The NPR Politics Podcast - Computer Chips, Made In America?

Episode Date: October 5, 2022

President Biden sees large-scale capital investment by the U.S. government as the way to revive the anemic American manufacturing industry. The CHIPS and Science Act, which domestic boosts semiconductor manufacturing, even managed to attract Republican support. But who will benefit from its tens of billions in subsidies?This episode: political correspondent Danielle Kurtzleben, political correspondent Susan Davis, and White House correspondent Franco Ordoñez.Learn more about upcoming live shows of The NPR Politics Podcast at nprpresents.org.Support the show and unlock sponsor-free listening with a subscription to The NPR Politics Podcast Plus. Learn more at plus.npr.org/politics Connect:Email the show at [e-mail] the NPR Politics Podcast Facebook Group.Subscribe to the NPR Politics Newsletter.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Hey, it's Asma Khalid from the NPR Politics Podcast, and Atlanta, we want you to come see us live. Join me, Mara Liason, Susan Davis, Tamara Keith, Miles Parks, and Georgia Public Broadcasting's Stephen Fowler as we do our show live at the Buckhead Theater, Thursday, October 20th at 8 p.m. You can find more information about tickets, including student ones, at nprpresents.org. Thanks to our partners, Georgia Public Broadcasting, WABE, and WCLK Jazz. We hope to see you there.

Hi, this is Ryan at the East Lansing City Hall, where I just registered to vote in Michigan's 7th Congressional District. This podcast was recorded at 12.05 p.m. Eastern Daylight Time on Wednesday, October 5th, 2022. Things may have changed by the time you hear this, but I will still be a first-time Michigander voter. Okay, here's the show. You love to see it. Go Ryan! Yay, democracy! Hey there, it is the NPR Politics Podcast. I'm Danielle Kurtzleben.

I cover politics. I'm Frank Ordonez. I cover the White House. And I'm Susan Davis. I cover politics. President Biden's big legislative achievements have all poured huge amounts of money into American manufacturing industries. And that is especially true of the Chips and Science Act. And now the president has a team in place charged with implementing $52 billion in subsidies. Today, we're going to dig into what we know so far about what all that money will do. So, Franco, CHIPS was signed a couple of months ago at this point. Remind us, what exactly does the CHIPS Act do? Yeah, it's this massive plan to build back the domestic manufacturing of these chips in the

United States. These are chips, semiconductors that go into everything that has an on and off switch. That includes cars, it includes dishwashers, healthcare devices, but also weapons like the ones that the U.S. is sending to Ukraine. I mean, anyone who has bought a car in the last couple of years or pretty much anything electronic knows that there has been a shortage of these trips. And the Biden administration is really desperate to make sure that the United States is no longer or is not so much reliant on China for this critical technology. So all this money, these subsidies are going to go to companies to help them build factories and hire more workers to make more of these chips here in the United States. And we are seeing some of the results already as companies like Intel

and Micron have been announcing big investments because they're expecting to get some of that money. Right. And I mentioned that that bill contains $52 billion worth of subsidies for producing those semiconductor chips. Can you give us a sense of the scope of that or what is the aim of this bill? What is the finish line that it is hoping to get us to, those $52 billion? You know, the finish line is a little bit murky, but the White House is not happy where it stands right now. It used to be a leader in this industry, but now says that it just produces about 10 to 12 percent of the world's supply of semiconductors and none of those advanced chips in the United States, whereas East Asia accounts for 75% of global production. And China is also a big part of that. It's becoming a bigger and bigger leader in manufacturing of these chips, as well as in research and development. So a big part of this is just making sure that the United States is not so reliant on China for such critical technology, for example, if there was another pandemic. There is also some geopolitics here at play. You know, it's about

