The United States plans to free up $52 billion in subsidies to boost domestic semiconductor production.

The House of Representatives has already approved the grant, albeit as part of a larger bill that contains some hard-to-swallow bucks for Republicans.

This is delaying approval of the US microchip industry aid program in the Senate.

But the unanimous prognosis is that the program is coming in the not too distant future - as it has strong bipartisan backing.

Winand von Petersdorff-Campen

Economic correspondent in Washington.

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It is noteworthy that the United States has never launched a major subsidy program for a single industrial sector.

But the old idea that the government shouldn't choose the winners of an industry, but leave the selection to free market competition, has hardly any followers in politics, at least not when it comes to technology that is considered to be relevant to security.

There is no doubt that these are microchips: Without semiconductors, today's cars, computers and smartphones would just be useless shells.

The significantly increased inclination towards industrial policy is due to China, whose practice of appropriating sensitive technology accommodates the politicians' wish, which can be justified in terms of political economy, to be generally active.

In addition, there is the fresh experience of disrupted supply chains as a result of the corona pandemic.

The car industry, for example, had to cut production because it couldn't get hold of enough microchips in time.

Apple relies on Asian partners

Almost 40 billion dollars of the subsidies are to go into the construction of new production facilities, the rest into research and development.

Stephen Ezell, director of the technology think tank ITIF, believes that this is sorely needed.

According to him, it is around 25 to 40 percent more expensive to produce microchips in the United States than in East Asia.

And 40 to 70 percent of this cost advantage, Asian producers owe to subsidy and tax programs by their governments.

A study by the OECD examined subsidies for the 21 largest semiconductor companies in the world and came to the conclusion that 86 percent of all subsidies in the form of equity (the state participates in the company) went to Chinese companies, as did 98 percent of the preferential loans.

There are no indications

The price-driving factor is that no other industry requires a higher level of annual investment than the chip industry: in a study for the American semiconductor lobby, the Boston Consulting Group found that more than a fifth of the proceeds flow into research and development, and 26 percent into traditional investments determined.

Moore's Law rules: Every two years, the number of transistors on a microchip doubles, and with it the performance, while the costs halve.

And this speed takes its toll: Ezell calculates that it costs around $20 billion to set up a production facility, and around $10 billion to operate for ten years.

Asian industrial policies have helped shrink America's share of total semiconductor production from 37 percent in 1990 to 12 percent today.

American corporations are still considered leaders when it comes to designing the most sophisticated microchips.

But companies like Apple or Nvidia now rely on Asian partners to take over production.

According to Ezell, this is a tricky bet: Around 92 percent of the technologically particularly sophisticated semiconductors are now manufactured in Taiwan, the rest in South Korea.

Boston Consulting has determined that disrupting the supply relationship with Taiwan would cost the global electronics industry $500 billion.

The horror scenario is based on a real concern.

In the White House, the national security advisors have long been concerned with the question of when China will take the decisive step to incorporate Taiwan, in five years or in ten years?

There is little doubt among experts that this will happen.

But America's national security advisers are occasionally wrong.

Nevertheless, the American settlement efforts are already bearing fruit, as reports from the last six months show.

The Taiwanese industrial giant Taiwan Semiconductor Manufacturing Co. (TSMC), the world's most important contract manufacturer for sophisticated microchips, is building a production facility in Arizona.

Intel has announced a factory in Ohio and Samsung wants to produce in Texas.

States and local governments have decided the choice of location with their own subsidy programs.

But all major investments are subject to one major caveat: that Congress finally approves the $52 billion in subsidies.