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In this week’s Corner, we explore how Intel’s recent woes suggest that Biden administration’s CHIPS and Science Act was insufficient and recommend how the next administration must go further in investing in semiconductor manufacturing to protect the country’s national interest.

Intel’s Woes Prove the CHIPS and Science Act Was Necessary but Far from Sufficient

Austin Ahlman

Congress this week made headway [[link removed]] on a bill designed to make it easier to build new domestic semiconductor manufacturing facilities. And Vice President Kamala Harris, the Democratic nominee for president, doubled down [[link removed]] on the administration’s commitment to reviving American manufacturing and pursuing an industrial policy that makes America more secure and competitive by promising substantial new public investments in her second term.

These advances came at a point where the limits of the Biden Administration’s initial program to rebuild the domestic semiconductor industry came into better focus. This includes big cuts at microchip design and fabrication giant Intel, and even the floating of a takeover attempt by a major competitor. And it includes fresh indications that Chinese tech manufacturers are making major headway in engineering around the harsh restrictions on exports of high-end chips manufactured in US and key allies. Both programs were designed to help break dangerous offshore manufacturing chokepoints, especially within China.

The reports that mobile device microchip design giant Qualcomm had approached Intel about an acquisition disrupted financial markets. A deal between Qualcomm and Intel looks unlikely, due both to national security concerns and potential action by antitrust enforcers in the U.S. and elsewhere. But Intel has taken on symbolic importance as part of the administration’s semiconductor strategy, and the fact that Qualcomm even raised the idea highlights the challenges facing domestic producers. Intel’s predicament indicates that the unprecedented investments made by the CHIPS and Science Act were just the first step in a larger effort, and that Congress and the next administration should be prepared to take further actions to protect the national interest.

From a national security perspective, the most obvious problem with any mega-merger between Qualcomm and Intel is how any deal would affect Intel’s fabrication business, which makes up the heart of the U.S.-owned semiconductor manufacturing base. Putting Intel’s sprawling fabrication capacities under the control of a corporation with no history of fabrication experience may only exacerbate the challenge. Splitting Intel’s semiconductor manufacturing business off from its much more dependably profitable chip design business—as reports suggest Qualcomm is considering—poses other similar concerns. Additionally, the deal would also combine the lead domestic mobile microchip designer with the lead domestic PC and server chip designer.

The solution to the broader domestic industry’s problems is more and better directed public investment, with an eye toward allowing Intel’s fabrication side to innovate and truly compete with cutting-edge fabricators like Taiwan’s TSMC and South Korea’s Samsung. While the nearly $20 billion in grants and loans that were awarded to Intel through the CHIPS and Science Act is very large by U.S. historical standards, the total is far short of the hundreds of billions of dollars China has poured into its semiconductor fabrication capacity over the past decade.

But instead of committing to an investment strategy that ensures a robust domestic microchip manufacturing base, Congress has failed to even fully follow through on the ambitions represented in the CHIPS and Science Act. Billions of dollars in funds to accelerate research and development that were authorized by that bill have remained [[link removed]] unappropriated, largely due draconian spending caps that have been pushed by the right wing of the House Republican caucus in recent budget fights.

Pushing the needle on American microchip capabilities will also likely require lawmakers to take bolder steps to rebuild true competition in domestic chip manufacturing. As Open Markets first reported [[link removed]] earlier this year, lawmakers in both parties recently acted against the wishes of both the Department of Commerce and the Pentagon, by mandating that Intel receive some $3.5 billion of the CHIPS and Science Act’s $39 billion manufacturing fund on a redundant facility for the Department of Defense. The move granted Intel a functional monopoly on the market for secure microchips. Critics both inside the government and out had hoped that the subsidies could instead have been used to support Intel’s creation of new cutting-edge fabrication facilities, as well as to expand the capacity of smaller U.S. manufacturers who could provide important long-term competition to Intel’s manufacturing capabilities.

Harper’s Cover Story on Saving Liberal Democracy by Barry Lynn of Open Markets

Open Markets executive director Barry Lynn takes a fresh look at the Biden-Harris administration’s revolutionary changes in antitrust enforcement, in the October 2024 cover story for Harper’s [[link removed]] magazine. Lynn’s reporting and storytelling weaves together a number of the top issues of the day into a single stark picture of the threats we face as well as the unprecedented opportunity to address power in ways that protect our democracy and individual liberties. This includes looking closely at Elon Musk’s role on social media and in the presidential election, two incredibly consequential DOJ cases against the Google, and the degree to which antiquated Chicago School economic thinking still shapes the actions of the Supreme Court’s liberal justices.