countering the rise of influence in China, a big issue here in Washington these days, and has been for, you know, quite a while now. I mean, during the signing ceremony at the White House, Biden mentioned China five times, even talked about how they were lobbying against the bill. But it is still a significant shift in thinking for Washington, kind of stepping away from free trade aspects. And Sue, the CHIPS Act managed to pass Congress with some bipartisan support, and that is no small feat these days. Especially when you're spending money. Right. Yes, absolutely. So remind us what that passage was like. Was it a tough sell? Was it a bumpy road? It was. I mean, it took a lot to put this bill together. I think a lot of the focus

was in the Senate, because as we've well established, you need 60 votes to get through the Senate. So it needed to have big bipartisan support there. And it ultimately did come together. They had a super majority of support for it. And as Franco said, I think you have to look at this bill through a couple different lenses. One, I think a lot of lawmakers across the ideological spectrum see this partly as a national security issue, that outsourcing such a key technological component to our economy has national security risk to it. I think they also look at it, especially coming out of the pandemic and the economic situation, jobs, right? We're talking about this spending is going to build factories

in states across the country that are thousands and thousands and thousands of American jobs. Who is against that in Congress? And third is the China component of this. I mean, I think a lot of lawmakers, particularly on the Republican side of the aisle, because I do think the Republican Party, certainly under the former administration, has been much more vocal of what they see as a threat from China, with a lot of that sort of economic posturing of the past administration. And so there is a bipartisan recognition that like the U.S. had to step up its game in terms of the threat that they see that China poses to the U.S. economy and to U.S. national security. Yeah, it's really interesting seeing China as kind of like the uniter here and bringing both the Republicans and Democrats together because they are full force against China. And that is one thing that they can really agree on. Well, so, Franco, let's talk implementation. This whole law is aimed at massively amping up U.S. semiconductor production, as you mentioned. And I know that you also recently talked to Ronnie Chatterjee, whom the administration has put in charge of administering

all of these subsidies. How does he see his job? What did he tell you? Yeah, I mean, he's basically in charge of laying the foundation for how the money is going to be spent. He'll hold his first meeting with cabinet leaders tomorrow where they'll go over objectives and set some metrics. You know, he says it's pretty critical to have all the stakeholders on the same page for this from the start. I mean, just to talk a little bit about the importance here. I mean, as an example, he noted the impacts to the auto industry as a case study on how important these tiny little thumbnail size chips are to the economy. That was one of the biggest drivers of inflation, probably one third of inflation increase in 2021 was because of cars, we couldn't get the chips we needed to build the cars. And when you can't get the chips, you need to build the cars, workers get furloughed, and prices go up. Yeah, so I mean, obviously, this is a very critical here. Talking to him was one of the first times I'd heard about the such

large, I mean, who knew the auto industry had such a huge impact on the global economy, but it just shows how significant these little chips are. Franco, is the money going out the door yet? Not yet. It's, you know, the legislation only passed a couple months ago. Companies cannot actually apply for federal backing until next year. But, I mean, they're really getting ahead of the plans. funding could make that number grow to $100 billion. Micron announced this week that it's going to spend $100 billion on a new chip plant in upstate New York. And it's something that that CEO said is only happening because of the new law. I mean, there are still a lot of question marks because the money is not going out yet. It has to be applied for. But those players are getting ahead of the game now because they know they have to. And it doesn't hurt to have Biden coming to their home states and championing their cause. It makes it much more likely that they will get the money.

All right. We're going to take a quick break. More in a second. And we're back. And Franco, you mentioned geopolitics surrounding this bill earlier. And I also understand that in your interview, Chatterjee talked about this bill specifically in national security terms. Can you tell us more about that? Yeah, for sure. I mean, so much of the weapon systems today are built on electronic systems. I mean, take the Javelin missiles, for example, that have proved so valuable for Ukraine and its defense against Russia. You know, those really can't work without these chips. Here's Chatterjee talking more about that. The same chips that go into those devices and products, anything with an on-off switch, are also in our defense systems. So if you think about everything protecting us, they also rely on chips. We need to make sure at least two things. We have a resilient supply

