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posted by janrinok on Monday July 04 2022, @10:16PM   Printer-friendly
from the somebody-wants-more-bribes dept.

U.S. May Lose Silicon Wafer Factory If Congress Can't Fund CHIPS Act, Commerce Secretary Says

U.S. may lose silicon wafer factory if Congress can't fund CHIPS Act, commerce secretary says:

U.S. Commerce Secretary Gina Raimondo told CNBC's Jim Cramer on Monday that she believes GlobalWafers will follow through on its plan to build a silicon wafer factory in Texas — but only if Congress passes funding for the CHIPS for America Act by the time the August recess begins.

"This investment that they're making is contingent upon Congress passing the CHIPS Act [funding]. The CEO told me that herself, and they reiterated that today," Raimondo said in an interview on "Mad Money."

"It has to be done before they go to August recess. I don't know how to say it any more plainly. This deal ... will go away, I think, if Congress doesn't act," she added.

GlobalWafers, a Taiwan-based semiconductor silicon wafer firm, said Monday that it plans to build a facility to produce the component in Sherman, Texas. The facility could create up to 1,500 jobs and produce 1.2 million wafers a month, according to the U.S. Commerce Department.

The CHIPS (Creating Helpful Incentives to Produce Semiconductors) for America Act incentivizes investment in the U.S. semiconductor industry. While it was passed in January 2021, a funding package has not been approved by Congress.

McConnell Warns Dems of Fallout for Reviving Biden Bill

McConnell warns Dems of fallout for reviving Biden bill:

Senate Republican leader Mitch McConnell threatened Thursday to derail a bill designed to boost semiconductor manufacturing in the United States if Democrats revive their stalled climate and social policy package.

The rejuvenation of the Democratic reconciliation package, central to President Joe Biden's agenda, remains a work in progress and is far from certain. But with some signs of progress in the negotiations, McConnell is moving to complicate Democratic plans by warning that Republicans would react by stopping separate semiconductor legislation from moving over the finish line in the coming weeks, despite its bipartisan support.

"Let me be perfectly clear: there will be no bipartisan USICA as long as Democrats are pursuing a partisan reconciliation bill," McConnell tweeted, referring to the shorthand name for the computer chips bill that passed the Senate last year.

Both chambers of Congress have passed their versions of the legislation, which would include $52 billion in incentives for companies to locate chip manufacturing plants in the U.S. Lawmakers are now trying to reconcile the considerable differences between the two bills, but at a pace that has many supporters worried the job won't get done before lawmakers break for their August recess.

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  • (Score: 3, Interesting) by Anonymous Coward on Monday July 04 2022, @10:52PM (11 children)

    by Anonymous Coward on Monday July 04 2022, @10:52PM (#1258118)

    Why wouldn't they build the plant without the law and the benefits entailed?

    Because it's not cost-effective. Literally, it costs too much to do business in the USA. If it were cost-effective, they'd leap at the chance. But it isn't.

    Why does the government want to do this at all? Well, there's the usual smokescreen about american jobs, but a lot more of it has to do with american dependence on foreign supply chains for critical industries.

    OK, so if it's that important, why not just do it?

    Because it's really expensive. It's a billion dollars per state in the union, arguably only benefiting one state directly, and the government is bleeding money already like a slashed artery. It's as if every household in the nation ponied up hundreds of dollars to boost a chip plant in Texas.

    But what's the problem with the other law?

    The budget reconciliation item that the democrats are trying to push through is the latest version of the Build Back Better plan, which republicans largely don't agree with, and think is a bad deal. Of course, they're entitled to their opinion and their votes, and given that the democrats are having real trouble pulling support for it even from their own ranks, given their majorities in both houses, it seems that the reconciliation hinges on either the republicans bowing to it or democratic party unanimity - both of which are out of reach.

    What else is there about this?

    Well, it would be a political gift for the democrats, if they could push this through, because they could be seen to be doing something about jobs and the economy (although on a per-person basis, those would be insanely expensive jobs). This means of course that the republicans have no intrinsic interest in pushing this law through. It's arguably good for the democrats, it's very expensive, and such incentives have a frankly low success rate in the long term (just take a look at the Foxconn project, for example).

    With all that in mind, why on earth would we expect the republicans to think of this as a good idea, as opposed to policies calculated to lower the cost of doing business in the USA?

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  • (Score: 5, Insightful) by Mykl on Tuesday July 05 2022, @02:21AM (2 children)

    by Mykl (1112) on Tuesday July 05 2022, @02:21AM (#1258140)

    There's still no reason for the Republican's to threaten one piece of legislation if the Dems even _talk_ about another unrelated piece of legislation, other than to play games.

    The chip plant is very expensive, but is a drop in the bucket compared to Defence spending and is arguably a better return-for-dollar in terms of security interests (per my post above).

