picture here is really important, and often lost.