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Froma Harrop: Washington puts its chips on chips

From the commentary: Supply chains have become an economic battlefield of the 21st century. In a jarring example, Europe faces an energy crisis for having become dependent on Russia for gas and oil.

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Froma Harrop Commentary
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Should Washington push an "industrial policy"? That is, should the U.S. government get involved in promoting certain domestic industries?

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Froma Harrop Commentary
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Darn straight it should. And that goes double when it comes to semiconductors. Computer chips are the little brains that run appliances, airplanes, mobile phones and cars. You can't have a modern economy without them.

We saw what happens when key manufacturing activities go offshore. During the COVID-induced supply chain crisis, Western manufacturers couldn't get their hands on the chips they needed to meet demand for their products. Some had to close or slowed production.

American automakers were especially handcuffed. General Motors, for one, blamed the chip shortage for a 15% drop in its U.S. deliveries of new vehicles in the second quarter from a year earlier.

And so it's hard to overstate how bringing chip-making to this country is good for this country. It would not only create many thousands of American jobs; it would ensure that other U.S. manufacturers don't have to beg Asians for semiconductors.

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Toward that end we should hail the Chips and Science Act, championed by the Biden administration. It was astounding that 187 Republican House members voted against the bill, though gratifying that 24 did.

The GOP leadership had joined Chinese lobbyists in opposing it. Never mind that chip independence had the full-throated support of several former Trump officials, notably former National Security Adviser H.R. McMaster. To partisan robots, the national interest rarely overrides the joys of political warfare.

Commerce Secretary Gina Raimondo rightly called the $52 billion in new semiconductor money "rocket fuel for our global competitiveness."

Asia dominates the production of semiconductors. Taiwan makes 65% of the world's semiconductors and accounts for nearly 90% of the advanced chips. And if China attacked and took over Taiwan, an adversary would have a stranglehold on America's — and the world's — manufacturing.

Meanwhile, the Chinese government has been pouring hundreds of billions of dollars into its own semiconductor industry. So, by the way, have the Europeans.

This is part of a bigger picture in which the U.S. has been reversing decades of "off-shoring" factory jobs to lower-wage countries. Almost 350,000 jobs will be "reshored" this year — on top of about 265,000 added in 2021. The chips act and the Inflation Reduction Act are fueling many of the moves with tax breaks and other economic incentives.
"Globalization is in retreat," economists at Barclays told their clients.

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Raimondo, a former venture capitalist, has been wonderfully aggressive on this front. When Taiwan's GlobalWafers abandoned a plan to spend $5 billion on a plant in Germany, she called the CEO and nabbed the factory for Texas. Here come 1,500 jobs.
Citing the chips bill, U.S. semiconductor companies say they plan billions in new investment, and their jobs pay very well.

President Joe Biden preened at the recent groundbreaking for a new $20 billion plant Intel is building near Columbus, Ohio. Beside him stood two good Ohio Republicans, Gov. Mike DeWine and Sen. Rob Portman.

The Chinese government has been pouring money into other hot tech fields, such as artificial intelligence and robotics. These are areas in which the United States used to have a safe lead.

"We need America to dominate in certain areas of technology," Raimondo said. "Critical minerals, electric vehicle batteries, semiconductors, artificial intelligence." This obviously goes beyond jobs. It's about national security.

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Well, is America going to compete or not? Washington just put its chips on chips. That would seem a smart wager.

Froma Harrop is an American writer and author. She can be reached at fharrop@wctrib.com or on Twitter @FromaHarrop.

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