Victory with the help of Uncle Sam

This article is part of the On Tech newsletter. You can register here to receive it weekdays.

In order to continue to compete with China, should the United States become a little more like it?

I am provoked, but basically it is the question behind the US government’s plan to finance US-made computer chips and possibly other homegrown technologies.

In fact, the US government has always subsidized or supported industries. But the idea of ​​a government helping their favorite industries that the United States often scoffs at is a corruption of the free market. That’s what China does, or what European governments do with their top aircraft manufacturers.

That leaves what’s happening with computer chips just the beginning of a thorny policy debate: Should government intervene more to create winners in the US, particularly in the field. technology and other important areas? And if so, how?

What is happening: Computer chips are like tiny brains or memory in everything from jet fighters and satellites to refrigerators and cars, as my colleagues Ana Swanson and Don Clark have written. Silicon Valley is named for a material in computer chips – and Intel is an industry pioneer. No more.

Taiwanese companies including Taiwan’s Taiwan Semiconductor Manufacturing Company and South Korea’s Samsung have been ahead in cutting-edge designs and are now king of manufacturing. Much of the world’s chips are made outside of the United States, partly by government subsidies abroad.

The pandemic caused a shortage of chips that slowed American car factories, and made the US military and US corporations more urgent to find safe and uninterrupted supplies of chips at hand. .

So last year, Intel and federal government agencies proposed financial assistance to the US chip industry. The result is the people’s tax authorization to subsidize US chip factories and chip research in the military policy bill finalized a month ago.

Congress has yet to fund the show so the amount and specifics are being limped, Don told me. He also said that government money could take years to turn into more US-made chips. But you reach your goal: Make sure that more chips are working inside the US, whether made by Intel or by foreign chipmakers in the United States.

The bigger picture: The background to all of this is China. It is worrisome that longtime tensions between China and Taiwan could disrupt the island’s chip industry and affect the rest of the world.

The Chinese government has also spent a lot of money developing its own chip industry and is less dependent on imported chips and equipment.

In the political, military and economic competition between the US and China, the chip is one of the leading fronts.

What’s next: It’s a bizarre scene in Washington: Republican politicians who tend to be less fond of government intervention are siding with left-wing politicians in favor of more government backing. with private companies. That’s true for computer chips and in a number of other areas, including artificial intelligence, robotics, and advanced manufacturing.

One question is how to support these industries without wasting people’s tax money. Government aid advocates have supported more generous tax credits for company spending on research and development, government support for basic science research, and funds taxpayer-financed investments in strategic industries such as chips, batteries and automobiles. The US has done this before, especially in the 1980s and 1990s when Japan was a rising economic power.

This debate is about more than one policy. It’s about figuring out the proper role the government plays in the economy and what the US should do when other nations pour endless money into their national championship companies.

And finally this is a doorway to a big question that I keep pondering over: What should the United States do about a future where technology becomes less and less American?

A history lesson could be related to the chip

When I first heard about government funding proposals for the chip industry, I thought about the 1990s and equipment for the telephone network. (Yes, I am great.) Take me on a tour of history.

North American companies were once king of another essential industry: the equipment phone companies needed to route world communications. But for complicated reasons, US giants including Lucent – the former Bell Labs successor – were sold to foreign companies or died.

Today, the world’s leading telecommunications equipment company, China’s Huawei, and the United States are worried about this.

So I wonder if Huawei is a cautionary tale about a missed US opportunity. If the US government threw people’s tax dollars behind the country’s telecom sector in the 1990s, as they do with chips now, would Lucent thrive, not Huawei?

I asked that question to Rob Atkinson, who wrote a history last year about the decline of US telecom equipment companies. “If you really wanted to save Lucent, yes, I think they might have survived” with funding or loans from the US government, he said.

Dr. Atkinson is the chairman of the Information Technology and Innovation Foundation, a research group that receives funding from telecom and technology companies including Intel.

There are, of course, complicated reasons that led to the death of US telecom companies and the rise of Huawei. I encourage you to read Dr. Atkinson’s article for more. Nor can it be sure whether the US government’s support in previous decades will really change anything for Lucent and its colleagues.

Dr. Atkinson’s organization further supports the US government’s investment in essential industries including chips. And like others who support those policies, Dr. Atkinson argues that the United States also needs to facilitate its trade and diplomacy with China as it is slowly reducing its heavy industrial backing. homegrown.

Before we go …

Hold this

Teach your cat to flip a coin. The best part was the man’s delighted response.

We want to hear from you. Let us know what you think about this newsletter and what else you’d like us to explore. You can contact us at [email protected]

If you have not received this newsletter in your inbox, Please register here.