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142. Why the CHIPS Are Down: Stock Buybacks and Subsidies in the U.S. Semiconductor Industry
- Author:
- William Lazonick and Matt Hopkins
- Publication Date:
- 09-2021
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- The Semiconductor Industry Association (SIA) is promoting the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, introduced in Congress in June 2020. An SIA press release describes the bill as “bipartisan legislation that would invest tens of billions of dollars in semiconductor manufacturing incentives and research initiatives over the next 5-10 years to strengthen and sustain American leadership in chip technology, which is essential to our country’s economy and national security.” On June 8, 2021, the Senate approved $52 billion for the CHIPS for America Act, dedicated to supporting the U.S. semiconductor industry over the next decade. This paper highlights a curious paradox: Most of the SIA corporate members now lobbying for the CHIPS for America Act have squandered past support that the U.S. semiconductor industry has received from the U.S. government for decades by using their corporate cash to do buybacks to boost their own companies’ stock prices. Among the SIA corporate signatories of a letter to President Biden in February 2021, the five largest stock repurchasers—Intel, IBM, Qualcomm, Texas Instruments, and Broadcom—did a combined $249 billion in buybacks over the decade 2011-2020, equal to 71 percent of their profits and almost five times the subsidies over the next decade for which the SIA is lobbying. In addition, among the members of the Semiconductors in America Coalition (SIAC), formed specifically in May 2021 to lobby Congress for the passage of the CHIPS for America Act, are Apple, Microsoft, Cisco, and Google. These firms spent a combined $633 billion on buybacks during 2011-2020. That is about 12 times the government subsidies provided under the CHIPS for America Act to support semiconductor fabrication in the United States in the upcoming decade. If the Congress wants to achieve the legislation’s stated purpose of promoting major new investments in semiconductors, it needs to deal with this paradox. It could, for example, require the SIA and SIAC to extract pledges from its member corporations that they will cease doing stock buybacks as open-market repurchases over the next ten years. Such regulation could be a first step in rescinding Securities and Exchange Commission Rule 10b-18, which has since 1982 been a major cause of extreme income inequality and loss of global industrial competitiveness in the United States.
- Topic:
- Science and Technology, Regulation, Legislation, Strategic Competition, Subsidies, and Lobbying
- Political Geography:
- United States of America
143. Geo-tech politics: Why technology shapes European power
- Author:
- Ulrike Franke and José I. Torreblanca
- Publication Date:
- 07-2021
- Content Type:
- Policy Brief
- Institution:
- European Council on Foreign Relations (ECFR)
- Abstract:
- New technologies are a major redistributor of power among states and a significant force shaping international relations. The European Union has for too long seen technology primarily through an economic lens, disregarding its implications for its partnerships and for its own geopolitical influence. If the EU wants to be more than a mediator between the two real technological powers, the United States and China, it will need to change its mindset. For the EU and its partners, the vulnerabilities created by battles over technology divide into two types: new dependencies and openness to foreign interference. The EU and its member states need deeper engagement with the geopolitical implications and geopolitical power elements of technology. This engagement has an external element of reaching out to partners and an internal element of ensuring close cooperation between the EU and its member states.
- Topic:
- Science and Technology, European Union, and Geopolitics
- Political Geography:
- China, Europe, and United States of America
144. The evolution of US strategic priorities
- Author:
- Carl Bildt
- Publication Date:
- 03-2021
- Content Type:
- Policy Brief
- Institution:
- European Council on Foreign Relations (ECFR)
- Abstract:
- The Biden administration’s Interim National Security Strategic Guidance reflects an evolution in US strategic thinking and policy priorities. The document shows how the administration intends to shift away from America Alone and towards America and its Allies. But the optimism and confidence the US expressed in 2015 has been replaced by deep concern over a range of strategic trends. The US will now prioritise strategic competition with China, a new approach to trade, the rise of technology, the defence of democracy, the urgent climate and health crises, and efforts to avoid ‘forever wars’ in the Middle East.
- Topic:
- Climate Change, Health, Science and Technology, Democracy, and Trade
- Political Geography:
- China, Middle East, North America, and United States of America
145. How 2400 Pages of Tech Industrial Policy will change Transatlantic Relations
- Author:
- Tobias Gehrke
- Publication Date:
- 07-2021
- Content Type:
- Policy Brief
- Institution:
- EGMONT - The Royal Institute for International Relations
- Abstract:
- The currently 2400-page long ‘US Innovation and Competition Act’ making its way through Congress is about one thing only: China. But it also signals a much broader shift in American geoeconomic strategy towards tech industrial policy which matters just as much for Europe. To avoid major rifts, tech industrial diplomacy will need to become a staple of transatlantic affairs.
