How to Avoid a Subsidy War Over Chips
Insuring against a looming national-security risk is vital. But it won’t go well unless the US works with its partners.
Fabs aren’t cheap.
Photographer: Lauryn Ishak/Bloomberg
Around the world, governments once skeptical of industrial policy have announced billions of dollars in subsidies for manufacturers of semiconductors. Especially in the US, the switch is guided partly by new and excessive optimism about the government’s ability to direct economic growth. But the US and its partners also share a justified and urgent concern about possible conflict over Taiwan, which would devastate the supply chain for chips that power everything from cars to cruise missiles.
Hedging against the national-security risk of supply disruptions in a critical industry makes sense. But the planners need to focus their efforts. An unchecked spending spree will lead to wasteful bidding wars, overcapacity and higher costs — with no commensurate gain in security. The US, Europe and other advanced economies need to do more than write checks if they want to build supply-chain resilience and manage risk.