President Biden claimed bipartisan victory in his speech tonight for the CHIPS Act. He said:
Outside of Columbus, Ohio, Intel is building semiconductor factories on a thousand acres – a literal field of dreams.
That’ll create 10,000 jobs. 7,000 construction jobs. 3,000 jobs once the factories are finished.
Jobs paying $130,000 a year, and many don’t require a college degree.
Jobs where people don’t have to leave home in search of opportunity.
And it’s just getting started.
It’s a nice story, but it doesn’t reflect what’s really happening in the semiconductor industry right now. While politicians on both sides would like to believe they can completely isolate the U.S. from outside pressures, the semiconductor industry is and will remain thoroughly global. Right now, it’s entering a supply glut.
That means prices will fall, and semiconductor firms around the world are expecting huge revenue losses. Intel’s CEO announced last week that the company will be cutting pay across its workforce. That came after Intel and Korean chipmakers Samsung and SK Hynix announced huge profit declines for the fourth quarter of 2022.
We’ve known this was coming for a while (you can find warnings from analysts about it in late 2021 and articles about selling semiconductor stocks from last May). And it’s here. Semiconductor firms are currently losing money on every new unit they sell.
In other words, it’s not a great time to expand production. But Intel will give it a try anyway, with your tax dollars ready to bail them out if it goes poorly. Politician-driven economic planning is working about as well as should have been expected.