The Biden administration has pushed the CHIPS for America Act to provide funding in support of semiconductor manufacturing in the United States.  The argument for the bill is that this type of manufacturing is critical for national defense.

The bill passed the Senate in June with significant bipartisan support.  What are the merits and demerits of this bill?

Arguably, the world leaders in semiconductor manufacturing are Samsung, Intel, and Taiwan Semiconductor Manufacturing Company (TSMC).  The first company is renowned for its standalone memories.  The second two companies fabricate logic parts, which invariably embed memories.  The first two companies have state-of-the-art manufacturing facilities in the United States, and the third has agreed in principle to build here, too.

Along with many other companies, what distinguishes companies such as Apple and AMD?  They don't actually fabricate chips.  Apple designs the supercomputers that go into cell phones.  AMD's engines dominate the gaming industry and have even broken into Intel's monopoly business supplying high-end datacenters.  With respect to bleeding-edge parts, companies such as Apple and AMD are chip design houses.  Manufacturing is outsourced to design-compatible TSMC.

This government initiative doesn't help capitalism.  It won't strengthen manufacturing companies in the marketplace.  It certainly is not moving closer to laissez-faire capitalism, which brings innovation and prosperity by producing profits for those who create goods and services valued by consumers.  The CHIPS Act is teaching companies to wallow in closer to the government trough.  Instead of just focusing on the market, companies will spend more time, energy, and money on politics.  This initiative attempts to designate winners and losers by preferring certain semiconductor manufacturing over others.  It is crony capitalism, which is a move closer to the fascist implementation of socialism with government control of production by means of regulation and taxation.

There is a constitutional argument against this bill.  There is no authority delegated to the federal government for this activity.  Every taxpayer should know that it is unconstitutional for his wealth to be confiscated and re-distributed to multi-billion-dollar semiconductor manufacturers.

Politicians don't manage business activity well.  The USPS comes to mind quickly.  Some people might prefer the dentist to the DMV.  The reason the government is uncompetitive in managing businesses is that the government is authorized to use force to achieve particular ends.  Governments don't need to respond to market forces; they want to force markets.  Businesses have no such coercive tools, and so they must rely upon voluntary exchange among willing participants.  The motivation is that each profits, in some way, from an exchange of money for goods and services.  The history of government involvement in markets stifles innovation and production through regulatory burdens and high taxation.

There never is anything benign about government redistribution of wealth.  Money that goes out always has strings attached.  Bureaucrats apply regulations to exercise control.

A conservative response to the challenge of enticing semiconductor manufacturing to the U.S. is to reduce regulations and corporate taxes.  This is heavier lifting politically than interfering in markets.  Reducing regulations and taxes is consistent with much smaller government.  Currently, we are in a historic struggle between progressive fascism, enabled by bipartisan out-of-control spending growing Leviathan, and constitutional liberties secured by small government.  Conservatives desiring healthy markets need to devote time and energy to identifying programs, offices, agencies, administrations, and departments that can be defunded, so government interference in markets disappears.

Monetary inflation by the Federal Reserve is causing financial distress in lower- and middle-income families.  A lower standard of living inflicted on the poor and middle class is inconsistent with improved national defense.  This bill exemplifies continued out-of-control deficit spending.  Such fiscal irresponsibility is paid for with more monetary debasement, which will cause yet more inflation.  And pressure increases for tax hikes.

It is a red herring that our country's defense hangs in the balance.  Existing and planned Intel and Samsung semiconductor factories in the U.S. are state-of-the-art.  And TSMC has indicated it will build a factory in the U.S.  Importantly, if China invades Taiwan, then that doesn't mean China controls semiconductor manufacturing there.  TSMC factories in Taiwan can be shut down within weeks for lack of spare parts if the U.S. leads an embargo.  Spare parts for the equipment in Taiwan's factories aren't manufactured there.

Where would government interference in the semiconductor industry stop?  Chips cannot be fabricated unless they are designed and laid out first.  The software for these purposes is incredibly complex, involving device layout, parasitic electrical effects, voltage droops, electromigration, and performance under cross-coupled conditions.  Before manufacturing, chip designs can be validated to a certain extent using simulators and emulators.

Semiconductor manufacturing isn't monolithic.  A factory is the aggregate collection of complementary equipment, each of which is high technology itself.  Such equipment forms the backbone for the process flow used to make a chip.  A computer chip on a semiconductor wafer is good for nothing.  Naked chips cut from wafers must be packaged.  Before and after packaging, chips must be tested to discard faulty ones.  Testing equipment is incredibly sophisticated and complicated.

Packaging is an increasing share of the total price of computer chips.  Package complexity has risen with each new chip generation for layer count, minimum feature size, interconnect requirements, and materials.  Packaged chips are good for nothing in your hand.  They must be soldered onto boards to be useful.  Board design complexity is coupled with chip design complexity for layer count, minimum feature size, interconnect to memory, and materials.  Once started, there is no end to the government interference possible.

How has government interference in other markets fared?  Everyone is familiar with the Endless Wars perpetuated by the military-industrial complex to refine equipment and tactics at the expense of blood, time, and treasure.  This practice is enabled by Federal Reserve interference in money markets by means of monetary policy.  We still are in the medical tyrannical grip of the pharmaceutical industrial complex, which flouts constitutional rights and the Nuremberg Code.

Are conservatives happy with the propaganda and censorship exercised by the Big Tech-MSM industrial complex?  Americans already are being subjected to higher energy prices based on the progressive fascist war against fossil fuels.  Attacks include government restrictions on federal lands, withholding new leases and permits, stricter regulatory enforcement, and encouragement of the banking-financial industrial complex to withhold financing for oil production projects.  The policies of the environmental industrial complex lead to energy poverty and permanently higher prices.  Americans will learn that the true, and higher, cost of unreliables (i.e., solar and wind) must capture dispatchable energy sources.  These are necessary to prevent electrical grid collapse and avoid blackouts and brownouts caused by intermittency (e.g., from cloudy or windless days).

Liberty and prosperity are compatible with much smaller government.  Toward this, government programs, offices, agencies, and departments need to be eliminated.  Government interference in markets is only compatible with more progressive fascism.

Image via Peakpx.

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