No images? Click here 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.
Congress this week made headway 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 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 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 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.
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 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 to discuss his cover story. Read Lynn’s story in Harper’s here.
Open Markets Institute’s legal director Sandeep Vaheesan and chief economist Brian Callaci coauthored an article in Harvard Business Review 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.
Open Markets Reports Directly from Courthouse Where Google Ad Tech Trial is Being Heard Open Markets Institute has been closely following 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, 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 as saying, “a Google win would increase the divide between ‘the haves and the have-nots.’" Follow Montoya’s coverage of the case here and sign up here to receive updates directly in your inbox. 📝 WHAT WE'VE BEEN UP TO:
🔊 ANTI-MONOPOLY RISING:
We appreciate your readership. Please consider making a contribution to support the continued publication of this newsletter. 📈 VITAL STAT:$10 billionThe 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 Dive) 📚 WHAT WE'RE READING:The Tech Coup: How to Save Democracy from Silicon Valley — 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 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. 🔎 TIPS? COMMENTS? SUGGESTIONS? We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue. |