    I think you hit the nail on the head with your comment about the 'political gift for the democrats'. If doing something good for the country makes the Democrats look good, we shouldn't do it! The GOP would rather have the country burn than allow the Democrats a win. It's what Mitch did through the Obama years and is reflective of the GOP's priority - party first, country second.

    • (Score: 0) by Anonymous Coward on Tuesday July 05 2022, @04:46AM (1 child)

      by Anonymous Coward on Tuesday July 05 2022, @04:46AM (#1258159)

      You missed the part where the republicans don't think that either is necessarily wise, and they're both stupidly expensive. It's a lose/lose/lose proposition to them. It's a political loss, it's a practical loss, and it's a fiscal loss. If someone sees something that way, why in the name of little green monkeys would they vote for it? Because Chuck Schumer asked super-duper nicely?

      Put differently, this is republicans trying to compromise: "You can have your stupidly expensive, pathetically transparent vote-buying exercise in Texas, if you'll just close the door on your insanely expensive, nationwide desperate vote-buying exercise."

      That doesn't make them evil; that makes them pragmatic.

  • (Score: 2) by Reziac on Tuesday July 05 2022, @02:55AM (3 children)

    by Reziac (2489) on Tuesday July 05 2022, @02:55AM (#1258143) Homepage

    Maybe a better question is -- why isn't it possible to be profitable in the U.S. without being propped up by tax dollars?

    Dunno about other states, but breaking ground on such a project in California could take as much as 20 years due to the absurdly inflated regulatory and permitting process; who the hell would bother?

    And there is no Alkibiades to come back and save us from ourselves.
    • (Score: 2, Interesting) by Anonymous Coward on Tuesday July 05 2022, @05:03AM (2 children)

      by Anonymous Coward on Tuesday July 05 2022, @05:03AM (#1258163)

      Two major factors: Cost of labour, and exchange rate.

      Exchange rate first, because that's easier and simpler to explain. The dollar is an expensive currency, so any exports from the USA immediately have a relative purchasing power handicap compared to exports from most of the rest of the world. If the dollar were to tank against most other currencies, US exports would take off like a rocket because suddenly it would be that much easier for everyone else to pay the cost in dollars. This is one of the major downsides to the dollar being a world reserve currency - it's overvalued which increases domestic standard of living, but reduces export competitiveness.

      Cost of labour is the tougher one. Yes, US workers get paid well, and they are paid in dollars. This much is obvious. What then usually comes up is that someone starts hyperventilating about the relative efficiency and productivity of US workers - which is very misleading because while on paper it's true, it's largely true because US employers have been driven by decades of competitive problems to get more from their workers by aggressive investments in assistive technology and automation. If you just look at the output and US worker pay rates, the productivity is indeed very good, but when you look at sunk capital and tooling, the picture darkens which is one reason for the return on investment on foreign investments to be much higher than circumstances would otherwise suggest.

      If the folks in congress were really devoted to making the US competitive, they'd ditch the policy of making the dollar a reserve currency. It's unwinding anyway. Just let it die a natural death, and let the dollar devalue. People would moan and groan about chinese imports costing more, and there would be great instability in China as they scrambled to find other markets (or as they desperately wound the RMB's crank to try to keep it stable compared to the dollar) but american industry would be boosted.

      There are geopolitical arguments on both sides.

      • (Score: 1) by khallow on Tuesday July 05 2022, @01:17PM (1 child)

        by khallow (3766) Subscriber Badge on Tuesday July 05 2022, @01:17PM (#1258247) Journal

        Two major factors: Cost of labour, and exchange rate.

        There's also factor three - that regulatory burden that Reziac mentioned.

        Cost of labour is the tougher one. [...] If you just look at the output and US worker pay rates, the productivity is indeed very good, but when you look at sunk capital and tooling, the picture darkens which is one reason for the return on investment on foreign investments to be much higher than circumstances would otherwise suggest.

        In other words, your cost of labor factor is actually a cost of capital factor. I assure you that sunk capital and tooling is not labor. And regulatory burden is a big part of the reason that is so expensive (for example, policies that drive up the cost of real estate).

        • (Score: 0) by Anonymous Coward on Tuesday July 05 2022, @02:02PM

          by Anonymous Coward on Tuesday July 05 2022, @02:02PM (#1258254)

          It's both.

          To put it another way: you can get high returns from american labour if you offset the labour cost by reducing the need for it with heavy capital investment, which works well in the USA because of decades of experience doing exactly that. Or, you can avoid the capital investment and deal with the high cost of american labour unameliorated by automation.

          The central point is that the generally paraded idea that american labour is particularly valuable as if somehow the USA were made up of magic productivity dirt is a lie, based on ignoring how the productivity numbers are calculated. Either way a prospective factory gets to decide between a huge money dump today, or a heavy money bleed.

