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Why is the US trying to donate $ 52 billion to companies like Intel? | Robert Reich

Congress will soon make final adjustments Tip methodProvides over $ 52 billion to companies designing and manufacturing semiconductor chips.

Subsidies are required by the largest chip makers as a condition for making more chips in the United States.

It’s pure blackmail.

The world’s largest chip maker (sales) is already an American company, Intel, based in Santa Clara, California.

Intel requires very little money.Its earnings have risen to $ 79 billion last year. Its CEO, Pat Gelsinger, $ 179 million (This was 1,711 times the average Intel employee).

Intel designs, assembles and tests chips in China, Israel, Ireland, Malaysia, Costa Rica, Vietnam, and the United States.

The problem for the United States is that Intel is not helping the United States cope with the current chip shortage by prioritizing US producers. And that doesn’t keep America at the forefront of new chip technology.

Obviously, Intel wants a portion of the $ 52 billion Congress to be put into the semiconductor chip industry. But why does Intel need to make money exactly?

Among other potential beneficiaries of the tip law are GlobalFoundries, which currently manufactures chips in New York and Vermont, as well as many other places around the world.

GlobalFoundries is not an American company either.that is Wholly owned subsidiary Mubadala Investment Co., a sovereign wealth fund in the United Arab Emirates

The country where the chip maker (or other tech global company) is headquartered is increasingly unrelated to where it is designed and manufactured. thing.

This explains why all industries that may be considered “important” are working with governments on subsidies, tax cuts and regulatory exemptions in return for design and manufacturing in that country.

It’s a huge global shakedown.

India, Japan and South Korea have all recently passed tens of billions of dollars in tax credits, subsidies and other incentives to the semiconductor industry. The European Union has completed its own tip method of $ 30 to $ 50 billion as a subsidy.

Even China is expanding tax exemptions and tariff exemptions and other measures aimed at upgrading chip design and production.

“Other countries around the world … are investing heavily in innovation and chip production,” said Senate majority leader Chuck Schumer. “If we don’t act quickly, we can lose tens of thousands of high-paying jobs in Europe.”

But who are the “us” of the Senator?

John Neufer, Chief of the Semiconductor Industry Association (Washington Lobbying Division of the Semiconductor Industry), warns that chip manufacturing facilities are often 25-50% cheaper to build abroad than in the United States.

why is that?As he admits, it’s mostly Incentives provided by foreign countries.

As capital becomes more and more global and lame, it becomes easier for global companies to compete with each other.Don’t be shy as the then CEO of ExxonMobil, based in the United States Said: “I’m not a US company and I don’t make decisions based on what’s good for the US.”

people, In contrast, because it is rooted in the state, its bargaining power is much lower.

This asymmetry is even $ 22.5 billion, which Congress says is ready to hand over $ 52 billion to a profitable global industry, but the Biden administration needs to deal with the ongoing Covid public health crisis. Also helps explain why you can’t come up with it.

In the case of an initial public offering, the company must be loyal to its shareholders by maximizing the value of the stock. However, more than 40% of the shareholder value of US-based companies is owned by non-Americans.

Moreover, there is no reason to think that American owners of a company are willing to sacrifice return on investment for the benefit of the country.

The real question is what conditions should the United States (or any other country that subsidizes chip makers) impose on receiving such subsidies.

Chipmakers sell chips to the highest bidders around the world, regardless of where they are produced, so they agree to produce more chips in the countries they are subsidizing. Just is not enough.

If the United States intends to subsidize them, it should require chip makers to give top priority to their US-based customers who use chips in products made in the United States by American workers.

And Congress needs to demand that the United States produce the highest value-added chip manufacturing (design, design engineering, precision manufacturing). That way, Americans can gain that technical expertise.

What if all the countries subsidizing chip makers demand these for themselves?

After that, the chip maker has to choose. After that, the blackmail ends.

Why is the US trying to donate $ 52 billion to companies like Intel? | Robert Reich

Source link Why is the US trying to donate $ 52 billion to companies like Intel? | Robert Reich

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