“It is Google, Amazon, Microsoft, Facebook, and Apple that today enjoy the power to create and destroy, to censor and punish, to ‘make and unmake’ who they will. It is these corporations that —even as we fear consolidation of power in the public state — have erected a private state over us,” Lynn writes. For nearly a quarter century, Lynn’s close studies of the structure of the U.S. political economy have provided much of the foundation for the renewal of antimonopoly law and enforcement in the U.S. and Europe, and for the growing movement to renovate America’s original system of liberty for the 21st century. Lynn appeared on a podcast produced by the UK magazine The Spectator [[link removed]] to discuss his cover story. Read Lynn’s story in Harper’s here [[link removed]].

In Harvard Business Review, Open Markets’ Vaheesan and Callaci Show How Antimonopoly Can Fix America’s Housing Crisis

Open Markets Institute’s legal director Sandeep Vaheesan and chief economist Brian Callaci coauthored an article in Harvard Business Review [[link removed]] exploring the nation’s severe housing crisis and proposing hard-nosed competition policy-based solutions that would address unaffordable housing. “The country’s housing crisis will not be solved through simple deregulation of zoning laws and building codes — it requires ambitious public action,” they wrote, noting this includes antitrust enforcement such as the Department of Justice’s lawsuit against RealPage, a property software company that sets rents using an algorithm. “The landlord cartel orchestrated by RealPage in cities across the nation attests to that. Antitrust and other laws against unfair business conduct should be used to stop myriad restrictive practices in housing and land markets.” Read the full story here [[link removed]].

Open Markets Reports Directly from Courthouse Where Google Ad Tech Trial is Being Heard

Open Markets Institute has been closely following [[link removed]] the Google ad tech trial, with Karina Montoya, senior reporter at the Center for Journalism & Liberty, reporting directly directly from the Virginia courthouse where the Department of Justice is prosecuting its case against the tech giant for monopolizing the market for digital advertising technologies. Montoya also summed up developments from the trial, which began earlier this month, in an article in Tech Policy Press [[link removed]], where she wrote, “This parade of witnesses depicted a digital advertising market in which it is difficult for publishers to escape their reliance on Google, rival publisher ad servers and ad exchanges can’t grow, and ads are transacted by Google in ways that reinforce its dominance.” She was also quoted by PC Mag [[link removed]] as saying, “a Google win would increase the divide between ‘the haves and the have-nots.’" Follow Montoya’s coverage of the case here [[link removed]] and sign up here [[link removed]] to receive updates directly in your inbox.

📝 WHAT WE'VE BEEN UP TO: Open Markets Europe director Max von Thun published an article in the Financial Times [[link removed]], commenting on the recent appointment of a new EU competition commissioner, Teresa Ribera, who is currently serving as Spain’s deputy prime minister and whose portfolio will expand to include climate. “There is a risk that competition enforcement falls through the cracks as a result. But allowing that to happen would be a serious error,” von Thun writes. “Intelligently done, this is the most powerful tool the commission wields to shape markets in the public interest.”

Von Thun also wrote an article for The Guardian [[link removed]] commending the DOJ for opening an antitrust investigation into Nvidia, which he writes, “sells 88% of the world’s GPUs, and has elbowed its way to domination in AI, too, which according to some estimates will be a trillion-dollar market within just a few years.”

Claire Kelloway, food program director at Open Markets Institute, appeared in a video produced by More Perfect Union [[link removed]] on the proposed $36 billion merger between snack makers Mars and Kellanova, which will contribute to rising prices. “Your favorite snack foods could get even more expensive,” Kelloway kicked off the video by saying.

Kelloway was also quoted by Salon [[link removed]] in two [[link removed]] article [[link removed]] s [[link removed]], on rising grocery costs and the proposed grocery megamerger between Kroger and Albertsons. “Absent antitrust enforcement and fair competition enforcement, it's really hard to imagine how these companies at the top ever get knocked off, or how three companies controlling 80% of the mayonnaise ever actually changes,” Kelloway said.

