The U.S. needs more than the CHIPS Act to stay ahead of China: MIT report
The government’s $53 billion CHIPS and Science Act has been hailed as a major step to ensuring the U.S. holds onto its advantage as the world’s technology powerhouse. But a new report out of the Massachusetts Institute of Technology says the investment isn’t enough to keep competing countries like China from overtaking America’s position as the leader in advanced technologies.
“If we don't have [competitive advantage], then U.S. firms are gonna lose out on contracts, on bids, on other things that we really care about that make U.S. firms more prosperous and the people in the United States more prosperous as well,” Neil Thompson, director of the MIT FutureTech Research Project and study lead, told Yahoo Finance.
Congress passed the CHIPS, or Creating Helpful Incentives to Produce Semiconductors for America, Act in July. The Commerce Department is getting set to announce how companies can apply for funds from the multi-billion project, which is aimed at bringing more semiconductor manufacturing back to the U.S. and incentivizing firms to research cutting edge technologies that will give American companies an edge over international rivals.
Thompson, however, says that while the CHIPS Act is certainly helpful, it doesn’t address the litany of other shortfalls that are hurting America’s competitiveness.
“Computing is...about having those computers, it's about having…ever better algorithms that you can run on those chips,” Thompson said. “It's about having the best people working on those things, and for U.S. companies and U.S. universities making those discoveries. So we need to have a broader approach to making sure that we are at the forefront of all of those things, not just making sure that we are sort of at the frontier with chips.”
According to the MIT report, a 2019 survey of 120 U.S. organizations including universities, national labs, and federal agencies found that 79% of respondents believe China is improving its ability to compete at a better rate than America.
Commerce Secretary Gina Raimondo says the government hopes to use funding from the CHIPS Act to build two chip manufacturing clusters in the U.S. The idea is to ensure that the country is able to both research and develop its own semiconductors.
America used to be the leader in chip manufacturing, or fabrication, as it’s known, but it now builds just 12% of the world’s semiconductors. The CHIPS Act could help turn that around, bringing more manufacturing capabilities back to the U.S.
The government has also taken steps to limit China’s ability to access high-end American technologies, creating a list of Chinese companies that U.S. firms can’t ship their products to out of fear that it will be used to assist the Chinese military.
But according to Thompson, the U.S. needs to do more than simply build chips and restrict China’s access to them. It also needs to ensure that the country has the capabilities necessary to develop new kinds of computer algorithms that help businesses improve their overall efficiency.
So how does he suggest building on the promises of the CHIPS Act? Part of the solution, he says, is to ensure the U.S. has enough immigrants to help fill important roles in the tech industry.
“We need to be graduating the best folks, we need to be giving them a pathway so that they can stay in the United States,” Thompson said. “That's an area where we're not doing very well right now, in terms of being restrictive. And so this is another example where the CHIPS Act is good, but it's only one piece of what we need if we want to be at the forefront of advanced computing.”
If the government and American businesses manage to come together, the country should be able to hold on to its lead in the tech industry, Thompson said. If not, China will likely grab the lead and its businesses and military will supplant the U.S. as the top dog on the international stage.
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Got a tip? Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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