- Topic:
- Industrial Policy, Science and Technology, Transatlantic Relations, Industry, and Strategic Interests
- Political Geography:
- China, Europe, Asia, North America, and United States of America
146. The EU-US Trade and technology Council: Mapping the Challenges and Opportunities for Transatlantic Cooperation on Trade, Climate, and Digital
- Author:
- Guillaume Van der Loo, Thijs Vandenbussche, and Andreas Aktoudianakis
- Publication Date:
- 09-2021
- Content Type:
- Working Paper
- Institution:
- EGMONT - The Royal Institute for International Relations
- Abstract:
- The EU-US Summit on 15 June 2021 marked the beginning of a renewed transatlantic partner- ship and set an ambitious joint agenda for EU-US cooperation post-COVID-19. The new Biden administration offers the EU the opportunity to re-establish transatlantic relations, which reached their lowest point since World War II under the turbulent Trump administration, and to address the bilateral disputes and tensions that have emerged, partly as a result of Trump’s ‘America First’ policies. One of the key deliverables of the Summit was the establishment of the EU-US Trade and Technology Council (TTC). The TTC aims to deepen EU-US relations on trade and investment and to avoid new technical barriers to trade by cooperating on key poli- cies such as technology, digital policy issues and supply chains. Despite the optimism in Brussels and Washington about renewing and strengthening transat- lantic cooperation, there are several challenges for EU-US cooperation. In the areas of trade, digital and climate in particular several differing views or outstanding disputes (most of them inherited by the Trump administration) will need to be addressed by the new TTC (the first meeting is scheduled on 29-30 September 2021) or other joint bodies. Only then will the EU and the US be able to deliver on the new ambitious transatlantic agenda. This paper will there- fore discuss the key challenges and opportunities for EU-US cooperation in the three inter- related areas of trade, digital and climate. For each of these areas, the outcome of the June 2021 EU-US Summit will be discussed and the challenges and opportunities for delivering on the renewed transatlantic agenda will be analysed. Moreover, this paper will present several policy recommendations, for the TTC or on EU-US cooperation in general, on how to advance the transatlantic partnership.
- Topic:
- Climate Change, Diplomacy, International Cooperation, International Trade and Finance, Science and Technology, European Union, Digitalization, and Summit
- Political Geography:
- Europe, North America, and United States of America
147. Quad Economy and Technology Task Force Report
- Author:
- Gateway House
- Publication Date:
- 08-2021
- Content Type:
- Special Report
- Institution:
- Gateway House: Indian Council on Global Relations
- Abstract:
- Conceived in 2020, the task force studied promising areas for cooperation between the Quad countries beyond their pre-existing maritime security partnership. The report highlights the need to increase economic and technological interdependence among the Quad countries and to establish common and updated rules and standards for emerging technologies in five study areas. The unique mix of the group – three developed and one developing nation, three Pacific and one Indian Ocean nation, three producer-trading nations with one massive emerging market – lends itself to innovation, experimentation and cooperation that can be a template for a new, post-pandemic geopolitical era.
- Topic:
- Climate Change, International Cooperation, Science and Technology, Economy, Vaccine, and COVID-19
- Political Geography:
- Japan, India, Australia, and United States of America
148. Inserting India into U.S.-Israel Defence Technology Cooperation
- Author:
- Gateway House
- Publication Date:
- 04-2021
- Content Type:
- Working Paper
- Institution:
- Gateway House: Indian Council on Global Relations
- Abstract:
- Over the last decade and a half, Israel and the U.S. have become India’s top arms suppliers, and a robust defence partnership is underway. Beyond pure defence trade, Israeli and U.S. defence companies have participated in the ‘Make in India’ initiative, focusing on technology transfers and the co-development and co-production of technologies. This is the moment for India to capitalise on these two critical, bilateral defence partners, and particularly the start-up innovation hubs of Silicon Valley and Tel Aviv. How can India insert itself into the U.S.-Israel defence technology cooperation corridor, and participate in the development of emerging technologies like quantum computing and artificial intelligence in defence? What benefit will the U.S. and Israel gain from a partnership with India? This paper studies the U.S.-Israel defence technology corridor, and suggests potential collaborations for India. It will necessitate the three innovation hubs of Silicon Valley, Tel Aviv and Bengaluru coming together to capitalise on their respective strengths and declared national technology priorities. Bringing a like-minded, tech-savvy democracy like India into the arc of the U.S.-Israel partnership will offer a trinity of benefits: a robust and tested edge in emerging technologies to the three militaries over their adversaries, develop interoperability, and reinforce their access to the Indian market. The greatest benefit will be for India, which has been set back by lengthy defence acquisition procedures, and will do better with a modern defence base at home. India will have to overcome the geopolitical hurdles of its defence relationship with Russia, and of Israel’s reported defence ties with China and Pakistan, to build a sturdy trilateral cooperation.