of chips so we can continue to build and invest in our defense systems, and they're secure and not vulnerable to hacking and cybersecurity risks. Those are two reasons why the Department of Defense is so involved in the CHIPS and Science Act and why this is key for national security. And Sue, I want to turn to you and kind of zoom out and talk about the big picture politics here. The way that this bill, along with the Climate Bill, also known as the Inflation Reduction Act, sort of represent a revival of old school democratic thinking of just having the government flat out subsidize an industry, multiple industries create jobs. But traditionally, Republicans have been in the past the party

of fiscal restraint and the free market. And indeed, they slammed the climate bill that passed for all of its spending provisions. So why did this bill, which was $280 billion altogether, why did this in particular get Republican support? Well, you know, I certainly think there has been Republican support for government subsidies and industries over the years, too. I think, you know, the agriculture industry would probably be a great example of that. Farm subsidies are also a huge part of government spending that many Republicans are, you know, quite supportive of. I think it really does help to view this through the China spectrum when you ask that question. I think Republicans are just as comfortable using government money to subsidize industries and prop up American jobs when it's done for the quote unquote right reasons.

Right. American jobs when it's done for the quote unquote right reasons, right? And in this situation, I feel like the rank and file Republican lawmaker probably thinks it's a pretty good idea for the federal government to invest in making the U.S. more competitive against China. I think that's a pretty winning argument in basically any congressional district in this country, but certainly any Republican congressional district. And I think, you know, it didn't pass the House with as big a bipartisan support, but part of that is just the politics of wanting to vote against whatever the president in power is. If this was a Trump bill, the Republicans would have been on board for it in the House. I also have to think, too, here is that

this is spending that will directly benefit the economy. So it costs money, but it's also going to create money, right? Like companies, as Franco said, are investing similarly in this. You're talking about jobs and you're also talking about, and I think in the Senate, you'll see this too, people are really interested in getting these factories in their states, right? Like it's a win politically speaking, if yes, it spends money, but they're going to be opening up a bunch of factories in Ohio that is going to boost good paying jobs. Right. Like these also tend to be not just jobs, but pretty good established, well-paying jobs. And that's just good politics. I mean, to me, like the chips bill is the easiest explainer of how politics works when the system is functioning.

Right. You have bipartisan buy in. It is clearly solving a problem that most people acknowledge exists. It is diverting government resources to solve that problem and ideally will ultimately, what happens down the road, five years, 10 years down the road, who gets the money and who are the winners and who are the losers? Because some of the concern in past policy like this is that some of that money went to those who spent the most lobbying or went to politically important districts., we've obviously seen that in the past. But right now, there's no question that, you know, that we're seeing some bipartisanship that we don't see very often. All right, Franco, to kind of wrap this all together, I'm curious, did Ronnie Chatterjee give you a sense of what success looks like for the administration on this? I really tried to push Chatterjee on to kind of give a percentage of the industry that they would be favoring. He would not. I mean, he would not say there is a number or a percentage that they would say mission accomplished. But he says, you know, the United States cannot stay where it is right now. It needs to be more resilient. It needs its own secure supply of semiconductors.

So it is not so dependent on China. We invented this industry in the United States. I mean, there's a reason it's called Silicon Valley. But over time, we went from producing more than a third of all chips in the world to only 12 percent and none, zero of the most advanced chips. So really, that's the numbers we're starting with today. And we need to increase our share of chip production. And we also need to increase our share of advanced chip productions for all the leading applications in the future of, let's say, cloud computing, artificial intelligence, and quantum. You know, it's a really big ask to kind of move

from 10 to 12% to a much larger portion or percentage of the industry when China and Asia are so far ahead. But he's, you know, he seems confident that the United States can do it. And he says really the greatest challenge that he sees is getting all the players, not just government, but also the private sector and labor, basically all singing from the same hymn book. All right. We are going to leave it there for today. I am Danielle Kurtzleben. I cover politics. Frank Ordonia I'm Frank Ordonia as I cover the White House. Danielle Pletka And I'm Susan Davis. I also cover politics.

And thank you for listening to the NPR Politics Podcast.