America has been at the forefront of every major technological revolution since the 19th century. It is a major reason why we became the world’s superpower. But with China rising fast, America must act fast to preserve its technological edge.
Much will depend on whether we can become, once again, a world leader in manufacturing the microchips used in everything from cellphones to cars. Advanced microchips are still designed in the U.S., but most are made in Taiwan, which China has promised to annex by force. A war over Taiwan would disrupt vital supply chains for all sorts of electronics.
What chases high-tech manufacturing abroad is not the lack of government subsidies, but excessive regulation and taxation. The CHIPS Act of 2022, in which Congress appropriated $52 billion to bring microchip factories (aka “fabs”) back to America, is a case in point. The subsidies are meant to accelerate construction of fabs, but they trigger environmental review under the National Environmental Policy Act, or NEPA, which turns the process into a years-long odyssey through the federal bureaucracy.
The Senate has passed a bill that would fast-track CHIPS Act projects by providing that federal funding does not by itself trigger NEPA where it is less than 10 percent of the project cost or is provided in the form of loans. Projects that merely expand existing fabs or are critical to national security would also be exempted.
Despite these narrow carveouts, the bill has stalled in the House of Representatives, largely because a few dozen congressmen who, while supportive of NEPA reform, oppose reforms that benefit only one sector. This concern is understandable but misplaced. Some of the most important NEPA reforms of recent decades started in just one sector and were expanded after proving their effectiveness. The expedited process for major infrastructure projects under FAST-41, for example, was born in the transportation sector.
One important NEPA reform would be to clarify that where federal funding constitutes only a small percentage of a project’s costs, such funds do not alone trigger NEPA. There is nothing wrong with introducing such a reform in just one sector.
As former Defense Secretary Leon Panetta testified recently, “Projects receiving CHIPS Act funding should advance with great urgency, including by removing any regulatory hurdles that may impede those efforts and streamlining federal environmental reviews.” Last fall, Commerce Secretary Gina Raimondo testified that the U.S. “does not have years” to approve these “national security-imperative projects.”
Predictably, Democrats have crammed a bunch of ideological pork into the program. The CHIPS ACT created a chief DEI officer at the National Science Foundation, which helps administer the program. Participating fabs must give “excess profits” back to the government, pay workers union-scale wages, and prioritize “minority-serving institutions” and “economically disadvantaged individuals” in the semiconductor workforce.
With all this red tape, many chipmakers are already building fabs elsewhere, where they can do it much faster, even if means foregoing federal subsidies. Major companies such as Intel, Samsung, and TSMC are already delaying or cancelling new fabs in the U.S.
The tech sector’s problems go far beyond woke pork and NEPA. The biggest obstacle to bringing chipmakers back to America is our lack of high-skilled tech workers. In this respect, China is rapidly developing an insurmountable lead.
Another looming challenge is electricity. Unless Biden’s climate policies are reversed, electricity will become far more expensive and unreliable, with potentially devastating effects for industry, as we are already seeing in Europe. Another source of worry for the industry is Big Tech's election interference and censoring of conservatives, and the measures that may be required to stop it.
In the long run, a competitive tech sector requires a national commitment to globally competitive regulation and taxation. Exempting microchip fabs from NEPA would be a good place to start.
Mario Loyola is a senior research fellow at the Heritage Foundation.