Open Markets Institute’s partner organization Farm Action published a major report on the consolidated U.S. agriculture industry, “Kings [[link removed]] Over the Necessaries of Life”: Monopolization and the Elimination of Competition in America’s Agriculture System [[link removed]]. The report shows how large corporations dominate who gets to farm, how they farm, what food gets produced and sold in this country, and how much consumers must pay for it. Commissioned by Farm Action and written by antitrust attorney Basel Musharbash, this landmark investigation details the policy choices that got us here, and conducts in-depth investigations into each major sector of today’s agricultural economy.

Labor Notes [[link removed]] quoted OMI chief economist Brian Callaci commenting on the ongoing strife at automaker Stellantis, which has been accused of unfair labor practices by United Auto Workers. “Capital jealously guards its ‘right to manage’ from any labor influence, yet somehow it’s always labor's fault when management screws up,” Callaci said. The Labor Notes article was reproduced in Popular Resistance [[link removed]].

A National Employment Law Project [[link removed]] article on the intersection of antitrust law and workers’ rights references the work of Vaheesan and Callaci. “Digital labor platforms want to have it both ways. As Sandeep Vaheesan and Brian Callaci at Open Markets Institute have said, they want control without responsibility,” the article read. “They want control over the workers doing the central work of their businesses, without being responsible to these workers for complying with wage and hour laws, health and safety laws, and paying into social insurance funds.”

🔊 ANTI-MONOPOLY RISING:

The Department of Justice is suing Visa over allegations it has illegally monopolized the market for debit cards, in a case that could have sweeping impacts across the economy by lowering the hefty ‘swipe fees’ paid by nearly every business during card-based transactions. ( CNN [[link removed]])

The Federal Trade Commission announced that it is suing three leading pharmacy benefit managers over claims they utilized their drug rebate practices to illegally raise the costs of insulin for millions of Americans. ( NPR [[link removed]])

The Federal Trade Commission released a report documenting sweeping surveillance practices by tech giants like Facebook and Google. The report, which may serve as the basis for new rulemaking on digital surveillance practices, found the corporations were collecting vast troves of data, including on minors, that far surpassed the understandings of typical users. ( The [[link removed]] New York Times) [[link removed]]

Invitation Homes, a rental housing conglomerate which owns more than 9,200 rental houses in Arizona, agreed to pay $48 million to settle claims brought by the Federal Trade Commission accusing the corporation of systematically abusing its customers by stealing deposits, charging junk fees, and failing to honor renters’ rights in eviction proceedings. ( AZ [[link removed]] Central [[link removed]])

The Federal Trade Commission announced new enforcement actions targeting five corporations over unfair and deceptive uses of artificial intelligence, such as generating artificial product reviews. ( Reuters [[link removed]])

We appreciate your readership. Please consider making a contribution to support the continued publication of this newsletter.

DONATE [[link removed]] 📈 VITAL STAT: $10 billion

The combined annual revenues of six academic publishers who were recently sued in a in a class-action lawsuit, which alleges that they colluded to make peer reviewing an unpaid job, prevented academics from submitting manuscripts to more than one journal at a time, and barred them from freely sharing their findings during the lengthy peer review process. The six publishers named as defendants — Elsevier, Wolters Kluwer, Wiley, Sage Publications, Taylor & Francis, and Springer Nature — publish two-thirds of all journal articles internationally and boast profit margins of above 30%. ( Higher [[link removed]] Dive [[link removed]])

📚 WHAT WE'RE READING:

The Tech Coup: How to Save Democracy from Silicon Valley [[link removed]] — Financial Times columnist and Stanford University Cyber Policy Center’s international policy director Marietje Schaake takes a sweeping look at the existential threat to democracy and personal liberty posed by the modern tech monopolies. After outlining the ways these giants have evaded regulation and amassed powers matching or surpassing that of many nation-states, Schaake proposes a suite of urgent policy solutions to take back the power concentrated within these corporations before it is too late.

Order Sandeep Vaheesan’s forthcoming book:

Sandeep Vaheesan, the legal director at the Open Markets Institute, will publish his first book Democracy in Power: A History of Electrification in the United States [[link removed]] on December 3. Vaheesan examines the history—and presents a possible future—of the people of the United States wresting control of the power sector from Wall Street, including through institutions like the Tennessee Valley Authority and rural electric cooperatives.

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Written and edited by: Barry Lynn, Austin Ahlman, and Anita Jain.

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