- Topic:
- International Cooperation, Science and Technology, Geopolitics, Arms Trade, and Defense Industry
- Political Geography:
- Pakistan, Russia, China, South Asia, India, Israel, and United States of America
149. Labs over Fabs: How the U.S. Should Invest in the Future of Semiconductors
- Author:
- Chris Miller, Jordan Schneider, and Danny Crichton
- Publication Date:
- 03-2021
- Content Type:
- Special Report
- Institution:
- Foreign Policy Research Institute (FPRI)
- Abstract:
- The U.S. semiconductor industry faces an existential competitive threat. China’s efforts to catch up and eventually overtake the U.S. in semiconductor technology is not only an economic challenge—it is also a security threat. The Trump administration’s decision to pressure Huawei by cutting off its access to critical semiconductor technologies has only intensified China’s commitment to developing its own ability to design and manufacture computer chips without reliance on foreigners. China has spent billions of dollars in state subsidies, and plans to spend billions more in the coming years. At risk is not just the U.S. industrial base, but also the complex supply chains that link U.S. firms to customers and suppliers in South Korea, Taiwan, Japan, and several European countries. On February 24, 2021, President Biden ordered a 100-day review aimed at “securing America’s critical supply chains.” The executive order focused on the semiconductor industry, declaring that “over the years we have underinvested in production—hurting our innovative edge—while other countries have learned from our example and increased their investments in the industry.” While production certainly has its place, it would be dangerous for the U.S. to focus solely on the fabrication of semiconductors at the expense of other parts of the chip production process—including design, software, and production machinery—where the U.S. is currently stronger. There is a case to be made for supporting the construction of manufacturing facilities (“fabs”) for certain types of specialized chips, such as those needed in the defense sector. But reshoring most or all production is not a realistic goal. Moreover, the tens of billions of dollars that such a policy would cost are better spent elsewhere. Beyond that, the U.S. should focus less on supporting production of today’s technologies, which given the pace of innovation will soon be out of date. Instead, scarce resources should be devoted to shoring up the broader semiconductor ecosystem on which American innovation depends. In the past, the government has played a major role in investing in research that is not yet commercially viable, something it should be doing more of today. It should build talent pipelines from high schools to universities to corporations and startups, ensuring an ample supply of semiconductor engineers. And the U.S. should see open-source chip architectures such as RISC-V not as a threat to existing intellectual property, but as a technology that could unlock a new wave of semiconductor innovation—something that the U.S. would be well placed to lead.
- Topic:
- Science and Technology, Investment, and Semiconductors
- Political Geography:
- North America and United States of America
150. New Technologies and Nuclear Disarmament: Outlining a Way Forward
- Author:
- Tytti Erästö
- Publication Date:
- 05-2021
- Content Type:
- Special Report
- Institution:
- Stockholm International Peace Research Institute (SIPRI)
- Abstract:
- This report sheds light on the impact of recent military-technological advancements on nuclear deterrence and disarmament. Noting that progress towards multilateral disarmament is hardly possible without prior and significant reductions in the largest nuclear weapon arsenals, the report views the resumption of bilateral arms control between Russia and the United States as the most important step towards disarmament at the present moment. It argues that these two countries should move away from their cold war era nuclear doctrines, which seek an ability to win nuclear wars, towards a policy of ‘minimal nuclear deterrence’, that is focused on deterring a nuclear attack. In line with doctrinal changes, further cuts in Russian and US nuclear stockpiles could be achieved by removing nuclear weapons from regional conflict dynamics, meaning that they would no longer serve as a deterrent against conventional aggression. Such a change would help to reduce nuclear risks without undermining regional deterrence, as each side already has robust conventional forces comprised of precision-strike weapons and other advanced military systems. At the same time, the report notes that progress towards nuclear disarmament would be complicated by long-range precision-strike weapons and strategic missile defences, which have raised the bar for credible nuclear deterrence by creating uncertainty about US adversaries’ second-strike capabilities. Lowering that bar and eventually reducing the perceived need for nuclear deterrence will require creative arms control diplomacy, including limits on strategic missile defences; stronger norms against both nuclear and conventional aggression; as well as a clear stigma against nuclear weapons.
- Topic:
- Arms Control and Proliferation, Nuclear Weapons, Science and Technology, and Disarmament
- Political Geography:
- Russia and United States of America