With CHIPS Act, US Risks Building a White Elephant

By Alan Patterson, EE Times (December 7, 2021)

The U.S. Senate has approved $52 billion for the CHIPS for America Act, aimed at reviving the American semiconductor industry over the next decade. While the Act awaits approval in the House of Representatives, we should examine whether it is the most effective way to encourage investment in domestic manufacturing.

One of the key goals of the CHIPS Act is to encourage renewed investment in manufacturing. But the conditions that have caused the U.S. to fall behind are not addressed by the Act. The US incentive structure is skewed because there’s a stronger impetus for executives to choose stock buybacks over reinvesting in operations.

Several U.S. tech companies now lobbying for the CHIPS Act have squandered past support from the U.S. government while instead showing more appetite for share buybacks to boost company stock prices. Among the Semiconductor Industry Association (SIA) corporate signatories of a recent letter to President Biden, Intel, IBM, Qualcomm, Texas Instruments, and Broadcom did a combined $249 billion in buybacks over the decade 2011-2020, according to William Lazonick, Professor of Economics Emeritus at the University of Massachusetts.

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