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Monday, October 3, 2022

Fearing China, the US is changing industrial policy

The country will invest $52 billion in semiconductor manufacturing and $200 million in areas such as artificial intelligence and quantum computing.

The United States returned to the industrial policy of the last century: with direct subsidies and tax breaks. On August 9, President Joe Biden signed into law the implementation of stick horse what the Democrat gives to neoliberal politics since Ronald Reagan in the 1980s is the so-called Chip and Science Act.

With the new legislation, the US government will provide $52 billion to stimulate U.S. chip manufacturing and $200 billion for research in areas such as artificial intelligence, robotics, and quantum computing.

Mesozoic liberals like Reagan and Margaret Thatcher would have cursed this return of stimulus, but the world is like this, the pendulum swings between maximum liberalism and state intervention.

The new law is the most important change in American industrial policy in the last 50 years, according to Gary Hufbauer, a researcher for this newspaper article from the Peterson Institute for International Economics. New York Times.

In an era of extreme polarization, there was a rare convergence of interests: the law was passed with the votes of both Democrats and Republicans. Fear of China works wonders in the US. Biden follows the same policies as his alleged nemesis, former President Donald Trump.

The American shift in industrial policy is another development of the pandemic and the trade war with China, 2 factors that act like Siamese twins – you never know where one ends and the other begins.

The pandemic has shown how unreliable global chip production is. Everyone depends on Taiwan, China and, to a lesser extent, South Korea. A shortage of chips led to an industry-wide shutdown that felt more like a sci-fi scene than a historic hangover. The darkness of time is revealed in facts that no one dared to imagine. Such an event was the appearance of semiconductors.

The war with China revealed another frightening fact for the Americans: the Chinese already know how to make extremely complex 7-nanometer chips. The measurement is a reference to the size of the transistors that are used in the assembly of the chip. 7nm transistors are the smallest commercially produced transistors and have several advantages: they consume less power and operate faster. The iPhone XS has this chip.

The big question is how China managed to come up with such sophisticated technology even with the US embargo on the country: it is forbidden to export machines that lead to this brand new chip technology. The Americans suspect that the Chinese copied the 7nm chip from a Taiwanese company.

I don’t think history repeats itself even as a prank, but the 7nm chip reminded me of the shock the US experienced when the Soviet Union sent cosmonaut Yuri Gagarin (1934-1968) into space in April 1961. The Americans created a space program so successful that Soviet space artifacts looked like tin cans. I don’t think this will happen with China. One of the obsessions of the Chinese Communist Party is to study the causes that led to the collapse of the Soviet empire.

The funny thing about this story is that the US has started behaving like a Chinese dictatorship. The chip has become synonymous with power, as it always has been. The development of new processors is seen as a fundamental step towards technologies that should change the course of new technologies such as the quantum computer. The liberal notion that this production could be transferred to Taiwan, to South Korea, or even to China has gone to pieces. What will American companies do if China takes Taiwan, the world’s largest supplier of chips? To hell with liberalism. The numbers support American pragmatism. In 1990, the US accounted for 37% of the world’s chips, according to the Semiconductor Industry Association. In 2020, the share dropped to 12%. Over the same period, China’s share has fallen from almost zero to 15% of world production.

There are no economic models to predict what will happen to the billions that the US will invest in chip manufacturing, but there are indications that it could be very successful. The Taiwanese semiconductor company and Samsung, the 2 most important manufacturers in the global network, have already expressed interest in opening factories in the US so as not to lose their customers.

If this happens, it will become a historical banana for dogmatic liberals.

World Nation News Desk
World Nation News Deskhttps://worldnationnews.com/
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