          The other aspect that affects this particular industry is that it is so heavily automated anyway that the trade-off doesn't really exist as a point of comparison with other countries. You can't trade clean rooms and high precision machinery for ten thousand ugandan labourers sweating away for pennies a day. This means that wherever you put it, you're dumping a hell of a lot of money into construction and equipment no matter what you do, and any tinkering you do to the capital investment mix is relatively marginal. The few people (comparatively speaking) that you do need for the job are not easy to find nor replace (and I've known a few - these are very highly trained, skilled people with additional on-the-job training provided).

          You're quite right about the regulatory burden, but of course that is inclined to be lighter in Texas than, say, California.

  • (Score: 2) by Thexalon on Tuesday July 05 2022, @11:49AM (3 children)

    by Thexalon (636) on Tuesday July 05 2022, @11:49AM (#1258226)

    Because it's not cost-effective. Literally, it costs too much to do business in the USA. If it were cost-effective, they'd leap at the chance. But it isn't.

    There's another piece of the puzzle that I think is very relevant here: Negotiation tactics.

    How often does this happen:
    Corporate executives: "Sure, we'd love to put / keep our corporate headquarters / factory / office in your city, but we can't afford it unless you give us a tax break, *wink wink*."
    Mayor: "Oh, right. Yes, we need this tax break to bring jobs to our area, I understand. Here you go!"
    Executives: "Excellent, it was nice doing business with you. We'll remember that in your re-election campaign. Oh, and here's some campaign contributions for you."
    And the number of jobs is never what was promised, and the tax breaks somehow never go away, and ordinary citizen's taxes have to increase or city services have to be cut to deal with the shortfall, but it worked out for both the mayor and the executives, so who cares?

    Because anything that a company might do will be more profitable if they don't have to pay taxes on it, any company with the power to do this maneuver will at least attempt it.

    So when a company says that they need government incentives to do a thing they know the government would like them to do, what they're asking for is the power to set their own effective tax rates. And they're probably going to get what they want. And if you don't believe me, just look at what happened when Amazon asked governments to put in bids for their HQ2.

    The only thing that stops a bad guy with a compiler is a good guy with a compiler.
    • (Score: 0) by Anonymous Coward on Tuesday July 05 2022, @02:05PM (2 children)

      by Anonymous Coward on Tuesday July 05 2022, @02:05PM (#1258255)

      The real lesson that I remember from the HQ2 saga was that NYC was all set to get some of the action, until AOC started squawking about the usual big-biz-is-the-devil stuff, and then Amazon said: "Hell no, we've seen this movie before in Seattle, we're out."

      It's not all about the tax rates, it's also about the degree of naked hostility on the ground.

      • (Score: 0) by Anonymous Coward on Wednesday July 06 2022, @01:11PM (1 child)

        by Anonymous Coward on Wednesday July 06 2022, @01:11PM (#1258505)

        No, it was about "why should Amazon get tax breaks when `Mom & Pop Coffee Shop` doesn't". Amazon promised to bring ten "gazillion jobs" into an area (that already had help-wanted signs on most retail shops) for the "low, low cost" of "I don't need to contribute to the economy where i make my money". Being a resident of the local area, I found that the talking-points in the media didn't line up with what the people in the area actually wanted - which was "ok, build your stupid headquarters, but don't increase my property taxes to pay for it". What ended up happening was a smaller-than-planned office, with no "perks" from the government, which never met their own hiring estimates (sound familiar)?

        We were all very aware of the Foxconn fiasco in Wisconsin, and we'd rather not fund that kind of nonsense here

        • (Score: 0) by Anonymous Coward on Wednesday July 06 2022, @03:26PM

          by Anonymous Coward on Wednesday July 06 2022, @03:26PM (#1258537)

          Yeah, there are the shenanigans about tax negotiation as well, and of course the logical position for a jurisdiction is: "Sorry you feel that way, you obviously wouldn't like it here and shouldn't move here."

          But the financial calculation is far from the only one, which is what NYC's experience illustrated. Bear in mind that Amazon is headquartered in Seattle, and that is by no means a cheap city in which to do business. Sheer headline expense wasn't what drove Amazon to look elsewhere; it was also the sheer, naked hostility from the local government. AOC just made sure that it was crystal clear that they could expect more of the same in NYC, with the immediate result that regardless of local costs, NYC suddenly dropped off the list like rain from a gutter. Local office? Sure. HQ2? Not gonna happen.

          An analogous case just came up with Newsom trying to woo californians back from Florida. The chances of people who left California because of its current situation, to go to Florida, wanting to go back is quite small. Floridian officials looked amused, not concerned.