I read economist Noah Smith’s Substack Newsletter Noahpinion pretty regularly. Today, he had an interesting observation about an economic story that will transform Arizona’s economy in the coming years:
For over a year, along with many other writers who follow industrial policy, I sounded the alarm that the much-trumpeted TSMC fab (Taiwan Semiconductor Manufacturing Company) in Arizona was way behind schedule. Here’s The Economist in February of this year:
Last summer [TSMC] pushed back the start of production at the first of two plants it is building in Arizona from 2024 to 2025. In January it announced that a second plant, previously scheduled to open in 2026, would not be operational until 2027 or 2028. The second was meant to produce three-nanometre (nm) chips, the most advanced currently on the market, but TSMC has raised the prospect that it may now be used for less cutting-edge production.
The Economist
Although an early kerfuffle between the company and local construction unions was solved in January, other big problems, including environmental review, seemed to loom large. In general this contributed to America’s image as the Build-Nothing Country, and raised some doubts about the Biden administration’s ability to follow through on its industrial policy goals. Some Republicans had picked up on the story and began using it as evidence of Biden’s incompetence.
Except…it turns out that all the news stories about the huge delays, including all the ones I cited in my hand-wringing posts, were wrong. The instant that the CHIPS Act handed TSMC its $5 billion in subsidies, the company suddenly declared that the Arizona plant is ahead of schedule and will begin operating later this year:
Three months after TSMC announced further delays at its $40 billion Arizona fabs, the chip manufacturer has now said the plant is expected to be operating at full capacity by the end of [2024].
The announcement comes several weeks after it was first reported that TSMC is set to be awarded more than $5 billion in federal grants under the US CHIPS and Science Act…
Now, according to a report from the Chinese news outlet money.udn, TSMC is expecting to begin pilot production operations by mid-April, with the preparations for mass production to be completed by the end of the year. It is unclear whether both fabs or just the 4nm facility are now due to be in production ahead of schedule.
OOOOOPS!!! So much for that whole story. Assuming this report is confirmed, it appears that the delays were intentional sandbagging by TSMC to ensure the security of its CHIPS Act money. As soon as the check was safely in the mail, the company started moving full steam ahead.
There are a few lessons here. First, news stories are often wrong and subject to rapid revision, and we always need to be prepared to adjust our beliefs quickly as new information comes in.
Second, industrial policy involves a very complex and often adversarial dance between companies and governments, full of bluffs, counter-bluffs, backroom struggles, last-minute deals, and credit-hogging after the fact. This is nothing new—if you read books about the World War 2 production effort like Destructive Creation, you’ll see lots of similar anecdotes.
Finally, industrial policy is a learning process, especially for a government that isn’t used to doing it. It’s not the kind of policy that immediately achieves demonstrable, dramatic, uniformly positive results on day one. It’s a process of exploration, adjustment, and recalibration, and it involves lots of mistakes and blind alleys. It’s possible for it to fail, but it’s not the kind of thing where you can immediately know whether it’ll ultimately be a success or a failure. The opposition party will always have the urge to jump on any apparent setback for political reasons, and sometimes they’ll even be right. But those of us pundits who strongly value objectivity have no choice but to watch and wait.
No, FINALLY, one should never bet against America, MAGA bitches!
We can, and – with Joe Biden as our President for another fantastic four years – we will achieve a manufacturing and middle-class renaissance, building the strongest economy in the world from the middle out and the bottom up. We have had 26 consecutive months of under 4% unemployment (generally considered to be ‘full employment’ by economists) for the first time since the 1960’s. Wages for lower and middle-income workers are rising, and demand is surging. Joe Biden’s Build Back Better industrial policy initiatives to secure our supply chains and re-shore and friend-shore strategically vital industries of the future is working. It will be a learning curve between government and industry and there will be missteps, but we Democrats are taking those political risk in order to ensure our nation remains the strongest, most prosperous, and fastest growing economy on Earth. We are not just cynically sniping from the side-lines like the MAGAs, we are creating a better future for America.
Contrary to the fantasy dystopia that the MAGA are trying desperately to fool Americans into believing, immigration is a big part of our current economic successes and strength. We’ve recently learned from notoriously liberal Brookings Institute studies as reported by liberal bastion Forbes magazine (yes, that’s sarcasm…) that immigration into America has added over a trillion dollars in GDP to our economy in the last decade, kept employment growth and domestic consumption strong coming out of the pandemic, and helped us largely avoid the aging demographic trends imperiling the economic prosperity of many of our peers and competitors. The future belongs to America and we are set to enjoy yet another American Century primarily due to the practical policies, prudent guidance ,and solid traditional pragmatic America values of the Democratic Party. Immigrants commit less crime, create more jobs, and build more businesses than native born Americans; i.e. they are overwhelmingly hard-working, law-abiding, go-getters, not rapists and crime lords – we have Donald Trump for that.
We certainly have our challenges ahead: creating a rational and humane immigration policy and border control systems that leverage immigration as a major strength of America – rather than fear mongering a dog-whistle racist threat to ‘replace’ white people! – is among those challenges. But it you think these MAGA morons who conjure boogeymen stories about the border and shoot down legitimate compromise in favor or political sloganeering to gain short-term electoral advantage are going to solve the problem, well… bless your heart!
If you are one of those who thinks that we would be better off with a demented, power-mad loser, sexual predator and narcissist who lied a million Americans into an early grave., faces almost 100 felony charges, threatens to tear down the alliance and trade networks that keep our world safe and prosperous in favor of autocrats and corrupt cronies, and threatens our very democracy and domestic peace, well… bless your fucking heart, too!
Michael so enjoy your writing about many topics (industry and govt) ( and what it means to keep gop out of power) that are usually pretty dry and complex but your descriptions of the details really tell me to pay attention more as a citizen. Thank you. The threat is real. Vote Blue.