US lawmakers highlight CHIPs Act’s impact on competition with China.

Boosting Domestic Production: The CHIPS Act

Last year, President Joe Biden signed the Chips and Science (or CHIPS) Act into law, promising over $50 billion to domestic semiconductor manufacturers to boost domestic production and “counter China.” This landmark microchip manufacturing bill was pivotal in drafting and negotiating on behalf of the law was Sen. Mark Kelly (D-Ariz.), who beat out Republican candidate Blake Masters in the 2022 midterm elections.

Communist China or American Free Enterprise?

While Sen. Kelly predicted a return of manufacturing jobs as a result of the law, some economists argue that the policy is actually more aligned with the values of communist China than those of American free enterprise. Mises Institute senior fellow Robert Murphy told The Epoch Times that “The CHIPS Act is just another example of top-down industrial planning that is more reminiscent of Maoist China than an ostensible market economy.”

Disincentivizing Innovation?

Another concern among free-market economists is that by flushing historically uncompetitive American firms with new capital, the law will disincentivize innovation by artificially propping up the revenue of domestic chip companies without their needing to improve the product. However, Sen. Kelly argued that corporate profits are frequently reinvested into research and development, so this should be no different.

Wage Floor and Union Rates

The law’s inclusion of a wage floor is not conducive to the creation of manufacturing jobs, according to Murphy. “If they want to ‘create manufacturing jobs,’ then it’s counterproductive to insist on union wage rates,” the economist added. “That means U.S. employers won’t be able to hire as many workers as they otherwise would.”

Boosting Arizona’s Competitiveness

Sen. Kelly believes that the CHIPS Act will boost Arizona’s competitiveness in the chip industry and be a “big loss for China.” With the law’s passage, he said in a statement, “After over a year of hard work, our landmark microchip manufacturing bill is now law.”

Conclusion

The CHIPS Act is a significant investment in domestic semiconductor manufacturing, but it has its critics. While some argue that it is more aligned with communist China’s values than American free enterprise, others believe that it will disincentivize innovation and job creation. Only time will tell if the law will achieve its intended goals of boosting domestic production and countering China.