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One Pager: CHIPS Subsidy Plan Fails to Address Broader Challenge of Competition with China

July 19, 2022

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Broad-based tax incentives will better address our global competitiveness

  • The Chinese Communist Party’s “Made in China 2025” plan seeks global dominance in 10 separate industries, which reach far beyond semiconductors:
    • Advanced information technology
    • Automation & robotics
    • Aerospace
    • Ocean engineering & shipping
    • Rail transport
    • Energy efficiency & electric vehicles
    • Power equipment
    • Advanced materials
    • Medicine & medical devices
    • Agricultural equipment
  • For about the same cost as CHIPS subsidies ($52 billion in grants + $24 billion tax credit), we could enact a powerful set of incentives to allow all American companies to compete and win in the global economy:
    • Double research and development (R&D) tax credit through 2025 ($69 billion).
    • 100 percent expensing through 2025 ($5 billion).
    • Allow R&D costs to be deducted immediately through 2025 ($4 billion).

U.S. is already on track to ramp up production with new semiconductor facilities


Location Announced Project Cost Completed Chip Type
TSMC Arizona Nov. 2020 $12 billion Early 2024 5nm / 4nm
Intel Arizona Mar. 2021 $20 billion Early 2024 7nm / 5nm
Samsung Texas Nov. 2021 $17 billion Late 2024 3nm
Intel Ohio Jan. 2022 $20 billion Late 2025 3nm 

CHIPS tax credit—via government checks—is an excessive industry handout

  • The 25 percent refundable tax credit would provide large government checks to a limited group of hand-picked companies.
  • Also creates an unjustified windfall for companies with projects already underway.

CHIPS tax credit lacks any guardrails to prevent investment shifting to China

  • Added to the $52 billion in grant money, the tax credit provides semiconductor companies with an unprecedented stack of benefits, all paid for by taxpayers.
  • Unlike the grant money, the CHIPS tax credit does not include protection against companies using the money previously earmarked for U.S. investment to increase their China footprint.
  • Without guardrails, Americans could be subsidizing expansion of the size and capabilities of semiconductor facilities in China.

Semiconductor companies already enjoy significant tax advantages

  • Semiconductor companies pay low corporate tax rates:
    • S. companies: Broadcom – 1.8 percent, Micron – 7.6 percent, Intel – 9.3 percent, Texas Instruments – 12.8 percent, Qualcomm – 13.6 percent.
    • Others: TSMC – 10.4 percent, SK Hyinx – 23.7 percent, Samsung – 24.9 percent.
  • Industry is using COVID-era supply chain problems to seek taxpayer-funded handouts.
    • These CHIPS subsidies will not alleviate existing semiconductor supply constraints because it takes years for facilities to ramp up and begin production.
    • Economists expect the market to rebalance before any new facilities come online.

U.S. is already a hub for tech investment, including semiconductors

  • TCJA was a boon for U.S. R&D investment—25 percent higher than in the years prior, reaching an all-time-high in 2019 ($584 billion and 3.06 percent of GDP).
  • U.S. semiconductor exports totaled $49 billion in 2020, behind only three other industries (aircraft, refined oil, and crude oil).
  • U.S. semiconductor companies remain the clear global leaders, with 47 percent of global semiconductor sales in 2020 (South Korea was second with 20 percent).
  • U.S. companies produce 44 percent of their semiconductors domestically, producing more here than anywhere else.
  • While the U.S. share of global semiconductor production has shrunk in recent decades, domestic semiconductor capital investment and output are increasing: U.S. capacity grew from under 2 million units per month in 2000 to more than 3 million units in 2018.

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