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Rent-Seeking Is A Dirty Business

Here’s a letter to the Wall Street Journal (I thank Scott Lincicome for feedback on an earlier version of this letter):


Attempting to justify government subsidization of his firm, Intel lobbyist Bruce Andrews writes that “domestic chipmaking capacity has been declining for decades” (Letters, April 10). This claim is a half-truth. What has shrunk is the share of global chip-making capacity located in the U.S. – from 37 percent in 1990 to 12 percent today. But this trend is due to increasing chip production abroad rather than to any absolute decline in U.S. production capacity. According to the Semiconductor Industry Association, between 2000 and 2018 America’s capacity to produce wafers domestically rose by more than 50 percent, and that capacity is still rising.

Mr. Andrews will insist nevertheless that the relative fall in U.S. chip-making capacity is reason enough for the government to shower his firm with taxpayer dollars. What he’ll not reveal, however, is that Intel and other US-based chip producers own and operate chip-making facilities in Japan and other foreign countries, resulting in U.S.-based chip-producers’ share of the global semiconductor market being (in 2019) 47 percent – much more than double the sales share of the number two country, Korea, and nearly ten times greater than China’s share of these sales.

Even putting aside the immorality of forcing taxpayers to subsidize producers, the purely utilitarian case for semiconductor subsidies is a sham.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030