The US’ Chips Act may protect national security – at the cost of taxpayers and businesses

THE United States’ recent launch of a US$52 billion semiconductor subsidy programme could be seen as a turning point in how Washington manages the American economy, in the direction of so-called “industrial policy”: bureaucrats and politicians employing government resources to benefit certain sectors, in order to advance specific priorities.

The first Chips for America funding opportunity was launched on Feb 28, under the Chips Act. Overseen by the Department of Commerce, the Act includes US$39 billion in incentives for domestic semiconductor manufacturing, and US$13 billion for research and development.

While the semiconductor industry was created in the US, American economic conditions and global market forces encouraged semiconductor manufacturing to move overseas in the last few decades. As a result, the US’ share of global chip manufacturing capacity has fallen from 37 per cent in 1990 to 12 per cent today.