Politics and Special Interests Eroding National Security
We’ve mentioned a decoupling of US and Chinese economies in this space several times. In many cases, this decoupling is hard for the normal US citizen to see. Many offshore manufacturing contracts have moved from China to other Asian countries, and even more have shifted to Mexico. To the everyday consumer, we don’t necessarily notice these changes. But none-the-less, these changes are happening and they’re happening fast. Distrust between the two countries is obvious and increasing. At the crux of the issues is a history of intellectual property theft that has affected many US businesses, but the most critical issue by far is IP theft of technology that could be used against US military and infrastructure. The largest concern is that of the semiconductor industry where we have outsourced most manufacturing to Asia, and Taiwan Semiconductor specifically. TSMC passed Intel as the technological leader several years ago, and Intel has struggled to regain its position as the top player in the industry.
Why does this matter? It matters for two reasons: 1. Our world is electrifying (not just cars), and so the controls for literally every part of our electrical grid and hundreds of items in every home rely on semiconductors to operate. If someone else controls how these are made, they become vulnerable to cyber attacks that can cripple the economy. 2. Our lead in military capabilities can be eroded by those who have access to the same technologies without any of the same spending on design. This is REALLY bad.
Our government officials know this to be true, and in order to combat this (and other problems in supply chain management), they have pushed for TSMC, Intel, and others to build plants (called Fabs) here in the US and they continue to offer incentives and cash to help move the effort forward. HOWEVER, for every award, the number of hands in the cookie jar seems to expand and delay the best efforts of the CHIPS Act and other incentive programs.
While there has been a ton written on the CHIPS act lately, and many awards handed out, a recent article in the Wall Street Journal highlighted a number of issues when it comes time to build these fabs. The US is not the only country getting into the act. Around the time that the CHIPs Act’s first awards, another TSMC plant was being planned in Japan. While this plant may have been smaller than what was planned in Phoenix, the efforts to complete the work were materially different. In Japan, the nation, and its workers rallied around this project and pushed for completion in the most expeditious manner possible. They brought in contractors from Taiwan with significant experience building these types of projects. In short, they did what it took to get up and running. Meanwhile, in Phoenix, the job continues to see massive delays because local union workers have complained that they should be doing the work and not some outside entity. This was true across many trades, and it has delayed the project significantly. What is perhaps lost in this bickering over who does the work, is that fabs are massively complex. Precision is of the utmost importance, and worrying about getting the work in the hands of the tradesman should be secondary to making sure the fab runs as well as those in Tawain. The semiconductor industry works within tolerances measured in nanometers and microns. While we would never advocate reckless government spending, we also can not afford to screw this up. Penny pinching is no better than money grabbing in this regard. Part of the CHIPs Act’s goal is to drive employment, but it’s more important one is that of protecting our national security. It’s time to put the politics and special interests aside and focus on what matters.
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