The narrow tax credits in CHIPS fail to address the broader challenge of keeping American industries competitive against China, warns the Wall Street Journal editorial board.

In a recent interview, Ways and Means Republican Leader Rep. Kevin Brady (R-TX) said “China, in their ‘Made in China 2025’ economic plan, is seeking to dominate 10 manufacturing and technologies in the world. It doesn’t make sense to cede to China nine of those industries and provide tax breaks to one.”

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

From the Wall Street Journal editorial board:

“Republicans on the House Ways and Means Committee point out that for the same money Congress could double the research and development tax credit for all companies through 2025.”

CLICK HERE to read the full editorial.

The CHIPS bill targets industries whose supply chain shortages are already recovering from the pandemic.

“The impetus for the bill was a severe pandemic chip shortage that disrupted supply chains and raised the cost of autos and many other products. But the shortage is easing as global demand and the economy slow.”

The U.S. is a global hub for tech and investment industries – including semiconductors – that already enjoy significant tax advantages and low corporate rates.

“The other claim for the bill is that the U.S. must subsidize domestic chip-making to compete with China, but this also isn’t persuasive. 

 

“The companies like to point out that the U.S. share of the world’s chips has fallen to 12% from 37% in 1990. They don’t mention that the U.S. leads in chip design (52%) and chip-making equipment (50%). Seven of the world’s 10 largest semiconductor companies are based in the U.S. China trails American companies by years in semiconductor technology.”

The bottom line:

“The chip bill isn’t needed to compete with China, and it will set a precedent that other industries will follow. Anybody who can throw up a China competition angle will ask for money.”